Do Walled Gardens Promote Innovation?

from the not-that-I-can-see dept

A former chief economist for the FCC, Thomas Hazlett, has written an article claiming that walled gardens promote innovation — which seems like an extraordinary claim. Unfortunately, he completely fails to back it up in the article itself. Instead, he mostly focuses on why regulating open access in the wireless space doesn’t make sense — a statement we tend to agree with. Regulating mandatory openness is excessive, and hopefully unnecessary as the industry realizes that openness actually provides more value and opportunity. It’s on that point that we appear to disagree with Hazlett. He claims that walled gardens are better for innovation, arguing that innovations like the Blackberry and the iPhone came first to US networks because of their closed, rather than open, nature. That’s not necessarily accurate. It’s much more likely that both came to North America first because both Apple and RIM are based in North America. And, it’s worth noting that both have expanded overseas.

Hazlett then uses the example of i-mode as another example of a success story of a walled garden — but ignores that it was actually the freedom and openness aspect of i-mode that made it an initial success — and it was the closed nature that later limited it. By enabling many developers to compete, real innovations were created. It wasn’t because it was a walled garden, but because the folks behind the project recognized the benefit of being quite open within that platform. Hazlett also seems to ignore the longer term history of most walled garden platforms. They may have initial success by creating a limited sandbox, but almost all of them eventually suffer as people go in search of more open and more innovative platforms. That’s what happened with AOL. It’s also partly what caused i-mode to stumble when it was unable to keep up with the innovation of others in the space. So, yes, it’s true that mandatory openness may not make sense, but it’s a huge leap to go from there to saying that walled gardens promote innovation. Walled gardens simply leave open the opportunity for someone else to innovate a more open solution.

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Comments on “Do Walled Gardens Promote Innovation?”

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Danny says:

I think I know...

what Hazlett is trying to say. I suppose trying to say that walled gardens force competitors to innovate in order to compete.

If I understand him it would go like this for AOL. AOL went with the sandbox theory therefor other ISPs had to come up with different (and ultimately better) ideas in order to compete.

The problem is that while the walled garden gives you the early edge you are closing yourself off from other sources of inspiration (and innovation).

Jean-Marc Liotier (user link) says:

I-Mode's success is an imperfect example

I-Mode’s success in Japan does have something to do with it being a walled garden : the kiosk model directly inspired by the French Minitel made a simple and effective revenue stream possible, which attracted content. But the main factor in I-Mode becoming so huge is that thanks to its regulatory influence, NTT Docomo managed to get away with abuse of its dominant market position at the time. Later I-Mode launches in other countries with markets more open failed be so successful.

I-Mode and Minitel prove that a walled garden can foster some innovation, but the demise of the Minitel as soon as Internet access spread in France shows that a decentralized and open model is overwhelmingly better.

WMark says:

The reason for walled gardens

Mike’s making some sense here (hooray, Mike!) about walled gardens and innovations, but there’s more to the story….

Walled gardens are…get this…CREATED out of innovation, in a place where there are no standards for “openness” to occur. Companies create their own set of standards so that they can get innovative ideas into the marketplace more quickly (and make higher profits at a faster rate). You can see it historically in every aspect of the technology business. Let’s go back, say, 20-25 years…

There once was company named Digital Equipment Corporation, and in the mid-80’s they were the 2nd largest computer company on the planet, with dreams of “catching IBM by the year 2005 – April or May,” they used to say. They created and unbelievably robust operating system (VMS) and a hardware architecture that scaled from a single user to hundreds of users. It was a completely closed and proprietary system, as it needed to be in order to develop and support the needs of enterprise IT organizations. It was also, by many accounts, the most reliable and user-friendly operating system of its time.

Along came Unix. And, although Unix was developed on a Digital platform, and although Digital had a Unix product, they pretty much stuck to their own “walled garden” while the rest of the market was busy building very competitive systems based on the “Open Standard” of Unix. Guess what happened? Digital sales fell faster than they could get back into the Unix game. They finally arrived, but it was too little, too late, and they were bought by a PC company who, in turn, was bought by HP (one of the “Open Systems” leaders!)

There is a time and place for walled gardens. They have to be created in order to develop and support new technologies where there are no standards, but the world always seems to move to the “open” side. We may be a little ahead of ourselves on “open networks” just yet..there are lots of pitfalls from having an open network, not the least of which is understanding the business model to support it (a few say they do, like Google, who has a history of creating new business models, anyway). When the first open network is a success, the rest of the walled gardens will come crashing down.

By the way, I give RIM another year before they have the same challenge…

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