Skype's Saviours?

The answer, in my article over at GigaOM.com, is resoundingly NO.

But there’s more to it than that.

My argument in this piece was largely an economic one, not as much a dissertation on the independent merits of the protocols in play.  I do think that the issues around SIP remain relevant as they result in far less than satisfactory economics.

However, Skype is now a big company (either within or outside of eBay).  It can afford to be infrastructure-heavy.  It can now spend money on things that it could NOT have when it was founded (and funded) in 2002.  So Skype’s design was perfect for an aenemic startup.  Note that for a number of years Skype had no billing system, no “SkypeOut”, and virtually no infrastructure.

So even if you could accept the shifted economics of moving to SIP (which is far from standardized in practise) — how exactly would you make Skype backward compatible?  How could you possibly make this shift without disrupting the current userbase?  Or are folks proposing that Skype cause every user to upgrade their client on the same day?  That would be suicidal.

I strongly believe that rumours that Skype is negotiating to buy Gizmo5 are totally unfounded — and probably originate within the Gizmo Project team itself.  Take it from the source, Mike.

Full text of the article below, but there’s a vibrant ongoing discussion @ gigaom.

—=—

Could SIP Really Save Skype?

by Ian Andrew Bell

Global Index, a technology owned by Skype co-creators Niklas Zennstrom and Janus Friis via their company JoltID, is the fulcrum of leverage in their ongoing dispute with current Skype owner eBay and its potential purchasers. If you were either the buyer or seller in this labyrinthine transaction, you’d likely be tempted to declare, “Let’s just rip out Global Index and use something different.”

Such a move would undoubtedly take the wind out of JoltID’s sails as Skype tries to find a new home outside of eBay. Indeed, many VoIP pundits insist that Session Initiation Protocol (SIP) could be Skype’s savior. But while it’s true that technologies like SIP and its stepchild XMPP achieve a lot of the same goals as Global Index, such an argument ignores the fact that Skype is as successful as it is because it has exponentially better operating economics than the rest of the VoIP industry –- and Global Index is the singular reason why.

The Promise of SIP
In 2002, as Zennstrom and Friis were facing a bevy of lawsuits of indeterminate scope and the writing was on the wall as to the profitability prospects of a P2P file-sharing network, many in the then-fledgling VoIP industry were busily attempting to re-architect the telephone network in the Internet’s visage. A number of these services, including two from entrepreneur Jeff Pulver — Vonage and Free World Dialup — used SIP at their core. They were consumer-focused services that, in their own way, attempted to mimic the architecture, business structure and design of the public switched telephone network using Internet Protocol technologies.

SIP is now hugely significant in shaping how many telecom networks are architected. But while many of us initially thought that SIP might herald an era of person-to-person multimedia communications free from the control of large companies, it hasn’t exactly worked out that way.

The Drawbacks of SIP
For telecom companies and their vendors, the draw of SIP was that it could be used to transpose the proprietary SS7 signaling network onto the Internet while allowing the calls themselves to transit IP networks –- both at a significant discount to the cost of switched telecom trunking. But even as a client-server phenomenon deployed on the public Internet, SIP is an incomplete solution. On its own it has no way of traversing firewalls or, more importantly, dealing with NAT traversal –- a critical oversight for a protocol created in the late 1990s for the IP address-starved modern Internet.

SIP user agents (such as that software on your computer or that phone on your desk) must also be manually configured to register themselves to a SIP proxy server if users are to be allowed to use them for differing networks. Furthermore, all traffic, addressing and routing decisions in a SIP network are typically handled at the network core or by equipment operated by the service provider. That includes the various workarounds such as STUN that enable folks behind firewalls or using private IP addresses to talk to each other, not to mention derivative (and much cooler) protocols and techniques such as XMPP and Jingle.

If adapting SIP to the vagaries of the modern Internet sounds expensive, it is. By 2006, Vonage had already burned through nearly half a billion dollars. More importantly, SIP architectures are a critically flawed design starting point for a true P2P network. SIP and XMPP networks are really client-server networks masquerading as P2P.

Forgetting about the exponentially more costly business of sending voice or video data across networks, 70 percent of traffic on XMPP instant messaging networks is the result presence updates. Some estimates are that as much as 60 percent of this information is itself redundant. Servicing the traffic on a network such as Skype’s, which consists of some 45 million daily users, would bury most startups in server and bandwidth expenses. Add to that the actual messages themselves, and having to handle the voice channel or video at the core, and it becomes clear that only the big boys get to play in distributed communications services.

Enter the Supernodes
Or do they? As it turns out, features like instant messaging, voice/video chat, and presence management are ideal applications for the technology that Skype’s founders had been playing with for years in the P2P world. The networks using their technology when Skype was founded in September 2002, Kazaa and Morpheus, handled massive volumes of data between peers with no real central core to speak of, but still significant domain control by FastTrack, the company created by Zennstrom and Friis to license technology using the same moniker. The key concept exploited by the services derivative of this technology is the distributed, auto-discovering, self-healing node-supernode model tied together by PKI encryption.

On any of the other VoIP and IM networks such as Gizmo or iChat, each user is a node -– a logical endpoint in a cloud that connects to host computers operated by the service. But with Kazaa, Skype and even Joost, a small percentage of each service’s users unwittingly conspire to provide the network’s backbone in the form of supernodes. Which means that if you have some combination of a permissive firewall, really good port-forwarding on your router and a public IP address on your computer, you, too, can be a Skype supernode. When it comes to traversing firewalls, NAT, and handling distributed authentication and presence management, supernodes do all of the heavy lifting.

That is the reason Skype is able to service 45 million daily users on a fraction of the infrastructure that a SIP-based provider like Vonage needs to deploy. The workload that normally would be handled by equipment owned by the company is distributed among the users themselves.

The Power of Global Index
In order to make this seamless to users, Skype implements a Service Discovery Protocol. Such technologies have always worked well on Local Area Networks (Apple’s implementation is called Bonjour) but often get confused on the public Internet because there is usually no central registry — and because the broadcast packets they use tend to get snubbed by access routers.

