My research on Enron Broadband Services (EBS) is bearing fruit. Rex Shelby ended up at EBS because his software company, Modulus Technologies, was acquired by EBS at the end of 1998. The key executives at Modulus were Rex Shelby, Larry Ciscon, and David Berberian — I call this group the “Modulus Three.”
The seminal document for the original EBS direction is a Modulus PowerPoint presentation, created by the Modulus Three, titled Changing the Rules of the Telecom Game, presented by the Modulus Three to EBS (then ECI) in June 1998. This was before Modulus was acquired by EBS — back then, Modulus assumed the deal with EBS would be an InterAgent licensing deal (InterAgent was Modulus’ commercial software product) rather than an acquisition.
That presentation analyzed the state of the communications industry, pointed out areas of opportunity for improvement, proposed a business model and technology for EBS, and put forth a list of 6-month and long-term business steps. It included the first presentation of the Broadband Operating System (BOS) idea to EBS — in that PowerPoint, it was referred to as a “WAN-OS”. It also set forth the basic concept of what an “intelligent network” meant.
The Enron Task Force (ETF) prosecutors and the Judge managed to keep that document out of evidence at the EBS trial. It exonerates Shelby and the other EBS defendants by showing that the definitions of technology terms that the ETF and their sorry witnesses tried to use at trial were not the definitions used by the people at EBS who actually created the concepts and built the technology. It also shows that the engineers at EBS accomplished exactly what they proposed in that presentation and that EBS public statements were utterly consistent with both the concept and the status of the BOS technology.
The seminal document on the Enron Intelligent Network (EIN) is a December 1998 white paper, authored by Ciscon and edited by Berberian and Shelby, titled The Enron Intelligent Network — Software Concepts. Again, everything in that document is completely consistent with what EBS actually developed and with what was said publicly about the technology.
There is also an excellent video of a presentation by Rex Shelby at a big EBS training meeting in August 1999. It explains the high points of the EBS business model and describes how the business model drove the technology approach. Scott Yeager talks right after Shelby at that meeting. It’s a pretty good primer, I think. And it was also kept out of evidence by the ETF and the Judge at the EBS trial.
These key documents were based on an even earlier presentation by the Modulus Three, titled Changing the Industry: It’s the Applications, Stupid. The modern concepts of services embedded in the network, cloud computing, “we have an app for that”, etc. are in those materials. What the Modulus Three wrote about back then is now the preferred architecture of today’s most successful technology companies!
Oh, and one other thing. EBS received a patent on the BOS. The primary patent author was Larry Ciscon — other contributing authors included Steven Reynolds (another Modulus guy) and Scott Yeager. The writing of the patent application was begun as soon as Modulus was acquired by EBS, and it was finalized in 2000 and submitted in 2001. Ironically, final approval of the BOS patent was granted in 2005, just a few months before the EBS trial began. Again, the BOS patent exonerates Shelby and the other EBS defendants by showing that the definitions of technology terms that the ETF tried to use at trial were not the definitions that EBS had documented in the BOS patent. The depth of the ETF’s incompetence (or misconduct) is seen in the fact that these definitions were submitted to the government in 2001 (years before the EBS indictments) and, yet, the ETF still insisted on using false definitions at the EBS trial.
The more I research EBS and the EBS indictments, the more angry I become. People may choose to quibble over the witch hunt aspects of the Skilling/Lay indictments, but the misconduct of the Feds in the EBS indictments is stark. And the tactics used by the ETF in the EBS case are essentially the same ones practiced by the ETF in the Skilling/Lay case. At a minimum, the obvious abuse in the EBS case should motivate people to examine all the Enron-related cases with a more objective and skeptical eye.
The ETF’s fundamental failing wrt EBS was in not having a solid grounding in the technological aspects of the case.
OTOH, as advanced as the EBS technologies were, they were way ahead of their time. As in, “there’s no there there”. EBS + Blockbuster + 10 years = Netflix, but at the time, nobody had the bandwidth to support the consumer applications that they were trying to market.
Makes me wonder what Rex et al could have made of Modulus if they’d partnered up with Sun or Cisco (who were also aggresively courting them).
Barton, thank you for the comment — I am finding my research on EBS to be fascinating. In my research on EBS, I have looked at tons of weekly status reports from the EBS engineers and gotten direct input from a number of them. If Rex Shelby had gone to a re-trial, he would have had just about all the critical EBS software engineers lined up as defense witnesses. Here is what I learned.
From a legal standpoint, the key question is whether the EBS defendants lied in public statements about the technology. First, there was only one public statement about the technology from Rex Shelby, and everything he said came right from technical documents written by engineers — so if he was lying, then so was most of the EBS engineering team.
The ETF absolutely had no clue about the technology. Indeed, it is unthinkable that the ETF would indict people for lying about technology without having a clue what the technology actually was. Unfortunately, the jury also had no background in technology — so the ETF was able to mislead the jury on very basic concepts — for example, the concept of software releases that improve the functionality over time. From my reading of the EBS trial transcripts, if the jury had understood basic technology concepts, they would have laughed at the Feds and kicked them out of the court room.
The engineers I talked with think they were exactly at the right place on the technology curve — namely, at its forefront. They were pretty much spot on in the technology capabilities they built and the infrastructure they put in place. And EBS was largely meeting the projections they put in place in 1999 — like any high-tech startup, they projected losses for a period of time — Skilling talked about the losses at the famous January 2000 Analyst Conference.
In a sense, Rex Shelby did partner with Sun and Cisco (and other leading technology companies). One of the little appreciated aspects of EBS is the depth of the key partnerships that Shelby and others built in the industry — again, a step which would have served EBS well in the long run. Shelby talked about the Sun and Cisco partnerships in his video-taped internal presentation in August 1999.
I understand that Sun did make an acquisition offer to Modulus before Modulus decided to accept the Enron offer, a fateful decision. But, from what I hear about Shelby, he is not one to look backward. But, from my perspective, I would love to have seen what Shelby could have done with EBS if it had survived and he had stayed there.