Hazlett in Financial Times: Liberal Spectrum Policies Invigorate Markets, Intensify Creativity

Consumers demonstrate a strong preference for network coordination says Professor Thomas Hazlett, citing the success of Apple's iPhone and DoCoMo's iMode as examples of how consumers benefit when decision makers compete for customers and answer to shareholders.

Commenting in the Financial Times, Hazlett contends that by rejecting network neutrality, both companies have produced custom products and business models that have proven highly successful, prompting change in the marketplace that has benefited consumers.

How the "walled garden" promotes innovation, Financial Times, September 25, 2007. By Thomas Hazlett.

"Hosting this Apple party is a curious way for carriers to lock out innovation. It is even more remarkable that critics could configure Apple's entrepreneurship as an attack on creativity. They claim that only a device that is optimised for any application and capable of accessing any network is efficient.

"They are wrong. What works best for consumers is a competitive process in which independent developers, content owners, hardware vendors and networks vie to discover preferred packages and pricing. When decision-makers compete for customers and answer to shareholders, a sophisticated balance obtains. The alternative proposition, business models voted on by regulators, is a recipe for stasis.

"Apple could have offered its device as an 'open' platform, but instead chose (as with iTunes, iPods and Apple computers) to control how it builds, and how buyers use, its product. It aims for competitive superiority. Quashing its model bops the innovator on the head.

"Unbundling phones from networks is suggested as a policy fix in the US. European phones, working with different Sim cards across carriers and borders, are the model. Innovation in the European Union is said to flourish. But the iPhone came first to the US, as did the BlackBerry and advanced broadband networks using CDMA data formats. That is not surprising given that US networks are afforded wide latitude in designing their systems. Licences in the EU mandate a GSM standard. What is recommended as 'open' in fact deprives customers of a most basic cellular choice: technology."

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