When you load it up, it starts with a table of known supernodes and the central Skype server. Skype’s only centralized involvement is in verifying your identity via PKI authentication and providing an update (if necessary) of friendly nearby supernodes. From that point on, your associated supernodes handle every piece of data you share on the network. An added bonus is that supernodes can redesignate the location of the master Skype hosts on your computer whenever necessary.

Since the whole thing is encrypted, and the encryption keys of nodes and supernodes are all validated by Skype’s root key authority, everything on the network is trustworthy and virtually impossible to hack or otherwise corrupt. In other words, the Skype network is fully distributed, self-healing and largely decentralized, but still maintains all of the advantages of command and control desired by a service operator who actually wants to make money from integrating the service.

Thanks to Global Index, Skype operates at cost levels that are believed to be a fraction of those of even the most efficient SIP or XMPP-driven networks. It is this economic advantage that trumps the possibility of forklifting standards-based telephony technologies into the core of Skype’s network. If you truly wanted to replicate Skype’s ingenious — and very practical — design, you’d be better off looking at technologies like Napster, Bittorrent or GNUtella.

Ian Andrew Bell is creator of the team management service rosterbot.com

This is a critical opportunity for you to vote against Rogers with the only ballot that counts: your wallet. You too will be able to purchase unlocked 3G iPhones from him on eBay about a week later.

Why go to the trouble? Well, let’s just say I’m conflicted. I want the new iPhone (love my old one) but I don’t want Uncle Ted taking my purchase of one as an endorsement of his brutal pricing plan. The Globe & Mail makes the following comparison:

“For example, for $75 a month, Rogers provides 300 weekday voice minutes, 750 megabytes of data and 100 text messages. In the United States, a customer gets 450 weekday voice minutes, unlimited data and 200 text messages for the same price.”

750MB for a frequent iPhone user, particularly one who uses the navigation and web browsing tools, is nothing. But in particular it’s the three-year lock-in that requires the greatest consideration. At that end of the deal, Rogers has you by the short-and-curlies. And your obligation to them will almost certainly outlast your 3G iPhone. Needless to say, many of us are pissed.

So how does it work? Well, let’s just say that you can finally thank the French for something.

Thanks to French law, it is illegal for Apple (or any mobile phone handset maker or carrier) to sell a locked phone in the French marketplace without also making the same device available in the popular pay-as-you-go mode, fully unlocked and portable to any carrier.

This puts a stick in the mud for Apple’s lock-in plan and means that France will likely be selling a substantial number of 3G iPhones, until ZiPhone learns how to software unlock them, to eBay resellers like my friend.

So yes, please go and sign the petition at RuinediPhone.com but, since I know you’re going to buy one anyway, get the French iPhone instead of buckling under peer pressure to lock into Rogers’ data plan. It might cost you more in the short run (ironic) but in the long run you will force things to change.

Software unlocking has already forced several key changes in Apple’s strategy that favour the consumer. But a flop of Rogers’ package pricing on the Canadian market can send a clear signal to both companies, and their shareholders. Industry Canada, which should be paying attention, can and most definitely should censure Rogers, and its wireless competitors for a long history of market-limiting pricing (not limited to the iPhone launch in Canada) that has rendered our country a wireless backwater.

Of course, Microsoft can afford to write these cheques practically ad infinitum, but if your tools are so lacking in perceived utility that you need to bribe people to use them (even if the graft is partially subsidized by affiliate fees), perhaps this is not really the best you could hope for from your marketing team.

You can’t take on Google by trying to buy, or even out-feature, your way into the blank-text-box Search Engine arena. Except for some regional players, like Russia’s Yandex, they’ve won and will not soon be replaced.

What Ballmer, and lots of other people, are missing is that the Search marketplace as we know it is poised for a change. Much of this change emerges from the fact that Google fundamentally owns the global Search Market, but much of the opportunity extant in this space comes from the fact that the technology behind search, and how people will make use of search engines in the future, will be a whole lot different than what you see when you type in www.google.com today.

…. but, there is light at the end of the tunnel for folks who are on the outside looking in at Google’s substantial (and impossible to dislodge) market share:

For most people, web search is a kludge.

Think about how you use Google today. Think about why you type things into that blank text space beckoning to you on your Firefox browser, or why you surf over to Google.com and enter a few snippets of text into that empty area amidst the sea of clutter-free Google whiteness ten, twenty, or maybe many more times per day.

In some cases, you overheard something being discussed in a coffee shop. Or you saw a billboard ad. Something offline motivated you to head to the blank text box and ask it to do your bidding. That is Google’s fundamental market opportunity and has remained largely unchanged since the first search engines began emerging in 1995.

This is, however, just a fraction of the reasons why many of us head to search engines. Often the reasons are as much motivated by inadequate information at one site as by anything else. An example: You’re reading an article from a wire service like Reuters, which rarely include photos, about a car or a submarine or a mountain. You’d like to see what that looks like, so off to Google you go. Or you’re looking at a new LCD on eBay, but the seller hasn’t listed the number and type of inputs that come with it; so off to Google you go to try and find the specifications.

In short, most often we go to Google to search for things because our browsers aren’t good at building pathways between like objects on the web. These types of Searches are what I call context-driven. You shouldn’t need to do this. You shouldn’t need to interrupt your surfing to drop off to a third-party site in order to add flavour to the web objects which have already garnered your interest.

What if you could press a button and instantly be delivered relevant information that is contextual to that which you are/were looking at? What if sites displaying articles from wire services (notable for their sparseness) were able to draw in information – in realtime – which added relevant photos, videos, or related stories?

Some of this is already happening, albeit rather jerkily. One of the leaders which started doing this some time ago was Sphere, which was recently acquired by AOL. It took them some time to draw the same conclusions as I have, and they had a difficult time monetizing these services. But on a great enough scale the same technologies which make relevant content possible also make relevant advertising possible. And while click-thrus will be fewer in quantity they can be greater in quality and therefore infinitely more valuable, thanks to much more accurate targeting.

