Innovation, regulation and the choices of Mr Wheeler

Written by on January 27, 2016 in Opinion with 1 Comment

Door to new opportunity“The Internet is a great laboratory for innovation.” So said Steve Daines (Republican Senator from Montana) and Michael O’Rielly (Commissioner with the FCC)  in an article in Forbes last week. And so say all of us. Would Facebook, Uber and Netflix have seen the light of day if the Internet was as regulated as the Federal Government seems intent on making it? Almost certainly not, according to these two influential freedom fighters.

Their argument goes that if the Internet was regulated in the same way that telecoms (or other utilities) were regulated then the US would simply not have seen, or benefited from, the $1 trillion GDP boost that internet based companies provided last year.

The FCC, and the Obama administration, by trying to provide a regulatory regime for innovation are, instead, starving it of the oxygen of freedom.

This, of course, does not just apply to bumptious start ups trying to live the American Dream from their garage, but the big boys too. As the article says:

“The Commission’s recent requests for meetings with T-Mobile, AT&T and Comcast to explore details of their latest service plans in the context of the new rules is a perfect example of the “Mother, May I?” dynamic that has been established.”

We need, they say, to get back to the world of ‘permissionless innovation’ that the internet fosters. Or used to.

The communications industry has been wondering for a while how many more burdens can be placed on the already over regulated telcos before they really are forced to face up to the fact that they are utilities. It already takes ‘quite a few lawyers to figure out Net Neutrality.’ As Bob Quinn, senior VP with AT&T said recently. “Since the Open Internet Order came out we’ve had weekly calls with the business units and literally 15 lawyers who are all trying to figure out whether that stuff we’ve invested in… would be a violation of the order.”

Even though the culture within telcos is not geared towards innovation, there is now a growing and urgent understanding – and political will – to transform themselves into digital telcos so that they can take advantage of the opportunities of partnerships, personalisation and products that are becoming available to them. This is their last chance to cut off downward spiralling revenues from core services. To be slowed down, hampered and monitored in what they do cannot be anything except negative. And it will increase costs.

The whole net neutrality issue is one that has confused our industry since it was first proposed.

Oddly, we rather respect Tom Wheeler, the Chairman of the FCC. When he was head of the CTIA he transformed it into a multi-million dollar business, while quietly changing what the initials meant. Originally known as the Cellular Telephone Industries Association, under his leadership it became the Cellular Telecommunications & Internet Association. Now it is just the CTIA.

Strangely, Wheeler, while a supporter and fund raiser for Obama, has a career which would make you think that he understood market economics and the importance of fostering innovation. He worked for venture capital companies, he was on the board of several wireless firms and was awarded the title of one of the ‘Top US wireless innovators of all time.’

The net neutrality situation in the US is not unique. As our friends in high places, Messrs Daines and O’Rielly point out, the European situation is a classic example of what not to do. Over regulation has tied the hands of companies tasked with rolling broadband out across the continent and in so doing, ‘European broadband companies collectively lag behind their U.S. counterparts.’ Why? Because Europe ‘treats broadband as a utility, not a risky and capital-intensive business serving consumers and trying to turn a profit.’ This may be open to question, but for now we will let it be.

One problem, of course, is that what happens in the US happens as if in the spotlight of some TV programme. Everyone watches. And other countries, like India, who decide that net neutrality is a good thing cite the US as the leading player. Which clearly is not the case when it comes to fostering innovation.

If what goes on in the US, and particularly what Mr Wheeler does next, is under the scrutiny of the rest of the world, then the next step needs to be carefully thought through. If the apparently market savvy Wheeler decides to carry on down the path of ever tighter Internet regulation and ever more intrusive scrutiny, then there is a very real danger that investment in the sector will evaporate. If that happens, then instead of that $1 trillion extra GDP and 500,000 jobs, an already fragile eco-system could suffer a massive blow.

Your shout, Tom.

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About the Author

About the Author: Tony is a freelance writer, regular speaker, MC and chairman for the telecoms and digital services industries worldwide. He has founded and managed software and services companies, acts a market strategist and is now Editor of DisruptiveViews. In June 2011, Tony was recognized as one of the 25 most influential people in telecom software worldwide. .


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  1. Joe Zeff says:

    Net Neutrality Again?

    The blocking of “free” internet access to walled gardens will enable a playing field for innovation. How can a startup compete with global incumbents if they have the added burden of needing to fund a users internet connectivity. Sure CSP will sign a deal with FB to offer their subscribers “free” connectivity, as in that agreement they too get access to the subscribers login details and therefor they too can track everything about the users in an effort to provide better “Customer Experience”! I doubt they would do the same for a startup, thus stacking the field against innovation. BTW, have you seen FB partnering with operators in the US or Europe with this same deal, I haven’t. Wonder why?

    IMO Regulators should come down harder on operators. If a Customer pays for a 10Mbps service, it is no more the CSPs business what the customer fills it with, than the bakers what you put in your sandwich. The model the CSPs are pushing is they want to charge you for the bread, and the butcher for the salami.

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