TELECOM Digest OnLine - Sorted: Wireless Carriers' Veto Over How Phones Work Hampers Innovation

Wireless Carriers' Veto Over How Phones Work Hampers Innovation

Monty Solomon (
Sat, 4 Jun 2005 23:57:50 -0400


One reason the American high-tech industry has been able to create so
many innovative products is that it was able to maintain a close,
direct relationship with the individuals and companies that used its
products. High-tech companies could quickly determine whether their
software, hardware and online services were meeting user needs, and
they could revise and improve these products rapidly and continuously.

This direct feedback loop between the high-tech industry and its user
base became even better and faster in the past decade because of the
Internet. The Net created both an electronic-commerce system where
products could be directly purchased, and electronic forums where user
comments and complaints could be better heard.

Microsoft Chairman Bill Gates has called this Internet-aided feedback
loop "frictionless" because it minimizes the distorting and masking
effects of the middleman. It is one of the purest examples in history
of the benefits of free-market capitalism.

But in recent years, as the high-tech industry has begun to offer
wireless-phone products, this connection between technology producers
and users has been blocked by huge, powerful middlemen. In the U.S.,
the wireless phone carriers have used their ownership of networks to
sharply restrict what technologies can actually reach users.

I call these cellphone companies the new Soviet ministries, because
they are reminiscent of the Communist bureaucracies in Russia that
stood athwart the free market for decades. Like the real Soviet
ministries, these technology middlemen too often believe they can
decide better than the market what goods consumers need.

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