Ley de Metcalfe: Demasiado optimista

Researchers: Metcalfe's Law overshoots the mark

Summary: Rule that encouraged madcap expansion in the dot-com era turns out to have been, um, way too generous, scientists argue. ZDNet

Two University of Minnesota researchers have written a paper arguing that Metcalfe's Law, a rule of thumb that computes the value of communication networks, is overly optimistic.

Metcalfe's Law--a rule of thumb, really, that provided a rationale for aggressive expansion efforts during the dot-com boom--posits that the value of a network increases with the square of the number of devices in the network. But in a preliminary paper (click for PDF) published March 2, Andrew Odlyzko and Benjamin Tilly of the university's Digital Technology Center concluded that the law "is a significant overestimate." In one example, where the law would find a network's value increased 100 percent, their calculations found only a 5 percent enhancement.

The two researchers proposed an alternative formula that heads in the same direction as Metcalfe's Law but doesn't go as far. The differences in the two laws explain why established network powers, such as AT&T, have resisted cooperation with smaller rivals.

Metcalfe's Law was a driving feature of the dot-com boom. Netscape co-founder Marc Andreessen, for example, argued that the law explained the surging amount of time people spent online using services from America Online, his employer at the time.

There is no shortage of laws in the computing realm. Moore's Law, by Intel co-founder Gordon Moore, describes the rate at which more transistor circuitry can be packed onto a single chip. AndAmdahl's Law, by IBM mainframe designer Gene Amdahl, governs the performance boost gained by adding new processors to a computer. (Amdahl also is credited for another computing industry innovation, coining the term "FUD," the fear, uncertainty and doubt that one company's propagandists use to undermine a rival's product.)

'Fundamental fallacy'
Metcalfe's Law came from Bob Metcalfe, a founder of networking equipment supplier 3Com and coinventor of the now-ubiquitous Ethernet networking standard. According to the law, a network with 20 telephones--or alternatively, fax machines, instant-messaging teenagers or Internet-phone callers--is four times more valuable than a network with 10. A network with 30 nodes is nine times more valuable than one with 10.

Not so, Odlyzko and Tilly argue.

"The fundamental fallacy underlying Metcalfe's (Law) is in the assumption that all connections or all groups are equally valuable," the researchers report.

If Metcalfe's Law were true, there would have been tremendous economic incentives to accelerate network mergers that in practice take place slowly. "Metcalfe's Law provides irresistible incentives for all networks relying on the same technology to merge or at least interconnect."

The researchers propose a less dramatic rule of thumb: the value of a network with n members is not n squared, but rather n times the logarithm of n. That means, for example, that the total value of two networks with 1,048,576 members each is only 5 percent more valuable together compared to separate. Metcalfe's Law predicts a 100 percent increase in value by merging the networks.

It's not a merely academic issue. "Historically there have been many cases of networks that resisted interconnection for a long time," the researchers say, pointing to incompatible telephone, e-mail and text messaging standards. Their network effect law, in contrast to Metcalfe's, shows that incumbent powers have a reason to shut out smaller new arrivals.

When two networks merge, "the smaller network gains considerably more than the larger one. This produces an incentive for larger networks to refuse to interconnect without payment, a very common phenomenon in the real economy," the researchers conclude.

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Vainio-Pekkia: La nueva educación y los emprendimientos en Finlandia

Vainio-Pekkia: EL EMPRENDIMIENTO, UNA NUEVA OLA DE APRENDIZAJE LA EXPERIENCIA DE LA TEAM ACADEMY EN FINLANDIA

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Todo lo que necesita saber acerca de la guerra de precios en eReaders

Everything you need to know about the great e-book price war

How the DOJ's antitrust lawsuit against Apple and the Big Six book publishers will affect the business of lit

BY LAURA MILLER  - SALON

Jeff Bezos (Credit: AP/Reed Saxon)

Closing arguments for the Department of Justice’s antitrust suit against Apple concluded last week, although U.S. District Judge Denise Cote is not expected to reach a decision for another couple of months. If you’ve found the case difficult to follow, you’re not alone. Still it’s worth getting a handle on the basics because the suit — or, more precisely, the business deals behind it — have changed book publishing in significant ways. Furthermore, Judge Cote’s decision could have impact well beyond the book industry.

Apple was charged with colluding with publishers to fix e-book prices. At the root of the dispute lie two different ways that publishers can sell books to retailers.

First, there’s the wholesale model, the way that book publishers have sold printed books to bookstores and other outlets for years. The publisher sets a cover price for a book, sells it to a retailer at a discount (typically 50 percent) and then the retailer can sell the book to consumers for whatever price it chooses.

The other method of selling books is via the agency model, which means, essentially, on commission. The retailer offers the book to consumers at a price the publisher sets and gets a percentage of whatever sales are made. It’s rare for print books to be sold in this way, but it’s the method Apple uses to sell content like music and apps in its iTunes store.

Until 2010 — as Andrew Albanese explains in his admirably lucid “The Battle of $9.99: How Apple, Amazon and the ‘Big Six’ Publishers Changed the E-Book Business Overnight,” a new “e-single” published by Publishers Weekly — book publishers had been selling e-books to Amazon using the wholesale model. They’d simply adapted the system they were already using to sell print books to the online retailer. This, they would soon realize, was a big mistake.

The wholesale model is widely seen as an odd way to sell e-books, since what the purchaser buys is “licensed access” to a digital file, rather than a physical object like a book. But what would torment publishers most about this arrangement was the freedom the wholesale model gave to Amazon to set the prices of e-books.

