Silicon Flatirons Speakers: AI Bubble Looks Like Telecom Bubble
The AI bubble is real, but when it bursts it will likely look more like the aftermath of the telecom bubble of the 1990s than the dot-com bubble of the same approximate period, speakers said Sunday at Silicon Flatirons’ conference in Boulder, Colorado. Other sessions discussed the use of BEAD non-deployment funds, the FCC's prison jamming proposal and spectrum allocations and sharing (see 2602020034 and 2602020055).
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A boom or bubble is like a “sugar high,” and then everything comes crashing down, said Colorado Attorney General Phil Weiser (D), who founded the Flatirons center at the University of Colorado Law School. Almost every time there’s a new technology, it leads to a bubble, he said, which isn't bad unless it's based on pure economic speculation, like the tulip bubble of the 1630s in the Netherlands.
Venture capitalist Seth Levine, a partner at Foundry, agreed that bubbles aren’t necessarily bad and lead to change. During the dot-com bubble, people “got carried away” with their sense of what the internet could do, but successful companies like Amazon and Chewy grew out of it and learned from the failure of other startups, he said. “It was a bit of a gold rush,” where everyone was looking for a little bit of “pixie dust.”
The telecom bubble happened because there wasn’t enough demand at the time for all the fiber being built, Levine said. With AI, there’s obviously huge demand, but some companies are struggling to build business models to meet demand at rational costs, he said. Companies are investing based on the promise of future returns, but “if the music stops before you have a viable business, you go under.”
Larissa Herda, CEO of the former tw telecom, said her company was part of the telecom bubble, and when it burst, it was one of the most difficult periods in her life. Tw, a spinoff of Time Warner, ran its business to show growth and became a carrier’s carrier, she said, but when Worldcom went bankrupt in 2002, “all hell broke loose.” The capital markets closed, and tw had to lay off a third of its 3,000 employees, she said.
Herda noted that the telecom bubble led to mass deployment of fiber, which AI requires. There were also “a lot of people who lost a lot of money,” she said. “It crushed a lot of businesses -- it almost crushed ours.” Tw was purchased by Level 3 Communications in 2014.
AI is similar to the telecom bubble in that data centers and other infrastructure are being built rapidly, she added. There’s “an extraordinary amount of construction that’s going on.”
However, Levine said there are signs that AI demand is actually “outstripping” supply.
Weiser said AI companies are being valued by the market, in part, based on predictions that a huge amount of the future economy will be transformed by AI. “The premise is” that the technologies are “transformative in a way that will have huge economic implications.”
Future of the FCC
During a second panel discussion Sunday, Public Knowledge CEO Chris Lewis said the assertion by President Donald Trump's administration that it can fire any member of independent commissions, like the FCC or FTC, “flies in the face” of the intent of the law. “We’re already losing an independent, free press,” he said. During the first Trump administration, former FCC Chairman Ajit Pai was reluctant to go after media outlets at the behest of the White House, but that’s not true this time, Lewis added.
Gus Hurwitz, senior fellow at the University of Pennsylvania's Center for Technology, Innovation & Competition, said Trump’s position is that independent agencies are making political decisions, and they should be accountable to the president. If the policy fights aren’t based on technical expertise, maybe decisions should be made “in the political domain,” he said.
Humphrey’s Executor, a unanimous Supreme Court ruling in 1935 that limited the ability of presidents to fire independent commissioners, is “dead precedent walking,” Hurwitz said. There’s little question that the court will limit that precedent when it decides a case on the firing of FTC Commissioner Rebecca Kelly Slaughter, he said. The only question is “how and on what grounds.”
An independent agency doesn’t mean independence from Congress, said Tejas Narechania, a law professor at the University of California, Berkeley. The FCC and FTC “are subject to plenty of oversight from Congress, and that oversight matters.”
Blake Reid, an associate professor at the University of Colorado Law School, said there’s confusion about where SCOTUS is headed on administrative law. It's unclear whether the court is shifting power to Congress, to the president through the unitary executive theory, or to itself, he said.