An essay titled “The Phone Companies Still Don’t Get It” is featured in the July 31 edition of Business Week. It’s also available online.
Essentially, the essay contends that the telecommunications carriers charge too much, stifle competition, don’t know how to innovate, and don’t spend nearly as much as they should on research and development.
I agree that telecommunications carriers charge too much for their services, though competition from VoIP service providers and standards-based IEEE wireless technologies, such as WiFi and WiMax, have the potential to keep them somewhat honest. I’ll also agree that the telco behemoths work to discourage and prevent the market-based dynamic of competition. They’d rather just divide the market among themselves in peaceful oligopolies, like back in the old days before the anarchic Internet forced them to mend their complacent ways.
Where I diverge from the author of the essay is in relation to his next two points, namely that telcos don’t know how to innovate and that they should spend more money on research and development.
Oh, I agree that telcos don’t know how to innovate. As for as I’m concerned, that’s good. I don’t want them innovating. If they were capable of innovation, they’d charge too much for the resulting products and services and they would have a better chance of exterminating their smaller competitors. The result would be a pitiably limited range of choice for consumers and businesses, not to mention permanently high prices for offerings that inevitably would slide into mediocrity.
Similarly, I don’t want telcos spending their money on R&D. I just want them to provide me with a big fat communications pipe. For them to do that, all they need is networking gear from Cisco, Nortel, Alcatel, Juniper, and countless other network-infrastructure providers. I don’t want them devising and selling content, architecting walled-gardens, and putting up toll booths wherever they see fit. It’s okay for them to deliver basic service bundles through their pipes — say, broadband Internet access, IP TV, and VoIP — but I don’t want them restricting what I access through those pipes or applying service charges when I patronize a site that doesn’t belong to them or is outside their circle of preferred suppliers.
We don’t need vertical integration in the telecommunications supply chain. The system is more efficient, and more responsive to customer demands, when communications-equipment providers sell their gear to service providers, who then provide us with the resulting pipes, through which we decide, as consumers, what types of creative or informative content we wish to consume from the purveyors or sites of our choice. There’s plenty of room for everybody in that decentralized market model.
So, give us a pipe, telcos, and leave the technological innovation and content to people who know what they’re doing.