Being accurate in driving these sorts of searches is hard. Whereas Google relies on its users to sift through its top 30 or so recommendations to find the most relevant information, contextual search engines need to be able to do that with high accuracy on the first few matches with little to no meatware — sorry, Mahalo. Many of the current buzzwordy trends such as the Semantic Web initiatives, Social Search, the shift from RSS to Atom, and API-accessible semantic processing are key enablers to make this easier, but there’s still a considerable amount of R&D necessary to beat Google’s current level of accuracy in this regard.

As a result, you need a long lead to get there, and few of the companies dabbling in the Vertical Search space have raised enough capital or have investors who have committed to developing these opportunities. But in the long run, this will augment Web Search and replace much of the traffic that is today driven by Google’s simple, primitive, empty text box.

What’s clear is that Microsoft’s desperate attempts to lure users to its essentially equivalent service to Google’s can only cost its shareholders. A new paradigm is necessary and, fortunately, the opportunity is ripe for the picking, right in front of us all.

This is a rare opportunity where the solution lies in good, solid R&D and product realization — not in leveraging semi-monopolistic product integration or in brute force advertising spending. Is Microsoft bold enough to understand, and embrace, the fact that Search is shifting? Do they have the product and engineering people to make this happen?

According to Valleywag it seems that Jimmy Wales, creator of Wikipedia, has entangled himself where so many have been entangled before: in the gaze of the just slightly right-of-Hitler Rachel Marsden. While few of us were paying attention, Marsden happens to have vaulted her career from falsely accusing SFU’s swim coach of harassment after allegedly stalking him for months to a brief but uninspiring career at Fox News.

How the man smart enough to give us the crowd-sourced encyclopedia of everything was dumb enough to become caught in this web is beyond me.

Note to Jimmy: dude, you’re the starchild of Silicon Valley’s tech culture — lots of smart, good-looking women will probably sleep with you, I’m sure of it. There’s no need to dip into the looney bin.

Wherever Miss Marsden goes, trouble is sure to follow. When she arrived at my alma mater, Simon Fraser University, it didn’t take long for her to enmesh herself in the campus’ greatest controversy in its history. After reportedly stalking the swim team’s coach, Liam Donnelly, for months she accused him of sexual harassment and molestation, also claiming that they’d had a relationship for months. At the same time, Donnelly had been confiding to friends that her aggressive and persistent advances toward him were concerning, and that they jeopardized his position with the school.

In the end, the controversy culminated in the embarrassment of the University, the resignation of the University’s President, a lengthy RCMP investigation, a formal inquiry, and cash settlements for both parties — a blight on the institution.

We newly shamed SFU alumni thought that she would go away quietly, but boy were we wrong. Here’s a chronology of the good times as they keep on rolling:

• 1997: Rachel accuses Liam Donnelly of rape, harassment, and whatever else she can think of. Heads roll. Student body embarrassed. But apparently this started in 1993, when she was a teenager and he demoted her from the neighbourhood swim team.
• 1999: SFU threatens to evict Rachel Marsden from the campus residences for continuing to stalk Donnelly, for harassing and stalking SFU’s Harassment policy co-ordinator Patricia O’Hagan (leading O’Hagan to quit, change her number, and move) and also SFU Criminology Professor Neil Boyd, who takes his case to the RCMP. Clearly a woman with no sense of her own irony.
• 1999: Rachel Marsden’s father, then 56 years old, is suspended for inappropriate conduct toward his female students, reportedly having taken a student on dates, and showing up at the student’s workplace to give her gifts.
• 2000: Rachel Marsden’s father, Claude Arthur Marsden, is found guilty of professional misconduct. “Mr. Marsden engaged in a sexual relationship with a sixteen year old female student.”
• 2003: Marsden becomes a “Babe for Bush”.
• 2004: Marsden is fired by BC conservative MP Gurmant Grewal, where she was working under the alias “Elle Henderson”, after it is revealed she’s facing harassment charges in a BC court.
• 2004: Marsden is convicted of stalking and harassing Michael Morgan, a Vancouver radio host with whom she worked (or tried to) at radio station CFUN, according to some reports from 2002-2004.
• 2005: Marsden remakes herself as a conservative pundit with a blog, columns in the Toronto Star, and fleeting appearances on the O’Reilly Factor, plying her trade as a sort of bargain basement Hyper-Coulter.
• 2007: Marsden is escorted from the building by her new employer, Fox News, after the infamous Salon piece and after some rumours (propagated by her, it seems) that she had begun harassing the host of “Red-Eye”, Greg Gutfeld.
• 2007: Marsden accuses Tony Backhurst, an Ontario police officer and unsuccessful Tory MP candidate of “leaking security secrets to her” after he files a complaint of harassment against her and the RCMP launches an investigation.
• 2008: Marsden gets dumped by Jimmy Wales on Wikipedia, so she leaks some of their email and instant messaging conversations to Valleywag, and sells some of his stuff on eBay (I’ve preserved the auctions in PDF here and here).

The real irony is that Jimmy, apparently, had read the warning label on this explosive device but chose to meddle with it anyway — we men are so stupid. According to his own reports he had altered the Wikipedia entry for her after her repeated requests that the god of Wiki gods do so — obviously, with her notorious past following her every move, spin control was and remains a major priority.

At present, Marsden appears to be living in New York and promoting her new web site Grand Central Political, evidently a job board for conservative spin doctors and other politicos. Vexingly she continues to appear on CNN to comment on everything from the War in Afghanistan to NAFTA. But it’s quite astonishing that this tarnish hasn’t prevented her from continuing to get air time. What exactly does one have to do these days to discredit oneself in politics?

If Marsden is any precedent then clearly, other notorious right-wing political figures like Tom Delay, Michael Brown, and Linda Tripp are sitting on a goldmine of endless punditry possibility — they just need the right sort of publicist. Huzzah! According to Marsden’s personal web site, she is up for the task: “If you are looking for Public Relations or Communications/Media services, click here to contact Rachel“. Far too late for Slobodan Milosevic, I am afraid.

Obviously I’ll be updating and referencing this page for years to come. Keep up the good work, Rachel!

