Newswise — IEEE Spectrum, the Magazine for Technology Insiders, reported today that the theory that the value of a communications network is proportional to the square number of its users, first proposed by Ethernet pioneer Robert M. Metcalfe in 1980, is incorrect.
Metcalfe's Law seemed to offer a quantitative explanation for Internet boom mantras such as "network effects" and "first mover advantage," but this could be construed as dangerous in the nascence of Bubble 2.0, as demonstrated by IEEE Spectrum contributors Bob Briscoe, Andrew Odlyzko, and Benjamin Tilly. "If there is to be a new, broadband-inspired period of telecommunications growth, it is essential that the mistakes of the 1990's not be reprised."
The authors compare Metcalfe's Law to other growth curves, including Reed's and Sarnoff's laws, and argue that network growth increases not linearly or exponentially, but logarithmically at a much slower rate. "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, which would make isolated networks hard to explain. Telecommunications providers need to value their enterprises correctly, and decide if they will be pure providers of connectivity, or make their money by selling or reselling content, such as movies or television."
To see the article "Metcalfe's Law Is Wrong" by Bob Briscoe, Andrew Odlyzko, and Benjamin Tilly (IEEE Spectrum, July 2006), go to http://www.spectrum.ieee.org/jul06/4109.
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