Innovation in the Wireless Ecosystem: A Customer-Centric Framework

The Federal Communications Commission’s Notice of Inquiry in GN 09-157 — "Fostering Innovation and Investment in the Wireless Communications Market" — is a significant event at an opportune moment.  Wireless communications has already radically changed the way not only Americans but people the world over communicate with each other and access and share information, and there appears no end in sight to this fundamental shift in communication markets. Although the wireless communications phenomenon is global, the U.S. has played and will continue to play a major role in the shaping of this market. At the start of a new U.S. Administration and important changes in the FCC, it is most appropriate that this proceeding be launched.

The title of the proceeding has been chosen wisely. Innovation and investment are two sides of the same coin; new ideas, new technologies and new business methods cannot happen without investment, and neither investment nor innovation will happen without incentives for innovators and investors to perform their roles. The focus on markets is also a wise choice; some might view wireless as a technology, or perhaps a social phenomenon, and of course it is all of these. But it is the market which brings all of this to fruition and certainly it is the market that determines what innovations and investments customers really want. Of course, this is not enough; key resources such as spectrum must be readily available in order for markets to play their role in eliciting innovation and investment.

Some analysts and pundits have suggested that the market for wireless communications is flawed, controlled by a few large firms that suppress new technologies and limit the market. They call for FCC intervention to fix these flaws via regulation, and many of the issues raised by these analysts and pundits are raised in the NOI.  But good policy requires that intervention in markets must be based on empirical evidence of market failures and the likelihood of a proposed remedy’s efficacy in correcting that failure.  Unless interventions are based on rigorous analysis of market failure and the efficacy of the remedy, the most likely outcome is increased cost, reduced customer choice, reduced incentives to invest and reduced incentives to innovate.