Okay, maybe you didn’t hear it here first, but El Reg reported yesterday that someone among a crowd of “well-wishers” in Albania stole George Bush’s wristwatch as he glad-handed the throngs. Apparently embarrassed Secret Service agents can now bid for the watch on eBay. I’m just happy to be able to gloat. Watch the video and play “Where’s Waldo” with the kids at home.

** note: no one named Waldo is known to be responsible for this deplorable act of wrist-terrorism.

September 21, 2003

Waiting For Spielberg By MATTHEW ROSE

Unlike most urban legends, the one about the Iranian exile stuck at the Paris airport for 15 years is true. Surrounded by a mountain of his possessions near the Paris Bye Bye lounge at Terminal 1 in Charles de Gaulle International Airport, Merhan Karimi Nasseri is still there after all these years — a celebrity homeless person.

Planted on the 1970’s red plastic bench he calls home, and surrounded by stacks of newspapers and magazines, Nasseri, also known as Alfred or ”Sir, Alfred” (title and comma appropriated from a mistake in a letter from British immigration), has organized his life’s belongings into a half-dozen Lufthansa cargo boxes, various suitcases and unused carry-on luggage. On a nearby coffee table spotted with aluminum ashtrays, Nasseri’s universe includes a pair of alarm clocks, an electric shaver, a hand mirror and a collection of press clippings and photographs to establish his present and his recent past. He seems both settled — and ready to go.

To the pilots, airport staff, fast-food merchants and millions who have passed through the terminal on their way to somewhere else, the 58-year-old Nasseri has become a postmodern icon — a traveler whom no one will claim. Little do they know that he is on his way to becoming a Hollywood icon, too. Inspired by Nasseri’s intriguing tale of lost identity, bureaucratic limbo and persistence, Steven Spielberg has bought the rights to his life story as the basis for the new Tom Hanks vehicle, ”The Terminal.”

”I realize I am famous,” Nasseri says in his soft, almost giggly voice, a gravelly mix of his native Persian, the airport French he’s picked up from the loudspeakers and the cigarettes he’s always smoking. As if to prove his fame, he pats a briefcase stuffed with his press clippings. ”I wasn’t interesting until I came here.”

Nasseri’s story is difficult to piece together. Over the years, he has claimed many things about his origins. At one time his mother was Swedish, another time English. Nasseri’s effectively reinvented himself in the Charles de Gaulle airport and denies these days that he’s Iranian, deflecting any conversation about his childhood in Tehran. (”He pretends he doesn’t speak Persian,” his longtime lawyer, Christian Bourguet, says. ”He was interviewed by Iranian journalists and made believe he didn’t understand.”) When we first met two years ago, he insisted that the United Nations High Commissioner for Refugees was attempting to locate his parents in order to establish his identity. But a spokeswoman for the agency dismissed the assertion as ”pure folly.”

Early on in his saga, Nasseri maintained that he was expelled from his homeland for antigovernment activity in 1977. According to a number of reports, Nasseri protested against the regime of Shah Mohammed Reza Pahlevi while a student in England, and when he returned to Iran, found himself imprisoned, and shortly thereafter exiled.

He bounced around Europe for a few years with temporary refugee papers, alighting finally in Belgium, where he was awarded official refugee status in 1981. He traveled to Britain and France without difficulty until 1988, when he landed at Charles de Gaulle airport after being denied entry into Britain, because, he contends, his passport and refugee certificate were stolen in a mugging on a Paris subway. Nasseri could not prove who he was, nor offer proof of his refugee status. So he moved into the Zone d’attente, a holding area for travelers without papers.

He stayed for days, then weeks — then months, then years. As his bizarre odyssey stretched on, Bourguet, the noted French human rights lawyer, took on the case, and the news media piled on. Articles appeared around the world, and Nasseri became the subject of three documentary films. (Oddly, apparently none of his friends or relatives have attempted to contact him.)

ike any number of Samuel Beckett characters, Nasseri has redefined the concept of waiting. But he remains busy, and during office hours when he’s not meeting filmmakers or members of the press, he collects McDonald’s soda tops and endlessly considers his situation in a sprawling, 1,000-plus-page diary that chronicles his journey to nowhere. These rambling handwritten notes recount his encounters with just about everyone he’s met, reporting faithfully everything from the details of his paper chase to some of the witty things he’s said (”I’m not Henry Kissinger”). Nasseri also asks most visitors to sign his journal.

An effete, balding man, Nasseri is well groomed (he washes daily in the men’s room and sends his donated Marks & Spencer clothes to the dry cleaners) with finely manicured fingernails. He smokes compulsively and is forever reaching for his pouch of Pall Mall rolling tobacco. At one point during our interview he coughs, adding with his characteristic sly humor, ”Maybe I caught SARS here in the airport.”

In an eerily Warholian relationship, Nasseri’s closest neighbors at the airport are a photo booth and a photocopy machine. Unlike most movie types, Nasseri does not have a cell phone, and he eats regularly at the McDonald’s in the food court 100 feet away. (”I like the fish,” he says.) The only green in his immediate environment is, ironically, the Sortie (Exit) sign.

In the Spielberg film, which begins shooting this month, Hanks is transformed into a refugee whose country disappears in a diplomatic wink of an eye. As chaos ravages his homeland, Hanks is rendered stateless, his passport turned into an eBay collectible. He’s grounded: a stranger in a strange New York airport. But Hanks is cured of his airport disease and soars to new heights (and, who knows, perhaps another Oscar), thanks to the Hollywood bombshell Catherine Zeta-Jones, who plays Hanks’s love interest, a flight attendant. Nasseri has had no such luck with the ladies and complains that there are no nightclubs in his airport. ”There’s no pleasure,” he says.

While Bourguet confirms that Spielberg’s company, DreamWorks, has in fact bought the rights to his client’s life story, Spielberg himself would not discuss ”The Terminal,” its plot nor Nasseri’s contract. Marvin Levy, a DreamWorks spokesman, confirms that a financial agreement was signed. However, he cautions, ”Mr. Nasseri’s story was an inspiration for the original treatment for ‘The Terminal.’ The film is not his story.”

