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. icon
    Mike (profile), 21 Jul 2006 @ 12:37pm


    Mike, services are what makes the damn network valuable correct. If someone else sells those services over the network, then the network isn't valuable. Thats my point.

    That's a total contradiction. The network is only valuable if the network owner can sell the services? You really believe that.

    Could I sell advertising on Techdirt? That would bring value to me, but not much to Techdirt. Could I set up a grill in a movie theater and sell hotdogs and profit from that? Sure, I could undercut the moviehouse price, consumers would benefit, but the theater owner would get pretty pissed.

    This is the best example you have? I don't even know how to respond other than to stand amazed that you think this is a valid analogy. First, the Techdirt is example is totally meaningless. That's not about making the site more valuable at all. In the movie example, many would argue that it's not so silly. If there was real competition for food prices more people might be willing to go to the movies and buy food there. It could work out to the theaters advantage and the consumers advantage.

    I'm amazed that you actually consider the monopoly position of the theater owner as a good example. In what sort of world do you live in that you consider the monopoly and artificially high prices a good economic and societal outcome?

    Hell, I will make it easy, would a bar owner let me walk into his place and sell beer out of a cooler for a buck a bottle? I would make a profit and the consumer would benefit, how do you think that would go over?

    This is a total strawman argument, and has no bearing on the discussion. Let me give you a better example that actually fits the discussion at hand. Let's say the owner of a tremendously large building can charge admission to that building -- but to do so, he needs valuable services inside. He can try to set them all up on his own, or he can let anyone set up shop there -- and as the marketplace competes the better services survive and gaining entrance to the building becomes that much more valuable, so more and more people are willing to pay to enter.

    Sure, those services make the network valuable, but without the network, those services are also worthless. You seem to think that its ok for services to be worth something, yet you deny the right of the network to be valuable also.

    Hmm. I don't deny that at all. You seem to misread what I'm saying. If the telcos want to offer their own services, more power to them. But, they shouldn't block out other services. They should let them compete.

    Answer my question, if you had to make the decision, would you lay fiber to equip consumers with high speed access if you knew that all they would buy from you would be that access? Would you take your $50 a month for data? Would you invest a thousand bucks to wire that house for that return?

    Ah, the strawman again. If this is the way the telcos view it then they're shortsighted and stupid -- and, frankly, deserve to go out of business.

    1. They can still offer more services and they can still charge for them. If they really are better/more convenient then people will buy them and they'll make more money.

    2. The $1000 to wire each home number is bogus and you know that.

    But, yeah, if I had the money to invest, and I could get REAL broadband speeds and an open network to as many customers as possible, I'd absolutely do that. And, I'd encourage all sorts of service providers to offer services to make my network that much more valuable. The more, the merrier. And, I'd try to offer additional services myself, knowing that I was competing with these other ones to provide the absolutely best service available.

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