9 Comments

Summary:

If Google’s bid for 700Mhz spectrum materializes in January, it will bring the trillion-dollar infotech and telecom industries into direct competition for the first time in 50 years. The industries were separated at birth in 1956 by a consent decree that banned AT&T (T) from offering […]

If Google’s bid for 700Mhz spectrum materializes in January, it will bring the trillion-dollar infotech and telecom industries into direct competition for the first time in 50 years.

The industries were separated at birth in 1956 by a consent decree that banned AT&T (T) from offering information services. Though the present form of both industries can be traced back to the invention of the transistor, in 1946, their development over the years offers a case study in nature vs. nurture. The interventions against IBM’s pursuit of a monopoly, for example, proved to be far more vigorous and successful than those leveled against AT&T.

Although the two industries operate under the same laws of physics, different levels of competition produced entirely different results. A telephone call between neighbors offers the same quality and experience today as it did 1956, whereas nothing about the infotech industry in 1956 survived 10 years, much less 50. The policies pursued to avoid monopoly in the cell phone business prove the ability of telecom companies to innovate when they have no other choice (although these days it’s the competitive handset industry doing most of the innovating, as Verizon Wireless recently admitted).

The consent decree-derived ban ended in 1982 with the breakup of AT&T. Yet aside from a few skirmishes, products made by the likes Microsoft, Intel and Yahoo do not overlap with those of AT&T, Verizon and Deutsche Telekom. Even after recognizing that communication applications represent a rich opportunity, most infotech companies have sought to become suppliers to the telcos, not direct competitors.

A survey of companies will reveal a range of approaches, but the prevalence of competition leaves telecom and infotech populating opposite ends of a spectrum analogous to that of prisons and hotels. Hotels and prisons offer similar functionality, but the range of available choices produces opposing experiences for their respective inhabitants.

The typical telco pursues a lock-in strategy in which the resources consumed to keep customers captive exceed those applied to refine service offers. The absence of lock-in options, on the other hand, makes innovation imperative for the survival of infotech companies. The competitive dynamics within these industries offer few remaining surprises, but a sector-wide conflict between infotech and telecom remains uncharted territory.

Microsoft pursues the incumbent telcos as the delivery channels for its communications sector ambitions, but will this type of a civility survive if Google (GOOG) executes a prison break by means of the 700Mhz auction? Frontline Wireless already used the U.S.’s declining Internet penetration rankings to energize public interest arguments in favor of changes in the auction rules.

AT&T et al will not shrink from engaging infocom pretenders. Google will need to win the spectrum auction and deploy infrastructure before the prison release can begin.

  1. [...] 29, 2007 If Google’s bid for 700Mhz spectrum materializes in January, it will bring the trillion-dollar inf… That’s how Daniel Berninger starts a rather gracefully-written post on infocom vs telecom. I [...]

    Share
  2. Infocom? Damn, I thought this was going to be about Zork.

    Share
  3. It’s “Deutsche Telekom” with a K.

    Share
  4. [...] November 29, 2007Could a Net Based Services vs Duopoly war be looming? If Google does indeed bid on and win 700MHz spectrum, it will truly be a shot heard around the world, and could be the manifestation of a new American revolution. If it happens it will be the outward  and very public manifestation of a shadow war that is already in progress. The battle is between an elite class of monopolists who constrain the supply of a network commodity to perpetuate fee for service vs an open bazaar for services that ant to be free. Traditionally, the network and services were separate businesses, but services are now a feature of the network, and the dividing lines have vanished: The industries were separated at birth in 1956 by a consent decree that banned AT&T (T) from offering information services. Though the present form of both industries can be traced back to the invention of the transistor, in 1946, their development over the years offers a case study in nature vs. nurture. The interventions against IBM’s pursuit of a monopoly, for example, proved to be far more vigorous and successful than those leveled against AT&T.Although the two industries operate under the same laws of physics, different levels of competition produced entirely different results. A telephone call between neighbors offers the same quality and experience today as it did 1956, whereas nothing about the infotech industry in 1956 survived 10 years, much less 50. The policies pursued to avoid monopoly in the cell phone business prove the ability of telecom companies to innovate when they have no other choice (although these days it’s the competitive handset industry doing most of the innovating, as Verizon Wireless recently admitted).(from Gigaom) [...]

    Share
  5. NOT. Google is not a telco carrier neither is it anywhere close to its core business model to become one. They are slowly getting what they want by pretending to want to bid or even bidding. No infocomm wars, just a transformation slowly forcing the big carriers to offer alternate access to their networks at the right price.

    if you think a pure wireless data network will ever work, i’ll just refer you to a case study of Ricochet. Loved by many, but just not enough $$ to sustain long term BC

    Share
  6. is all wi-fi in the 2.5 Mhz spectrum?

    Share
  7. [...] to blur the lines between technology and communication companies, something that in the States was prevented in the ’50s by a consent degree and likely was enacted in a similar manner in Canada. But if [...]

    Share
  8. [...] you to a case study of Ricochet. Loved by many, but just not enough $$ to sustain long term BC. http://gigaom.com/2007/11/28/here-comes-trouble-infocom-vs-telecom/#comment-730185 Comments for GigaOM [...]

    Share
  9. [...] sexta edição, exploramos um pouco o mercado de telecomunicações (1, 2, 3), o resultado de uma semana de Kindle e continuamos a falar mal da Microsoft, como esperado. [...]

    Share

Comments have been disabled for this post