Wireless Carriers' Veto Over How Phones Work Hampers Innovation


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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Monty Solomon
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