With the launch of the Kindle, Amazon promoted a low baseline price of $9.99 for most e-books. That meant that Amazon was selling virtually all newly published e-books at a loss. For example: A new book with a hardcover list price of $29.95 would be given an e-book price of $23.95 — 20 percent less to account for the publisher’s savings in printing, binding and distribution. The publisher would sell that e-book to Amazon for $12, and Amazon would retail it for $9.99, taking a $2 loss.

Why would Amazon do this? Observers have proposed several motives. Perhaps Amazon aimed to entice heavy readers to the newfangled Kindle; the customer could tell herself she’d make up the cost of the device in savings on the books themselves. Others have suggested that cheap e-books were loss leaders that drew customers back to Amazon over and over again, presumably so they’d go on to purchase high-margin items like TVs.

The most popular theory by far holds that Amazon intended from the start to totally dominate the e-book marketplace. By using its wealth to subsidize the sale of e-books at a loss, it could drive any competitors out of the market. Bricks-and-mortar chains like Barnes and Noble and online start-ups like Kobo (both of which would introduce their own e-reader devices) or device-neutral rivals like Google would simply not be willing or able to bleed cash as long as Amazon could. And because the Kindle is a “closed platform” — Kindle e-books can only be read on Kindle devices or apps — the more Kindle e-books a customer owned, the more reluctant she’d be to switch to a different device.

Obviously, however deep its pockets, Amazon would not be able to go on selling e-books at a loss indefinitely. But once Amazon was cemented in place as the uncontested sovereign of e-book retail, it could do whatever it wanted: force publishers to reduce their own prices, and/or raise prices on consumers.

If this was the retailer’s strategy, it was initially an effective one. By the end of 2009, Amazon owned 90 percent of the robustly growing e-book market. Even though e-books still made up a small percentage of overall book sales, publishers finally saw the writing on the wall. Amazon had a near-monopoly and was furthermore devaluing books in the eyes of consumers — they began to think of books as worth $9.99, not $23.95. Book publishing is a low-margin business to begin with, and the mammoth retailer seemed poised to scrape even those minimal profits away.

At that point, Apple entered the scene with a hotly anticipated new device, the iPad, and plans to open its own e-book store. Needless to say, the nation’s largest book publishers looked upon this rich new Amazon competitor with keen interest. The trial at the U.S. District Court for the Southern District of New York this month has provided a record of what happened next.

As narrated by Albanese and other observers of the trial, Apple approached book publishers about making their titles available in the iBookstore. Apple felt that it needed at least four of the “Big Six” publishers to launch the store, and it entered into discussions with all six. Initially, Apple’s primary negotiator, Eddy Cue, assumed they’d purchase e-books via the wholesale model. A couple of the publishers he spoke with proposed the agency model for e-books, an idea that had been kicking around the book world for a few months.

Apple liked the idea. So did the publishers — they would make less money per e-book this way than they did by selling wholesale to Amazon, but they could live with that. What Amazon was doing wasn’t sustainable anyway. Under agency terms, publishers could control the pricing of their books and assert that $12.99 to $14.99 was a fair market value for most new titles. Although authors would also receive less in royalties from agency sales, the Authors’ Guild endorsed the move as the only alternative to watching “Amazon destroy the physical distribution chain” — that is, brick-and-mortar bookstores — in the words of Guild president Scott Turow. (If you want to know why bookstores are especially important to authors, read this.)

However, Apple needed a critical mass of publishers to participate. Otherwise their store would have too few desirable titles. And none of the publishers wanted to be the first to go out on a limb and risk being the only one selling their titles for three to five bucks more than everyone else. Last but not least, Apple knew it couldn’t make the iBookstore a success if it sold the most in-demand titles for dollars more than Amazon did.

By early April 2010, when the iPad and the iBookstore officially launched, five of the Big Six publishers had entered into agency deals with Apple. Each of those publishers had also informed Amazon that if the retailer wanted to continue selling their e-books, it would have to buy them on agency terms as well. As the publishers saw it, they’d stood up to a “bully.”

Amazon was so infuriated by this development that it punished the first publisher to demand agency terms, Macmillan, by removing buy buttons from all Macmillan books, digital and print,for a week. “We will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles,” Amazon announced in a message to its customers after it finally restored the buttons — a curious statement a little like complaining that George R.R. Martin has a “monopoly” on the writing of George R.R. Martin novels.

But Amazon had more than petulant retorts up its sleeve. Days after Macmillan delivered its new terms to their Seattle offices, the retailer sent a white paper to the U.S. Department of Justice, accusing the publishers of violating antitrust regulations. By the next spring, Attorney General Eric Holder announced that the DOJ had filed a civil antitrust lawsuit against Apple and the five publishers who had agreed to sell books with the agency model through the iBookstore.

At issue was whether the publishers “colluded” together to set uniform prices or simply seized the opportunity presented by a new competitor to negotiate better terms with Amazon. DOJ argues that Apple is culpable because it deliberately served as a hub or conduit by which the publishers could reach an agreement among themselves. All five of the publishers, pleading financial constraints, have since settled with the government while admitting no wrongdoing. Apple is the only remaining defendant.

Initially, prospects looked dim for the tech giant. Before the trial started, Judge Cote said at a hearing, “I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case, including the terms of the agreements, will confirm that.”

