Why The Telcos Hate Innovation

from the it's-a-threat dept

Business Week is running a fascinating essay that highlights all the reasons why the telcos hate innovation. They're not technology companies, which is highlighted by how little they spend on research. They're in the business of extracting as much money as they can from their network right now -- which is a short-sighted and eventually self-destructive plan. They view real innovation as a threat, not an opportunity, because tech innovation is usually about driving down the cost of infrastructure. That doesn't help them squeeze more money out of it. As the writer of the essay points out, this is evident in the telcos continued fight against things like muni-WiFi, even as they quietly get involved in muni-WiFi projects themselves.

The article also highlights how this lack of technological innovation from within the telcos means that even in areas where they have every opportunity to innovate, such as IPTV, all they're doing is catching up to what the cable providers already deliver. They're missing the opportunity to do much more. In fact, this is a great way to view the net neutrality issue. If the telcos were really about promoting innovation (and the author makes fun of AT&T for claiming it needs to merge with BellSouth to be able to innovate), then network neutrality wouldn't be an issue at all. The company would focus on making its platform (the network) as accessible and as fast as possible -- to encourage more innovation and development from third parties. Instead, the telcos focus, not on encouraging innovation, but on setting up roadblocks. The roadblocks give them the power to squeeze more money out of the network -- but at the expense of actual innovation that would make their networks that much more valuable.

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  1. identicon
    Andrew Schmitt, 21 Jul 2006 @ 9:04am

    Same Channel, Same Content

    It's always the same old story here at Techdirt, the Telcos are big, fat and greedy. They should abandon their business models, open their network, and embrace the tech price elasticty model where demand rises faster than prices drop.

    I don't get it. They already offer flat rate internet pricing. Speeds have been going up over the years. They have not and currently don't block any applications. How is their 'platform' not open to all right now?

    It shouldn't be a surprise that the only VoIP providers making money are the ones that own the network - the cablecos. And there are no barriers to entry for VoIP companies. Owning and squeezing profit from the infrastructure is good business.

    The 'field of dreams' business model where you sink a big investment and wait for the return may work for a $1M Web 2.0 startup, but not for a $10BB venture. Try to find anyone in the world who will sink that kind of investment without knowing where the return will come from.

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