Rumors of a $275,000 fee for the rights to Nasseri’s life story and certain consulting duties have circulated. ”It’s less than $1 million,” Bourguet says, adding that the money hasn’t changed the predicament of his client. ”While he became a bit richer, Alfred is extremely paranoid and confused.”

Certainly, Nasseri may well be one of the only people on the planet not to have seen a Spielberg production. Asked what he thinks of Hanks, Nasseri replies straight-faced, ”Is he Japanese?”

Regardless of whether Hanks manages to capture the refugee’s deadpan delivery, the Hollywood retelling of Nasseri’s odyssey will undoubtedly include a first-class ticket to the American dream.

Nasseri’s real-life ending, however, is still up in the air.

”Alfred himself will have trouble leaving the airport,” says Glen Luchford, a fashion photographer cum director whose 2001 mockumentary, ”Here to Where,” attempted just such a scenario, with the director, played by Paul Berczeller, failing to tempt Nasseri beyond the concrete gardens of Charles de Gaulle.

”Alfred has to accept that he’s free,” Luchford says sadly. ”But with freedom comes responsibility. He represents people’s worst fears — the idea they might be procrastinating all their lives and end up being rooted to the spot.”

asseri cannot be forcibly moved or repatriated. He is protected by a number of international refugee statutes. According to Bourguet, he is legally free to leave the airport. All Nasseri has to do is sign the identity papers the French provided him in 1999. But the papers identify him as Iranian and don’t recognize his adopted name of Sir, Alfred. And so he can’t — or won’t- sign them: a testament to either patience, or madness.

Nasseri is doubtful about attending the premiere of ”The Terminal,” although his face lights up at the prospect. ”I would probably have technical problems with my papers in Los Angeles,” he says, before adding that he’ll likely leave the airport ”in September or October.”

If he does decide to finally exit the departure lounge, Nasseri could go to any number of places in the world. He says Florida has invited him, and, yes, why not New York, when ”I take over DreamWorks”? (The company is based in California.) And what of the plastic red bench, which has served as his de facto home for the last 15 years and must by now be a collector’s item?

”I’ll take it to DreamWorks,” he says with a smile. ”And send it by FedEx .”

Matthew Rose is a writer and artist living in Paris.

-Ian.

—– http://news.bbc.co.uk/1/hi/business/2955231.stm

US firm cashes in on ‘Comical Ali’

In the latest attempt to cash in on the war, a US toy company has produced dolls based on Mohammed Saeed al-Sahhaf, Iraq’s now-famous former information minister.

Mr al-Sahhaf gained notoriety – and even a cult following – during the war for his refusal to admit that Iraq was being beaten.

Now, in a sarcastic tribute to what it calls Mr al-Sahhaf’s “one-man battle against the observable facts”, US-based Hero Builders has produced 12-inch-tall action figures in his image.

The “Iraqi Dis-Information Minister” doll can be had for $24.95, or for an extra $11, there is a talking version that parrots phrases such as “There are no American infidels in Baghdad. Never!” and “Our initial assessment is that they will all die.”

Toys go to war

The doll is the latest in a long line of war-related dolls from Hero Builders, which boasts that its figures are all hand-made in America.

Among other patriotic offerings, the company also produces the “Saddam Insane”, the “Babbling Osama” and the “Dirty Terrorist”.

It also sells pink dresses and bondage outfits, which it says can be used to demean its villainous dolls.

Since the outbreak of war, a host of companies have rushed out patriotic or topical products, many of which have been accused of poor taste.

This week, for example, electronics giant Sony admitted a lapse of judgement, after attempting to trademark the phrase “shock and awe” – a reference to US bombing tactics – for its computer games.

The Nine Coolest Albums of 2002 Brad Barrish, 18 December 2002

If there’s one thing I know about music it’s that you can never be too ahead of everyone else. There’s nothing more satisfying than being able to say you knew about something before your friends and all the magazines did. It may scare everyone off at parties, but it’s still an exquisite, if solitary, feeling.

Sometimes, however, you have to go to extremes and find unknown stuff purely for the sake of it being unknown.

Which is why I’ve done the research and none of the listening for you, and have compiled a list of the nine coolest albums you can name-drop that, like, nobody’s heard of. Used properly, it will prevent you from buying the new Blur single and telling everyone how much you lo-o-o-o-o-ove it and instead scoff, ‘Um, yeah, I’ve mainly been listening to the new Gore Gore Girls. Sorry, I’m not really into that mainstream stuff.’ I’ve provided what you should say when spouting off about the music and some appropriate desultory comments (to be used at your discretion).

* * *

Black Keys, Big Come Up: ‘Just look at the name of the band. Look. See how it starts with the word ‘black?’ Find me a band that has the word ‘black’ in its name that doesn’t fucking rock and I’ll come over to your house and make some waffles from scratch. Forget about ‘white,’ ‘black’ is timeless, classy, and always cool. Enough about my wardrobe though. Black Keys are making the kind of soulful music that can only come from a couple of guys in their basement. Too bad you’re too scared to walk down a flight of stairs to hear it.’

Amalgamated Sons of Rest, Amalgamated Sons of Rest: ‘Will Oldham is The Indie God. So get on your knees and pray to a little side project of his. Anyone that considers themselves indie knows who Will Oldham is. Just because he didn’t write all of the songs on the album doesn’t mean a thing. He picked this project for a reason and who are you to question that reason? Just accept the fact that greatness is synonymous with Will Oldham. Will Oldham rules.’

Polmo Polpo, The Science of Breath: ‘Aside from having a cool name (that also looks great on a t-shirt), Polmo Polpo is responsible for some of the finest electronic music released in years, and real live guitars make some of this possible. Any electronic outfit worth listening to uses live instrumentation and not just a bunch of fucking knobs and keyboards. Let’s not forget that darkness, and I’m talking sit-in-the-corner-and-contemplate-slashing-your-wrists darkness, is always a good thing. Remember how I mentioned that black is timeless and all?’