However, many close watchers of the trial feel that Apple has made a strong case that if there was any colluding among the publishers, they did not enable it. By setting up agency-model terms with the publishers, Apple was merely making it possible to enter into the e-book retailing market as a competitor with Amazon. The day before closing arguments, Judge Cote remarked that her views on the case “have somewhat shifted.” But we probably won’t find out how just how much of a shift it’s been until the fall.

For Apple, the stakes remain high. If it is found to have violated antitrust law with the iBookstore, it will not be asked to pay damages. Instead, the DOJ will likely demand that Apple clean up its act and insist on overseeing its operations, perhaps as it did in settling the antitrust case against Microsoft in 2001. E-books make up a small sliver of iTunes sales, but the rest of the content offered there — music, apps, video — is obtained on very similar terms. Having the DOJ hovering over and meddling in future agreements would decidedly cramp Apple’s style. There are also pending and potential civil suits filed by states’ attorneys general and consumer groups seeking damages that would get a boost from a decision against Apple.

But for the Big Six publishers, this “defeat” has a surprising upside. They appear to have achieved much of what they wanted in the first place, which was not money but a more competitive e-book market and more control over the prices (and perceived value) of their books. Amazon has ceded 30 percent of the e-book market to competitors, and now buys most of the Big Six’s books on agency terms. The prices of popular Kindle titles, especially New York Times Best Sellers are either identical to those in the iBookstore, or at most a dollar cheaper. And as Albanese pointed out recently in Publishers Weekly, even the payouts to consumers mandated by the settlements have a silver lining: The “monies — nearly $175 million in total … will be issued almost entirely as credits to e-book consumers’ accounts, meaning those funds will flow back to the publishers, almost like a court-ordered promotion.” Sometimes you can’t lose for winning.

Laura Miller is a senior writer for Salon. She is the author of "The Magician's Book: A Skeptic's Adventures in Narnia" and has a Web site,magiciansbook.com.

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Rodriguez: La revolución necesaria y lo que las escuelas de negocios pueden hacer por ella

Rodriguez: LA REVOLUCIÓN NECESARIA Y LO QUE LAS ESCUELAS DE NEGOCIOS PUEDEN HACER POR ELLA

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Koria y otros: Facilitar los ecosistemas de innovación a través de la educación superior

Koria: FACILITAR LOS ECOSISTEMAS DE INNOVACIÓN A TRAVÉS DE LA EDUCACIÓN SUPERIOR

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Nueva estrategia de precios para aplicaciones parece ir bien

New pricing strategy for apps going strong

Developers around the world adopt pricing model 'Fans in charge'

Pricing experiment app SnelTrein still ongoing. App developers worldwide start adopting new pricing strategy. http://pressdoc.com/p/00141u

On June 27th a Dutch app developer launched a radical new pricing strategy for apps. They call the pricing model 'Fans in charge'. Free for anyone to adopt. Innovatio claims to be on a mission to heal the global app economy. A bit ambitious and crazy, but worth the risk. In a nutshell it comes down to this: An app gets more expensive everyday until a day comes by where the app is sold zero times. When that moment arrives, fans & early adopters get to decide on the final price tag of the app.

The motivation

Innovatio started the experiment because the company believes that the current app economy is sick and needs to be healed. Apps are pretty cheap, compared to other products in our daily lives, according to Innovatio. People happily pay $7 or more for a movie ticket, but find apps over $5 to be ‘unreal’.

The experiment

Last Thursday Innovatio launched a public transport app for the Dutch: SnelTrein. It’s a very cool and smart product that works really well. But that’s not the point. It’s the first app that uses this new pricing strategy. The app started at $0,99 and went up in price every day. It now costs $7,99 and is still selling. The developer is now waiting for a day with zero sales. When that moment arrives, fans & early adopters get to vote on the final price tag.

Early results

Although the amount of sales and revenue dropped as the price rose, it looks like revenue is bottoming out and is starting to rise. The big question is: How long will it take till a price is reached where people stop buying the app? Early results are plotted in a chart. (see attachments).

Pricing strategy gets adopted worldwide

Innovatio published the radical pricing strategy on TNW market. For free. So far 35 companies and developers have claimed the new pricing strategy for apps.

Innovatio

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La Ley de Metcalfe: Definición

Metcalfe's law 

Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n²). First formulated in this form by George Gilder in 1993,^[1] and attributed to Robert Metcalfe in regard to Ethernet, Metcalfe's law was originally presented, circa 1980, not in terms of users, but rather of "compatible communicating devices" (for example, fax machines, telephones, etc).^[2] Only recently with the launch of the internet and Web 2.0 design did this law carry over to users and networks as its original intent was to describe Ethernet purchases and connections. ^[3] The law is also very much related to economics and business management, especially with competitive companies looking to merge with one another.

Contents

• 1 Network effects
• 2 Limitations
• 3 Business practicalities
• 4 Modified models
• 5 See also
• 6 References
• 7 External links

Network effects

Metcalfe's law characterizes many of the network effects of communication technologies and networks such as the Internet, social networking, and the World Wide Web. Former Chairman of the U.S. Federal Communications Commission, Reed Hundt, said that this law gives the most understanding to the workings of the internet.^[4]Metcalfe's Law is related to the fact that the number of unique connections in a network of a number of nodes (n) can be expressed mathematically as the triangular number n(n − 1)/2, which is proportional to n²asymptotically. In more simple terms, if there are 5 telephones, the most number of connections that can be made can be found by substituting the number into the equation which in this case equals 10. The law is abundant and existent due to the ability of internet users to link together. If the internet were for information posting only, Metcalfe's Law would be a mere imaginative concept. Websites and blogs such as Twitter, Facebook, and Myspace are the center of this law taking effect. Forty five percent of Americans in 2005 said the internet had played a huge role in a major decision in their life as a result of this social networking.^[5]. Some of the major decisions involved buying a home, buying a car, inquiring medical help, and discovering a career. Interconnecting two networks is said to greatly exceed the power of the two separate, individual networks.

