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 @ 11:15am

    Re: Re: Same Channel, Same Content

    That's a good example. Intel spends Billions but before the market was this big they only had to spend millions on a fab. The risk of spending $2BB on a 45nm fab is quantifiable based on 20 years of CPU volume curves.

    New silicon entrants who target smaller markets or markets with a great deal of uncertainty use the fabless model. TSMC, UMC, others spend $2BB and spread the risk over tens of different semiconductor applications.

    Your analogy fits better with a TSMC than an Intel. TSMC provides a platform and lots of semiconductor companies profit from it.

    I still don't understand how Verizon or AT&T in the retail broadband area have set up 'roadblocks' to other people using this platform.

    Verizon or AT&T are DEFINITELY doing this on the Enterprise side. It takes weeks to get a T-1 and it still costs a fortune.

    I think they would be shocked if they offered DS-3 Broadband for $1k/month, with very high reliability and 1 week turn on, how many DS-3's they could sell. Obviously, there would have to be some stat muxing at those rates but think about the business applications that would emerge with that kind of bandwidth.

    Your arrows are well meant, but shooting them in the retail consumer broadband is misguided.

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