Gore Gore Girls, Up All Night: ‘You’re going to feel real stupid after listening to this album and then figuring out it wasn’t The White Stripes that put Detroit back on the map. Oh, and it wasn’t Eminem either. Forget what you think you know about ‘garage rock.’ In fact, while you’re at it just erase that category from your vocabulary. (You’ll sound way cooler just calling everything ‘rock ‘n roll.’ And that’s really what it’s all about, isn’t it?) Gore Gore Girls know all about being cool and playing rock ‘n roll. Enough said.’ (If anyone mentions the MC5, run away.)

Nightmare Tonight, Now It Begins: ‘This is one of those gems that you’re going to have to beg someone to part with. You may have to stab them and pry it from their hands.’ (Which is both cool and rock ‘n roll, so it’s very cool.) ‘There are only 1,524 people with copies of this album. If you’re one of the lucky ones, which I doubt you are, then you know that Nightmare Tonight is an impressive display of Curtis Mayfield meets Nirvana. Save up every penny you have, eat Stove Top Ramen for the next year, and comb eBay every day to get this album.’ (P.S., The A&R person who signs these guys owes me a finder’s fee.)

Mantronix, That’s My Beat: ‘You know nothing of electronic or old-skool hip-hop. Sure, you may be able to rattle off the early names, but you’ve never listened to them: you should know who Kurtis Mantronix is. Kurtis was doing big beat and coming up with some of the most familiar bass lines while the artists who would use them later on were still in diapers. Class is now in session and Kurtis Mantronix is about to drop some science on yo ass!’

Lorien, Under The Waves: ‘It doesn’t get any sweeter than this. Just stick the tap in the nearest tree in the Lorien forest and let it flow. What’s the Lorien forest, you ask? You suck. Personal attacks on your character aside, this album is the loudest quiet album of the year. Really, that’s all you need to know.’

Dyonisos, Western Sous La Neige: ‘If it weren’t for Dyonisos, I would probably insert some blanket statement to the tune of ‘French people embody snobbery in its purest form and the only good thing about France is that David Sedaris lives there.’ On second thought, David Sedaris and Dyonisos are the only two redeeming things about France. If you mention Jim Morrison’s grave, I will come over to your house and beat you to a pulp.’ (Note: verbal attacks on France should be reconsidered upon any impending resurgence of Francophilia.)

Bola, Fyuti: ‘IDM is alive and well. This album is the second coming for all of you smarty techno kids. For the rest of us, it’s the album that’s going to make you feel real silly for listening to all that Richard James stuff for the last year. Bleep-blip-beep-beep-blip-crash-blip-blip-beep. You know the rest…oh, wait, no you don’t.’

* * *

Brad Barrish didn’t listen to any of these albums but will say that he did. He is the founding editor and a contributor to Jeans and a T-Shirt.

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Its testosterone-fuelled traders were fixtures in Houston’s strip clubs. One division of the company spent $2m a year on flowers alone. And its executives used the firm’s corporate jets as taxis. In the first extract from his remarkable new book on the rise and fall of Enron, Robert Bryce describes the heady mix of greed, sex and arrogance that produced America’s most spectacular financial scandal

Monday November 4, 2002 The Guardian

J R Ewing never talked about pipelines. Jett Rink was interested in drilling for oil, not shipping it through a maze of unseen steel tubes. Real men – particularly fictional ones like Ewing and Rink – find oil and gas. Lesser mortals navigate the maze of engineering, metallurgical and legal wrangles that are needed to get those hydrocarbons delivered to the nearest refinery or storage terminal. Face it, there’s no sex in laying pipe.

Yet pipelines are the conduit for the American Dream. Every year, pipelines carry some 550 billion gallons of crude and petroleum products to refineries, airports, rail yards and other locations. Trillions of cubic feet of natural gas are moved through some 2 million miles of interstate, intrastate and local pipelines. Pipelines are the largely invisible, sometimes dangerous, infrastructure that allows America to consume more energy than any country on earth. By the early 1990s, when Jeff Skilling, a former McKinsey consultant, began his rise to power within Enron, the company and its leaders were, says one veteran gas man, “the kings of the American pipeline business”. Enron owned the greatest collection of tubular steel infrastructure ever assembled in one company. It was transporting or selling 17.5% of all the gas consumed in the United States.

Those pipelines were profitable but they were, and still are, heavily regulated by federal authorities. With all of the federal regulations on pricing, the pipeline business is more akin to the utility business than the energy business. Pipelines carry a product from one spot to another, and the owner of the pipe gets paid a fee for the service. It’s a straightforward, profitable business. As one former Houston Natural Gas executive said of pipelines: “All they do is make money. It’s boring, but it’s dependable.”

Perhaps that’s why Skilling hated them so much. Skilling’s brain was too big for pipelines. He was always thinking big thoughts. And big thoughts have no place in the pipeline business. Pipeline companies demand solid managerial skills from people who show up every day and stick to their business. Skilling was not a manager, he was a deal-maker. Exotic financing schemes and the deals that came with them excited Skilling. Collecting nickels, dimes and quarters from what was essentially a new-fangled toll road that no one could even see, did not. The only thing that mattered to Skilling about Enron’s pipelines was that they kept providing him with cash that he could use elsewhere.

For Skilling, elsewhere meant only one place: the trading business. Skilling may have disliked pipelines, but he was an absolute genius at figuring out how to trade the precious commodity that moved inside them.

As soon as Skilling moved on to the 50th floor, he began a hiring binge that didn’t stop until the company went bankrupt. But give him credit: he attracted the best and the brightest. Harvard, West Point, Rice, University of Chicago – every prestigious school in the country began feeding their best MBAs, engineers and maths wonks to Enron. At the same time, Skilling began raiding Wall Street, stealing traders, investment bankers, information technology whizz kids, programmers and every other skill-set that Enron needed.

The fleet of newly hired hotshots were never short of confidence or the belief that they were working at the best, smartest, fastest-moving company in the world. One longtime Enron employee (who held a PhD from the University of Maryland) said: “There’s no question that Enron people arrogantly thought they were smarter than everybody else. There’s no excuse for that. But they were smarter than everybody else.”