The law has often been illustrated using the example of fax machines: a single fax machine is useless, but the value of every fax machine increases with the total number of fax machines in the network, because the total number of people with whom each user may send and receive documents increases. Goods characterize the first component or intrinsic network effect. Services fall under the second component of network effects known as complementary.^[6] A social networking site works the same way as the fax machine described above. The greater number of users with the service, the more valuable the service becomes to the community. Deriving from Metcalfe's Law, every new "friend" accepted or added on these social networking sites makes the user's profile ever more valuable in terms of the law. Positive and negative outcomes take place with all network effects involving a service of this sort. New jobs, relationships, and opportunities arise with more people coming together, however, if not used correctly, services of this type can lead to distant relationships.

Limitations

 In addition to the difficulty of quantifying the "value" of a network, the mathematical justification for Metcalfe's law measures only the potential number of contacts, i.e., the technological side of a network. However the social utility of a network depends upon the number of nodes in contact. If there are language barriers or other reasons why large parts of a network are not in contact with other parts, the effect may be smaller.

Business practicalities

With Metcalfe's Law the way it is described, all companies would theoretically combine with another partner. This would create more users involved in the company both on a consumer and supplier basis. This is not the case however. Much of the time, only companies of equal equity are willing to interconnect with one another. In the case of a larger network or business, and a smaller network or business, the larger feels the smaller one is benefiting on a much larger scale. The larger business gains little in comparison to the small company as the large has already developed a reputation whereas the small company is feeding off their previous success.

Modified Models

Within the context of social networks, many, including Metcalfe himself, have proposed modified models using (n × log n) proportionality rather than n² proportionality.^[7] Reed and Odlyzko have sought out possible relationships to Metcalfe's Law in terms of describing the relationship of a network and one can read about how those are related. Tongia and Wilson also examine the related question of the costs to those excluded.

Wikipedia

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Briscoe et al.: La Ley de Metcalfe está equivocada

Metcalfe's Law is Wrong

Communications networks increase in value as they add members--but by how much? The devil is in the details

By Bob Briscoe, Andrew Odlyzko, Benjamin Tilly . IEEE Spectrum

Of all the popular ideas of the Internet boom, one of the most dangerously influential was Metcalfe's Law. Simply put, it says that the value of a communications network is proportional to the square of the number of its users.

Illustration: Serge Bloch

The law is said to be true for any type of communications network, whether it involves telephones, computers, or users of the World Wide Web. While the notion of "value" is inevitably somewhat vague, the idea is that a network is more valuable the more people you can call or write to or the more Web pages you can link to.

Metcalfe's Law attempts to quantify this increase in value. It is named for no less a luminary than Robert M. Metcalfe, the inventor of Ethernet. During the Internet boom, the law was an article of faith with entrepreneurs, venture capitalists, and engineers, because it seemed to offer a quantitative explanation for the boom's various now-quaint mantras, like "network effects," "first-mover advantage," "Internet time," and, most poignant of all, "build it and they will come."

By seeming to assure that the value of a network would increase quadratically--proportionately to the square of the number of its participants--while costs would, at most, grow linearly, Metcalfe's Law gave an air of credibility to the mad rush for growth and the neglect of profitability. It may seem a mundane observation today, but it was hot stuff during the Internet bubble.

Remarkably enough, though the quaint nostrums of the dot-com era are gone, Metcalfe's Law remains, adding a touch of scientific respectability to a new wave of investment that is being contemplated, the Bubble 2.0, which appears to be inspired by the success of Google. That's dangerous because, as we will demonstrate, the law is wrong. If there is to be a new, broadband-inspired period of telecommunications growth, it is essential that the mistakes of the 1990s not be reprised.

The law was named in 1993 by George Gilder, publisher of the influentialGilder Technology Report . Like Moore's Law, which states that the number of transistors on a chip will double every 18 to 20 months, Metcalfe's Law is a rough empirical description, not an immutable physical law. Gilder proclaimed the law's importance in the development of what came to be called "the New Economy."

Soon afterward, Reed E. Hundt, then the chairman of the U.S. Federal Communications Commission, declared that Metcalfe's Law and Moore's Law "give us the best foundation for understanding the Internet." A few years later, Marc Andreessen, who created the first popular Web browser and went on to cofound Netscape, attributed the rapid development of the Web--for example, the growth in AOL's subscriber base--to Metcalfe's Law.

There was some validity to many of the Internet mantras of the bubble years. A few very successful dot-coms did exploit the power of the Internet to provide services that today yield great profits. But when we look beyond that handful of spectacular successes, we see that, overall, the law's devotees didn't fare well. For every Yahooï»' or Google, there were dozens, even hundreds, of Pets.coms, EToys, and Excite@Homes, each dedicated to increasing its user base instead of its profits, all the while increasing expenses without revenue.

Because of the mind-set created, at least in small part, by Metcalfe's Law, even the stocks of rock-solid companies reached absurd heights before returning to Earth. The share price of Cisco Systems Inc., San Jose, Calif., for example, fell 89 percent--a loss of over US $580 billion in the paper value of its stock--between March 2000 and October 2002. And the rapid growth of AOL, which Andreessen attributed to Metcalfe's Law, came to a screeching halt; the company has struggled, to put it mildly, in the last few years.

