August 12, 1990

A HIGH-SPEED fiber-optic telephone network in Silicon Valley by the year 2000, being proposed by Canadian entrepreneur Bill Smith, doesn’t sounds like a great idea to everyone. As is true with many things about technology, the companies who have invested in existing ways to deliver information into the home — that is, the cable television companies and traditional publishers such as newspapers — aren’t looking forward to having to change the way they do business.

Fiber’s enormous bandwidth — 622 million bits of information per second and faster, compared to the present copper wire’s 64 thousand bits per second — immediately empowers a vast array of information providers to “broadcast,” so to speak, myriad services into the home using a public access distribution channel. Today, unless you break the law, the only way you can watch HBO et al is to pay the cable company an installation fee and up to $50 a month. If the phone company installs a fiber phone network, the law dictates — at least today — that it can’t discriminate against who gets to use those fibers. That means cable providers would have to compete in an open marketplace.

Newspapers don’t like fiber for the same reasons. A fast fiber-optic network would make it cheaper and easier to subscribe directly to electronic news services. Some entrepreneur would write a program to filter out all the stuff we weren’t interested in, and we’d get to choose — from a much wider variety of sources — the news we wanted to read.
We’re already seeing moves along those lines today by companies who are using fax machines and phone lines to deliver customized news summaries — kind of like Ronald Reagan used to get from his staff — for busy corporate executives who don’t have time to sift through mountains of magazines and newspapers.

But many people who support a high-speed fiber-optic phone network believe the technology shift is inevitable. Dick Knock, a senior consultant at Stanford Research Institute in Menlo Park, is an optical technology specialist who admits to a heavy pro-fiber bias. “I think the concept and where it’s going is definitely the next wave. Exciting things can happen, once you have the network in place,” he says. “Software companies and application companies just bloom in such an atmosphere, and that’s what Silicon Valley does best.”

One Silicon Valley company is already working on the problem. Fremont-based Raynet Corp., which makes fiber phone transmission systems, made headlines a few months back by announcing that its LOC-2 product cost no more to install in the home than copper wire. Despite this feat, Raynet marketing director George Ballog says today it still costs about $4,000 to get the phone company to install a fiber line. Then there’s the enormous costs surrounding a fiber installation — replacing existing equipment with optical switches, installing signal splitters so the enormous bandwidth can be used, making sure it’s both reliable and compatible with the existing phone network, and so on.

Pacific Bell says it can’t subsidize such a radical shift at the expense of ratepayers right now, but it fully expects its time will come. At PacBell headquarters in San Ramon is a technology lab headed by Thomas Edrington that has a fiber-optic telephone network up and running multiple simultaneous applications in real time, including video teleconferencing. One ambitious project is called LiberNet; its goal is to convert paper books to digital ones, accessible via phone lines. Another is a fiber-based, public access local-area network between computer systems, the Switched Multimegabit Data Service, which would eliminate the need for expensive dedicated lines between systems and allow businesses to only pay for a connection while it’s being used.

“What Smith has suggested absolutely delights me,” says Edrington, who asserts that PacBell would want a representative on a “Fiber in the Valley” committee if one is formed. “It’s a neat idea, and he’s a visionary. It would be neat if we could help the economic infrastructure by developing a testbed. But we’re also a business. The question is, how do we do that and still make money?”

It’s a good question, and Knock and Smith are hoping to meet in Menlo Park in mid-September to try and answer it. Who comes to that meeting, and what comes of it, might end up changing the scene in Silicon Valley like we haven’t seen for many moons. As the late Robert Noyce once said, “Ideas are a dime a dozen. The real ideas are the ones you can push through to the marketplace and sell.”