By mid-2000, Skilling had achieved his goal: almost all vestiges of the old Enron, the stodgy, slow-growing pipeline-based entity that transported gas and generated a bit of electricity, were gone. In its place, Enron had become a trading company. And with that change came a rock-’em, sock-’em, fast-paced trading culture in which deals and “deal flow” became the driving forces behind everything Enron did.

Traders ran the place. All of the company’s top executives – particularly those close to Skilling – were either traders or had helped run trading operations. And all of them believed in Skilling’s vision of Enron as a trading company. Chief financial officer Andy Fastow (who was last week charged with 78 counts of fraud and money-laundering) had learned the trading business while in Skilling’s group in the early 90s. Greg Whalley, the president of Enron Wholesale Services, the entity that ran the company’s trading operations, had worked in Europe as one of Enron’s chief power marketers. Mark Frevert, the chairman and CEO of Enron Europe, had overseen the company’s European trading operations. Other top execs, such as Lou Pai, had been involved in trading for years.

Pai, who owned a 14,000ft mountain in Colorado, had two passions in life: money and watching young women take their clothes off – but not necessarily in that order. At Enron, he was able to gorge on both. Stories of Pai’s fascination with strippers were legion. One executive recalled getting an expense report from Pai in 1990, shortly after Pai began working for him. “It was $757 [£484] for one lunch. He and two or three co-workers had gone to Rick’s [a Houston strip club]. I said, ‘I’m not approving this. You are going to have to take care of this yourself.’ You just don’t do that in business.”

But Pai’s attitude to women and sex was far from exceptional at Enron. Several women who worked at Enron said that Skilling and the young traders who dominated the company viewed women as a commodity that could be bought and sold just like gas, electricity, or any of the other products Enron was trading. And since Houston’s strip clubs are among the best in the country, it was only natural that Enron’s boy geniuses visited them regularly.

Sex and extramarital affairs are not, by themselves, a problem for companies. But at Enron, the sexual misconduct happened at such high levels that it became a part of the company’s culture. The sex, said one executive, “set the tone for the rest of the company. And you couldn’t get away from it. It was like a humidifier. It was in the air.”

Enron’s massive new edifice to itself, a 40-storey, 1.2 million sq ft building was going to be a monument to trading. The building, designed by acclaimed architect Cesar Pelli, would have four trading floors – each big enough for 500 “transaction desks” – with state-of-the-art communications systems. Chairman Ken Lay and Skilling would move their offices from the 50th floor of the old building down to the seventh floor of the new one. Instead of overlooking all of Houston, their new offices would be on a balcony overlooking the new trading floors. And they wouldn’t have to take elevators to get to the traders: two snazzy, curved stairways were going to connect their floor with the trading area.

The new tower had been under construction for nearly a year and was costing Enron a fortune. Pelli’s design, which would mimic the glass-sheathed oval tower Enron already occupied, was going to give Enron the most expensive building in downtown Houston. The final bill would be about $300m.

Enron was wasting even more money in Europe. The company’s European trading operations were located in an impressive new building named Enron House, located at 40 Grosvenor Place, in the heart of London, on land owned by the Duke of Westminster. Although the building cost $74m to construct, Enron spent another $30m in bringing it up to the company’s lofty standards. When it moved into Enron House in November 1999, the top executives, including Frevert, could sit in their top-floor offices and look down on rear gardens of Buckingham Palace. The rent for the new digs? A bargain at a mere £8m a year.

And if the Pelli-designed building was going to make a statement, it had to be decorated. It needed art. Expensive, trendy art. And Andy Fastow and his wife Lea – modern-day de Medicis – were just the ones to make sure Enron made the right decisions. Beginning in the summer of 2000 and continuing right through until the autumn of 2001, as Enron began to spiral downward, the Fastows were the driving force behind an amazing art-buying binge. They spent $575,000 on a soft sculpture by Claes Oldenburg. They paid $690,000 for a wooden sculpture by Martin Puryear, a record amount for his work sold at auction. The committee also bought works by the sculptor Donald Judd, the painter-printmaker Vic Muniz, the video artist Nam June Paik, the photographer Julie Moos and the painter Bridget Riley. By August and September 2001, the company had spent about $4m on 20 different pieces.

Extravagantly appointed offices were far from the company’s only indulgence. In 1997, Skilling’s gas and power trading group, Enron Capital and Trade, spent about $2m on flowers, according to an auditor who worked for the division. “Oh yeah, we had secretaries sending their bosses flowers, bosses sending their secretaries flowers. For a while, we were the biggest customer for about five florists all over Houston,” said the auditor. “We found out some secretaries were sending flowers to their friends so that the secretaries could get the pretty vases the flowers came in.”

Flowers, first-class airfares, first-class hotels, limousines, new computers, new Palm Pilots, new desks – Enron employees began to expect the best of everything, all the time.

But cost-control was never a consideration for Skilling and Lay. After all, EnronOnline, the company’s new website, was the toast of cyberspace. In the few months since it had been launched in November 1999, it had quickly become the biggest e-commerce site the internet had ever seen. The trading site had been the brainchild of a trader, of course, named Louise Kitchen, a brash young Brit who had been Enron’s head natural gas trader in Europe. Cocky and impatient, Kitchen was emblematic of Skilling’s new version of Enron. At just 31 years old, she was young, rich (in 2001, her total pay from Enron was $3.47m), and she believed that there was no end to what she – and Enron – might do.

While she and her team were developing the site, Kitchen said: “I didn’t need a pat on the back from Ken Lay or Jeff Skilling. It was obvious that we should have been doing this ages ago.”

Kitchen’s attitude was typical among the traders. They were the über-Enroners, the ultimate masters of the universe. Kitchen, along with another thirtysomething trader, a Canadian named John Lavorato, was rapidly consolidating her power within Enron. And within a few months of EnronOnline’s debut, the pair were heading all of Enron’s North American trading operations. There were hundreds of traders, lined up with banks of computer screens, keyboards, telephones – and adrenaline. In the first five months of 2000 alone, the website did 110,000 transactions with a total value exceeding $45bn. Deals could be done in seconds, rather than minutes or hours.