Metcalfe's Law was over a dozen years old when Gilder named it. As Metcalfe himself remembers it, in a private correspondence with one of the authors, "The original point of my law (a 35mm slide circa 1980, way before George Gilder named it...) was to establish the existence of a cost-value crossover point--critical mass--before which networks don't pay. The trick is to get past that point, to establish critical mass." [See " " a reproduction of Metcalfe's historic slide.]

Metcalfe was ideally situated to watch and analyze the growth of networks and their profitability. In the 1970s, first in his Harvard Ph.D. thesis and then at the legendary Xerox Palo Alto Research Center, Metcalfe developed the Ethernet protocol, which has come to dominate telecommunications networks. In the 1980s, he went on to found the highly successful networking company 3Com Corp., in Marlborough, Mass. In 1990 he became the publisher of the trade periodical InfoWorld and an influential high-tech columnist. More recently, he has been a venture capitalist.

The foundation of his eponymous law is the observation that in a communications network with n members, each can make ( n –1) connections with other participants. If all those connections are equally valuable--and this is the big "if" as far as we are concerned--the total value of the network is proportional to n ( n –1), that is, roughly, n2. So if, for example, a network has 10 members, there are 90 different possible connections that one member can make to another. If the network doubles in size, to 20, the number of connections doesn't merely double, to 180, it grows to 380--it roughly quadruples, in other words.

If Metcalfe's mathematics were right, how can the law be wrong? Metcalfe was correct that the value of a network grows faster than its size in linear terms; the question is, how much faster? If there are n members on a network, Metcalfe said the value grows quadratically as the number of members grows.

We propose, instead, that the value of a network of size n grows in proportion to n log( n ). Note that these laws are growth laws, which means they cannot predict the value of a network from its size alone. But if we already know its valuation at one particular size, we can estimate its value at any future size, all other factors being equal.

The distinction between these laws might seem to be one that only a mathematician could appreciate, so let us illustrate it with a simple dollar example.

ILLUSTRATION: SERGE BLOCH

Imagine a network of 100 000 members that we know brings in $1 million. We have to know this starting point in advance--none of the laws can help here, as they tell us only about growth. So if the network doubles its membership to 200 000, Metcalfe's Law says its value grows by (200 0002/100 0002) times, quadrupling to $4 million, whereas the n log( n ) law says its value grows by 200 000 log(200 000)/100 000 log(100 000) times to only $2.1 million. In both cases, the network's growth in value more than doubles, still outpacing the growth in members, but the one is a much more modest growth than the other. In our view, much of the difference between the artificial values of the dot-com era and the genuine value created by the Internet can be explained by the difference between the Metcalfe-fueled optimism of n2 and the more sober reality of n log( n ).

This difference will be critical as network investors and managers plan better for growth. In North America alone, telecommunications carriers are expected to invest $65 billion this year in expanding their networks, according to the analytical firm Infonetics Research Inc., in San Jose, Calif. As we will show, our rule of thumb for estimating value also has implications for companies in the important business of managing interconnections between major networks.

The increasing value of a network as its size increases certainly lies somewhere between linear and exponential growth [see diagram, " "]. The value of a broadcast network is believed to grow linearly; it's a relationship called Sarnoff's Law, named for the pioneering RCA television executive and entrepreneur David Sarnoff. At the other extreme, exponential--that is, 2n--growth, has been called Reed's Law, in honor of computer networking and software pioneer David P. Reed. Reed proposed that the value of networks that allow the formation of groups, such as AOL's chat rooms or Yahoo's mailing lists, grows proportionally with 2n.

We admit that our n log( n ) valuation of a communications network oversimplifies the complicated question of what creates value in a network; in particular, it doesn't quantify the factors that subtract from the value of a growing network, such as an increase in spam e-mail. Our valuation cannot be proved, in the sense of a deductive argument from first principles. But if we search for a cogent description of a network's value, then n log( n ) appears to be the best choice. Not only is it supported by several quantitative arguments, but it fits in with observed developments in the economy. The n log( n ) valuation for a network provides a rough-and-ready description of the dynamics that led to the disappointingly slow growth in the value of dotâ''com companies. On the other hand, because this growth is faster than the linear growth of Sarnoff's Law, it helps explain the occasional dot-com successes we have seen.

The fundamental flaw underlying both Metcalfe's and Reed's laws is in the assignment of equal value to all connections or all groups. The underlying problem with this assumption was pointed out a century and a half ago by Henry David Thoreau in relation to the very first large telecommunications network, then being built in the United States. In his famous book Walden(1854), he wrote: "We are in great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate."

As it turns out, Maine did have quite a bit to communicate with Texas--but not nearly as much as with, say, Boston and New York City. In general, connections are not all used with the same intensity. In fact, in large networks, such as the Internet, with millions and millions of potential connections between individuals, most are not used at all. So assigning equal value to all of them is not justified. This is our basic objection to Metcalfe's Law, and it's not a new one: it has been noted by many observers, including Metcalfe himself.

There are common-sense arguments that suggest Metcalfe's and Reed's laws are incorrect. For example, Reed's Law says that every new person on a network doubles its value. Adding 10 people, by this reasoning, increases its value a thousandfold (210). But that does not even remotely fit our general expectations of network values--a network with 50 010 people can't possibly be worth a thousand times as much as a network with 50 000 people.

