Innovation versus the telcos
"Isn’t it a little odd, for example, to hear the CEO of a company the size of AT&T talk about needing to get bigger to have the resources to innovate?’
That jab is taken from a perceptive article called "The Phone Companies Don’t Get It" by Mark Gimein (in BusinessWeek 7/31/06). Gimein lacerates the big two phone companies (AT&T and Verizon) for their ambivalence about technology and their anti-competitive behavior. The point is that getting bigger would probably make innovation even harder.
Even as the traditional phone business is being threatened by both established cable TV companies and by the threat of a surge in wireless broadband services, yet phone companies are being dragged reluctantly into the 21st century.
Gimein quotes a former Bell Atlantic/Verizon exec as saying "they do very little fundamental research and very little advanced devlopment... Thir view of the world is "we can buy it elsewhere’." That attitude, while it has some virtues, has created, according to Gimein "a culture distrustful of technology—and of progress….Increasingly their approach has pot the telcos on the wrong side of technological innovation, leaving them in the position of protecting their investments in their networks from the encroachment of new ideas."
To illustrate, the article reports that AT&T had revenue of $80 billion. They spent around $130 million on R&D. Verizon, with $44 billion iin revenue, does not even mention R&D I their annual report.
And the new ideas are encroaching. As we have written before, the convergence of the cable and telco industries is rapid, as the cable TV campaniles seem to be faster at integrating new services and expanding services. As the telcos drag their feat, cable-based telephone services (VOIP) via cable TV lines is gaining traction in the market. Meanwhile AT&T is trying to deny Vonage users access to their switches and to get legislators to stop municipal Wi-Fi.