Electricity, natural gas, coal, oil, refined products, bandwidth, paper, plastics, petrochemicals, and even clean-air credits were for sale on Enron’s website. Within a few weeks of its launch in November 1999, EnronOnline was the biggest e-commerce entity in the world. In all, the company was selling over 800 different products.

EnronOnline was the logical outgrowth of Enron’s gas trading business. What had been done by phone and fax was now being done on the web. The company’s trading business surged, in large part, because of tremendous increases in gas consumption in the United States. Between 1983 and 2000, demand for natural gas in America rose by nearly 30%, to 22.5 trillion cubic ft per year.

Enron transferred what it learned in gas to the electricity business. Once confined to trading among utilities, Enron elbowed its way into electricity trading in the mid-1990s. It was selling gas and power, but all the while it was collecting still more information that provided a constant feedback loop. Enron owned pipelines and power plants, and with EnronOnline, it could instantly tell in which direction the market was going. It could also tell who was buying, who was selling, and where it should be placing its own bets in the marketplace.

In a very short time, Enron had remade itself from pipeline company to the largest energy marketer in the country. But Skilling wasn’t satisfied. He wanted more. So in May 2000, Enron announced that it would buy the London-based MG plc, one of the biggest metals traders in the world, for $446m. Lay said that the deal would allow Enron to claim a major role in the $120bn-per-year metals market. “Our business model, which we have proven in the natural gas and electricity markets, will give us a tremendous advantage in an industry that is undergoing fundamental change.”

There it was again: Enron knew how to trade gas; it knew how to trade electricity; now it would apply those lessons to the metals business.

Surely, Enron would succeed. The company owned pipelines and power plants, valuable assets that gave it visibility in the gas and electricity markets in North America, South America, Europe and Asia. It had a big trading operation in Europe. EnronOnline was becoming the de facto standard for traders all over the world. Commodity traders on Wall Street relied on EnronOnline for pricing on dozens of different products and invariably had one of their computer screens tuned to the website. And Enron had one of the most sophisticated trading platforms ever developed. The company’s traders could assess the risk on any deal almost instantaneously. Any deal they made was instantly processed and accounted for in the company’s massive data centre. Almost any position Enron took in the commodities market was quickly hedged with a countervailing position. Furthermore, it had a battalion of traders who were among the sharpest in the business. They made more money, had bigger egos, and drove faster cars than just about anybody.

Skilling became convinced that Enron simply couldn’t lose. In the lingo of his predecessor, Rich Kinder, Skilling began “smoking his own dope”. Skilling had made Enron into the trading company that everyone was talking about. Enron had become the 900lb gorilla in the marketplace. It didn’t just own the casino. On any given deal, Enron could be the house, the dealer, the oddsmaker and the guy across the table you’re trying to beat in diesel-fuel futures, gas futures, or the California electricity market. With all of those advantages, Enron’s trading business must have been a cash machine. Right?

Wrong.

Like every business Skilling created while he was piloting Enron, the trading business was a loser. Sure, trading was glamorous and sexy, but it generated virtually no cash for Enron. And that was a problem. Instead, Enron’s trading operation had an insatiable appetite for cash. Unlike other online energy marketplaces such as Altra or the consumer-goods auction site, eBay – which matches buyers and sellers for a fee – EnronOnline was the principal in every transaction. That’s a very expensive place to be.

If a seller agreed on Enron’s posted price for, say, natural gas to be delivered on a certain date, that seller could sell it immediately to Enron. The company would then take title to the gas and try to sell it to another party. That may not sound like a big deal, but by mid-2000, Enron was doing several billion dollars’ worth of trades every day. And because it was in the middle of every transaction, Enron would have to hold some of those commodities for days or even weeks before it could get the price that it wanted on its trades. That meant Enron had to have billions of dollars in cash at the ready. The sort of ready cash needed to clear and fund each sale and purchase – often called a company’s “float” – can be enormously expensive. And the bigger the float, the bigger the expense.

Every day that Enron held on to a big position in a commodity, it had to pay interest on the money it borrowed to take that position. For instance, one of Enron’s gas traders might be betting that gas prices would rise and therefore go “long” on gas contracts in the amount of 500 million cubic feet of gas. At $3 per 1,000 cubic feet, the gas could be worth $1.5m. That might not sound like much. But Enron had hundreds of traders, some going long, others going short in gas and dozens of other commodities. Supporting all of those positions required huge amounts of capital. And as the number of transactions handled by Enron-Online grew, so did its appetite for capital. The new operation had to have enough cash to keep a liquid market in 800 different products, each of which was seeing a big surge in volume.

In the first six months of 2000, Enron borrowed more than $3.4bn to finance its operations. The company’s cash flow from operations was a negative $547m. Enron was losing money – real money, cash money – hand over fist by just being in business. Interest expenses were surging.

By the end of June 2000, Enron was paying about $2m per day in interest to banks and other lenders. The $376m in interest charges for the first half of 2000 was more than it paid in all of 1996. Despite EnronOnline’s voracious appetite for capital, Skilling was able to convince a nearly constant parade of reporters that Enron’s trading business was the golden goose. Other companies were going to explode as Enron figured out how to buy and sell every part of an individual company’s traditional business. Enron was going to intermediate everything, commoditise everything. Just as the Ford Motor Company didn’t have to own the steel mill to build cars, Enron was going to speed the breakup of every business in the world into its individual parts.

“We believe that markets are the best way to order or organise an industrial enterprise,” Skilling told the Financial Times in June 2000. “You are going to see the deintegration of the business systems we have all grown up with.”

If Enron was going to help that “deintegration”, its trading business was going to keep growing. And that meant Enron would need more capital, lots more capital. But there was a problem: Enron could not raise capital by adding more debt. More debt on its balance sheet might lower the company’s credit rating, which would further increase the company’s already high interest costs. Skilling needed more cash but no more debt. Some smart “financial engineering” was required.

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