At some point, adding one person would theoretically increase the network value by an amount equal to the whole world economy, and adding a few more people would make us all immeasurably rich. Clearly, this hasn't happened and is not likely to happen. So Reed's Law cannot be correct, even though its core insight--that there is value in group formation--is true. And, to be fair, just as Metcalfe was aware of the limitations of his law, so was Reed of his law's.

Metcalfe's Law does not lead to conclusions as obviously counterintuitive as Reed's Law. But it does fly in the face of a great deal of the history of telecommunications: if Metcalfe's Law were true, it would create overwhelming incentives for all networks relying on the same technology to merge, or at least to interconnect. These incentives would make isolated networks hard to explain.

To see this, consider two networks, each with n members. By Metcalfe's Law, each one's value is on the order of n2, so the total value of both of these separate networks is roughly 2n2. But suppose these two networks merge. Then we will effectively have a single network with 2n members, which, by Metcalfe's Law, will be worth ( 2n ) 2or 4n2--twice as much as the combined value of the two separate networks.

Surely it would require a singularly obtuse management, to say nothing of stunningly inefficient financial markets, to fail to seize this obvious opportunity to double total network value by simply combining the two. Yet historically there have been many cases of networks that resisted interconnection for a long time. For example, a century ago in the United States, the Bell System and the independent phone companies often competed in the same neighborhood, with subscribers to one being unable to call subscribers to the other. Eventually, through a combination of financial maneuvers and political pressure, such systems connected with one another, but it took two decades.

Similarly, in the late 1980s and early 1990s, the commercial online companies such as CompuServe, Prodigy, AOL, and MCIMail provided e-mail to subscribers, but only within their own systems, and it wasn't until the mid-1990s that full interconnection was achieved. More recently we have had (and continue to have) controversies about interconnection of instant messaging systems and about the free exchange of traffic between Internet service providers. The behavior of network operators in these examples is hard to explain if the value of a network grows as fast as Metcalfe's n2.

There is a further argument to make about interconnecting networks. If Metcalfe's Law were true, then two networks ought to interconnect regardless of their relative sizes. But in the real world of business and networks, only companies of roughly equal size are ever eager to interconnect. In most cases, the larger network believes it is helping the smaller one far more than it itself is being helped. Typically in such cases, the larger network demands some additional compensation before interconnecting. Our n log( n ) assessment of value is consistent with this real-world behavior of networking companies; Metcalfe's n2 is not. [See sidebar, " " for the mathematics behind this argument.]

We have, as well, developed several quantitative justifications for our n log( n) rule-of-thumb valuation of a general communications network of size n . The most intuitive one is based on yet another rule of thumb, Zipf's Law, named for the 20th-century linguist George Kingsley Zipf.

Zipf's Law is one of those empirical rules that characterize a surprising range of real-world phenomena remarkably well. It says that if we order some large collection by size or popularity, the second element in the collection will be about half the measure of the first one, the third one will be about one-third the measure of the first one, and so on. In general, in other words, the k th-ranked item will measure about 1/ k of the first one.

To take one example, in a typical large body of English-language text, the most popular word, "the," usually accounts for nearly 7 percent of all word occurrences. The second-place word, "of," makes up 3.5 percent of such occurrences, and the third-place word, "and," accounts for 2.8 percent. In other words, the sequence of percentages (7.0, 3.5, 2.8, and so on) corresponds closely with the 1/ k sequence (1/1, 1/2, 1/3…). Although Zipf originally formulated his law to apply just to this phenomenon of word frequencies, scientists find that it describes a surprisingly wide range of statistical distributions, such as individual wealth and income, populations of cities, and even the readership of blogs.

To understand how Zipf's Law leads to our n log( n ) law, consider the relative value of a network near and dear to you--the members of your e-mail list. Obeying, as they usually do, Zipf's Law, the members of such networks can be ranked in the same sort of way that Zipf ranked words--by the number of e-mail messages that are in your in-box. Each person's e-mails will contribute 1/k to the total "value" of your in-box, where k is the person's rank.

The person ranked No. 1 in volume of correspondence with you thus has a value arbitrarily set to 1/1, or 1. (This person corresponds to the word "the" in the linguistic example.) The person ranked No. 2 will be assumed to contribute half as much, or 1/2. And the person ranked k th will, by Zipf's Law, add about 1/ k to the total value you assign to this network of correspondents.

That total value to you will be the sum of the decreasing 1/ k values of all the other members of the network. So if your network has n members, this value will be proportional to 1 + 1/2 + 1/3 +… + 1/( n –1), which approaches log( n ). More precisely, it will almost equal the sum of log( n ) plus a constant value. Of course, there are n -1 other members who derive similar value from the network, so the value to all n of you increases as n log( n ).

Zipf's Law can also describe in quantitative terms a currently popular thesis called The Long Tail. Consider the items in a collection, such as the books for sale at Amazon, ranked by popularity. A popularity graph would slope downward, with the few dozen most popular books in the upper left-hand corner. The graph would trail off to the lower right, and the long tail would list the hundreds of thousands of books that sell only one or two copies each year. The long tail of the English language--the original application of Zipf's Law--would be the several hundred thousand words that you hardly ever encounter, such as "floriferous" or "refulgent."

Taking popularity as a rough measure of value (at least to booksellers like Amazon), then the value of each individual item is given by Zipf's Law. That is, if we have a million items, then the most popular 100 will contribute a third of the total value, the next 10 000 another third, and the remaining 989 900 the final third. The value of the collection of n items is proportional to log( n ).

