The Law of Accelerating Returns

exponential-growth-graph-1Ray Kurzweil, the chief engineer at Google, was hired because of his history of predicting the future of technology. According to Kurzweil, his predictions are common sense once one understands what he calls the Law of Accelerating Returns. That law simply says that information technology follows a predictable and exponential trajectory.

This is demonstrated elegantly by Moore’s Law, in which Intel cofounder Gordon Moore predicted in the mid-60s that the number of transistors incorporated in a chip will double every 24 months. His prediction has held true since then.

But this idea doesn’t stop with Moore’s Law. The Law of Accelerating Returns says that this same phenomenon holds true for anything related to information technology and computers. In the ISP world we see evidence of exponential growth everywhere. For example, most ISPs have seen the the amount of data downloaded by the average household double every four years, stretching back to the dial-up days.

What I find somewhat amazing is that a lot of people the telecom industry, and certainly some of our regulators, think linearly while the industry they are working in is progressing exponentially. You can see evidence of this everywhere.

As an example, I see engineers designing new networks to handle today’s network demands ‘plus a little more for growth’. In doing so they almost automatically undersize the network capacity because they don’t grasp the multiplicative effect of exponential growth. If data demand is doubling every four years, and if you buy electronics that you expect to last for ten to twelve years, then you need to design for roughly eight times the data that the network is carrying today. Yet that much future demand just somehow feels intuitively wrong and so the typical engineer will design for something smaller than that.

We certainly see this with policy makers. The FCC recently set the new definition of broadband at 25 Mbps. When I look around at the demand in the world today at how households use broadband services, this feels about right. But at the same time, the FCC has agreed to pour billions of dollars through the Connect America Fund to assist the largest telcos in upgrading their rural DSL to 15 Mbps. Not only is that speed not even as fast as today’s definition of broadband, but the telcos have up to seven years to deploy the upgraded technology, during which time the broadband needs of the customers this is intended for will have increased to four times higher than today’s needs. And likely, once the subsidy stops the telcos will say that they are finished upgrading and this will probably be the last broadband upgrade in those areas for another twenty years, at which point the average household’s broadband needs will be 32 times higher than today.

People see evidence of exponential growth all of the time without it registering as such. Take the example of our cellphones. The broadband and computing power demands expected from our cellphones is growing so quickly today that a two-year-old cellphone starts to feel totally inadequate. A lot of people view this as their phone wearing out. But the phones are not deteriorating in two years and instead, we all download new and bigger apps and we are always asking our phones to work harder.

I laud Google and a few others for pushing the idea of gigabit networks. This concept says that we should leap over the exponential curve and build a network today that is already future-proofed. I see networks all over the country that have the capacity to provide much faster speeds than are being sold to customers. I still see cable company networks with tons of customers still sitting at 3 Mbps to 6 Mbps as the basic download speed and fiber networks with customers being sold 10 Mbps to 20 Mbps products. And I have to ask: why?

If the customer demand for broadband is growing exponentially, then the smart carrier will increase speeds to keep up with customer demand. I talk to a lot of carriers who think that it’s fundamentally a mistake to ‘give’ people more broadband speed without charging them more. That is linear thinking in an exponential world. The larger carriers seem to finally be getting this. It wasn’t too many years ago when the CEO of Comcast said that they were only giving people as much broadband speed as they needed, as an excuse for why the company had slow basic data speeds on their networks. But today I see Comcast, Verizon, and a number of other large ISPs increasing speeds across the board as a way to keep customers happy with their product.

2 thoughts on “The Law of Accelerating Returns

  1. Pingback: Fiber Works with Exponential Growth | Lit San Leandro

  2. Pingback: The Law of Accelerating Returns | Doug Dawson |...

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