Incidentally, this mathematics indicates why online stores are the only place to shop if your tastes in books, music, and movies are esoteric. Let's say an online music store like Rhapsody or iTunes carries 735 000 titles, while a traditional brick-and-mortar store will carry 10 000 to 20 000. The law of long tails says that two-thirds of the online store's revenue will come from just the titles that its physical rival carries. In other words, a very respectable chunk of revenue--a third--will come from the 720 000 or so titles that hardly anyone ever buys. And, unlike the cost to a brick-and-mortar store, the cost to an online store of holding all that inventory is minimal. So it makes good sense for them to stock all those incredibly slow-selling titles.

At a time when telecommunications is the key infrastructure for the global economy, providers need to make fundamental decisions about whether they will be pure providers of connectivity or make their money by selling or reselling content, such as television and movies. It is essential that they value their enterprises correctly--neither overvaluing the business of providing content nor overvaluing, as Metcalfe's Law does, the business of providing connectivity. Their futures are filled with risks and opportunities. We believe if they value the growth in their networks as n log( n ), they will be better equipped to navigate the choppy waters that lie ahead.

About the Authors

BOB BRISCOE is chief researcher at Networks Research Centre, BT (formerly British Telecom), in Ipswich, England. ANDREW ODLYZKO is a professor of mathematics and the director of the Digital Technology Center at the University of Minnesota, in Minneapolis. BENJAMIN TILLY is a senior programmer at Rent.com, a dot-com company that actually made money, in Santa Monica, Calif.

To Probe Further

David P. Reed argues for his law in "The Sneaky Exponential" on his Web site at http://www.reed.com/Papers/GFN/reedslaw.html.

Several additional quantitative arguments are made for the n log( n ) value for Metcalfe's Law on the authors' Web sites athttp://www.cs.ucl.ac.uk/staff/B.Briscoeandhttp://www.dtc.umn.edu/~odlyzko.

Chris Anderson's article "The Long Tail" was featured in the October 2004 issue of Wired. Anderson now has an entire Web site devoted to the topic athttp://www.thelongtail.com.

George Gilder dubbed Metcalfe's observation a law in his "Metcalfe's Law and Legacy," an article that was published in the 13 September 1993 issue of Forbes ASAP.

An article in the December 2003 issue of IEEE Spectrum, "5 Commandments," which can be found athttp://www.spectrum.ieee.org/dec03/5com, discusses Moore's and Metcalfe's laws, as well as three others: Rock's Law ("the cost of semiconductor tools doubles every four years"); Machrone's Law ("the PC you want to buy will always be $5000"); and Wirth's Law ("software is slowing faster than hardware is accelerating").

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Semillas y software con la misma patente

Semillas y software: no tan distintos

01-07-2013 - 15:46 - 

 La inminente resolución de un juicio por patentes agrícolas en Estados Unidos podría tener impacto en la comercialización de los programas informáticos.

Martín Cagliani

Cuando Vernon Hugh Bowman decidió plantar 120 hectáreas con soja, ni se imaginó que terminaría siendo enjuiciado por la compañía más importante del mundo en semillas, y menos todavía podía imaginar que su caso podía terminar repercutiendo en la industria del software. En sus palabras, “ni siquiera soy lo suficientemente grande como para llamarme granjero”.

Este hombre de 75 años se dedica al cultivo de soja en el sudeste de Indiana, en Estados Unidos. En febrero último llegó a todos los titulares porque el caso que lo enfrenta a Monsanto, la compañía de semillas, fertilizantes y pesticidas más poderosa del planeta, llegó a la Suprema Corte de Justicia de los Estados Unidos.

Lo curioso es que la resolución de este caso —prevista para el mes próximo, junto con otro relacionado con el patentamiento de organismos vivos— podría tener impacto no sólo en el futuro de los cultivos modificados genéticamente, sino también en la comercialización de programas informáticos. ¿Por qué? Por una cuestión de patentes y derechos de autor.

Los límites del derecho

Todo comenzó con una semilla de soja modificada genéticamente para resistir el herbicida Roundup, ambos patentados por Monsanto. Ahora, ¿qué sucede cuando el dueño de la propiedad intelectual vende una copia de su producto? ¿El comprador es libre de hacer lo que quiera con él?

El problema surge cuando ese producto tiene la capacidad de reproducirse; es decir, de producir copias de sí mismo. ¿La propiedad intelectual del dueño del producto expira tras la primera venta? Según la postura del granjero Bowman, una vez que Monsanto vendió la semilla patentada, la protección de la patente termina para esa semilla, ya que el objetivo natural de la semilla es producir más semillas. Este granjero de Indiana compró soja en el silo de un acopiador. Allí tenían mezcla de semillas que pequeños y medianos productores vendieron al silo. El acopiador en cuestión no decía vender semillas, sino porotos de soja. Pero que también sirven como semillas: se plantan y crecen.

Bowman plantó esos porotos y luego aplicó el Roundup de Monsanto, que contiene el herbicida glifosato, que se deshace de la maleza. Pero claro, es dañino para muchas especies de soja, así que terminó eliminando a las variedades no resistentes al herbicida. Lo único que le quedó fue la soja que contenía la modificación genética creada por Monsanto, especialmente diseñada para tolerar el herbicida que también fue diseñado por ellos. Esta variedad de soja es conocida como Roundup Ready (RR).

Según Ana María Vara, investigadora de la Universidad Nacional de San Martín especializada en controversias técnicas y ambientales, “Bowman sabía bien que a los productores que le compran semillas de soja RR, Monsanto les hace firmar un contrato que dice que no pueden replantar o que, si lo hacen, le tienen que pagar un ‘fee’. Esto es hoy la práctica habitual en las empresas que comercializan semillas: en la Argentina, se llama contrato de regalía extendida”. Y agrega: “Es decir, que Bowman intentó otro camino para sobrepasar el obstáculo de la protección a la propiedad intelectual que dan los contratos que hace firmar Monsanto: compró porotos (porque no se los compró a un semillero) y los usó como semillas”.

“Los analistas coinciden en que, a partir de la audiencia del pasado 19 de febrero, lo más probable es que la Corte Suprema le dé la razón a Monsanto —expresa Vara—. Los argumentos esgrimidos por los jueces tienen que ver, fundamentalmente, con que Bowman, con la soja que compró, tenía el derecho de hacer muchas cosas (como darle de comer a sus animales o hacer tofu), pero no replantarla, porque eso implicaría que estaba haciendo copias de la misma. Y eso no lo puede hacer porque afecta los derechos de propiedad intelectual de Monsanto.”

El tsunami de Bowman

“Monsanto versus Bowman es un caso emblemático para la industria biotecnológica”, dice Cecilia Aloise, del Departamento Legal de Clarke, Modet & Co Argentina. “La resolución de la Corte de Estados Unidos reviste gran importancia dado que definirá la interpretación del órgano jurisdiccional con relación al alcance de las patentes biotecnológicas. Es posible que el caso tenga repercusiones en otras industrias como la informática y el software, que parecieran en teoría encontrarse tan ajenas a la problemática de las semillas”, agrega.

“En el improbable caso de que la Corte sentencie en contra de Monsanto (resolviendo que la venta de la semilla importa el agotamiento del derecho sobre la patente y, por tanto, la imposibilidad jurídica de Monsanto de imponer controles y condiciones al cultivo de su semilla patentada), se abriría un interesantísimo camino no sólo para el productor agropecuario (que podría reproducir y usar la semilla patentada con la más absoluta libertad, sin depender de los términos de venta y licenciamiento de Monsanto) sino que, además, se abriría el juego para otras industrias y comunidades —como la informática— que definitivamente abogará por una aplicación análoga de la teoría del agotamiento del derecho para la replicación y copia del software”, dice Aloise.

Para Beatriz Busaniche, miembro de Fundación Vía Libre y especialista en propiedad intelectual, “hay un eje central a considerar aquí que reúne a las empresas biotecnológicas y a las informáticas, y a toda otra empresa que basa su negocio en la propiedad intelectual”. Y agrega: “La cuestión a considerar es cuándo y cómo se agota el derecho del titular de un derecho de propiedad intelectual, sea la patente de una semilla o el ‘copyright’ de un software. Cuando una persona compra un libro, el derecho del vendedor del libro se agota. La existencia de esta instancia de agotamiento del derecho es la que permite la existencia de bibliotecas, librerías de usados y todo un mercado que va más allá del derecho de la editorial, que no vuelve a cobrar”. Pero en el desarrollo de software hace ya varias décadas que se instauró la lógica del licenciamiento. Cuando se adquiere un programa no se compra ese programa, sino un permiso de uso en determinadas condiciones.

Martín Carranza Torres, profesor titular de “Derechos Intelectuales” en el posgrado “Derecho de Alta Tecnología” de la UCA, cree que “hay enormes diferencias en la manera de encarar el problema por parte de las semilleras y de la industria del software. El régimen de propiedad intelectual que protege a las semillas es el de patentes mientras que el que protege al software es el de derechos de autor”. Para el abogado, “la industria del software está intentando migrar su protección desde el insulso sistema de ‘copyright’ hacia uno más fuerte de patentes, que las semilleras ya tienen desde mucho antes. Las empresas de software están pasando por un momento de altísimo riesgo en lo que se refiere a su protección”. Con respecto a los efectos del caso Bowman-Monsanto, aclara que “la nulidad de una cláusula contractual resultante de la adquisición de una patente afectaría a los contratos futuros”.

Con respecto al impacto que puede tener en la industria informática, Aloise considera que es necesario “hacer una distinción preliminar, ya que no todos los países aplican el mismo régimen de protección a los programas de computación. Mientras que en Estados Unidos el software puede ser patentado (es decir, recibe protección por vía del régimen de patentes), en la Argentina los programas de computación quedan amparados por el régimen de Derechos de Autor”.

“En consecuencia —agrega—, si bien el caso Bowman seguramente tendrá repercusión directa en el régimen de protección del software estadounidense, en regímenes de derechos autorales como el argentino tal influencia sería mucho más indirecta y difusa. Además, una sentencia a favor de Monsanto que condene a Bowman por reproducción ilícita de la semilla patentada difícilmente tenga influencia sobre el régimen argentino de protección del software, dado que es la misma Ley de Propiedad Intelectual la que prohíbe cualquier tipo de copia y/o replicación no autorizada del software”. Pero advierte que “una sentencia en contra de Monsanto sí podría reinstaurar la discusión sobre las limitaciones de los derechos de los titulares de patentes y, en consecuencia, tal discusión podría motivar iniciativas de modificaciones a la legislación autoral”.

La edición original de este artículo se publicó por primera vez en la revista Information Technology N°188 (mayo de 2013).  

InfoTechnology

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