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Dana Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
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Moore’s Law defines the history of technology. It held that the number of circuits etched on a given piece of silicon could double every 18 months as far as its author, Intel co-founder Gordon Moore, could see. Moore’s Law has spawned constant revolutions since then, not just in computing but in communications, in science, in a host of areas. Moore’s Law applies to radios, and to optical fiber, but there are some areas where it doesn’t apply. In this blog we’ll take a daily look at new implications of Moore’s Law in real time, as it rolls forward to create our future.
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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

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March 23, 2004

The Real Issue In Telco Dominance

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Posted by Dana Blankenhorn

In covering the CTIA show in Atlanta this week, I sometimes found myself boiling with rage, and not knowing the reason.

I have learned to listen to this rage, and to keep it inside until I find the reason.

I found the reason while talking to Andrew Bud. Bud is an Englishman running Mblox, an Atlanta-based company (they're a few miles southeast of the Atlanta Airport) bringing Premium SMS billing to the U.S. market.

What Premium SMS does is bring indirect sales to the cellular data market. That's a key entrepreneurial idea. It's an idea being fiercely resisted by most U.S. carriers, which is why the market for cellular data is so explosive in Europe and Asia, why so many new entrepreneurs are coming up in that world, and why the U.S. is behind in the biggest opportunity of this decade.

Bud explained it all. “There’s always an instant of pain in the transition from direct to indirect” content sales, he said. “You give up margin in exchange for volume.” It’s hard for operators to let go. “Verizon categorically prevents any content from going through Premium SMS – and they have the platform. I have a client who wants to invest millions of dollars in the ring tone business in the U.S., but won’t until this changes.”

Why won't Verizon let go? It's because, thanks to competing technical standards -- GSM, CDMA, etc. -- there is no direct competition here. If there are even two carriers in Italy there's real competition, because customers and channel partners can easily switch back-and-forth. But in the U.S. we're talking about completely different technologies -- you have four little monopolies, with no real competition.

As a result, take a look at who runs the Mobile Entertainment Forum, cellular data's leading trade group. There's Bud, an Englishman. He's joined by Israeli Rann Smorodinsky, Austrian Christian Lutz, Canadian Lorane Poersch, German Dr. Thomas Wiemers, and a host of other Europeans whose exact nationality is a little hard to define from their biographies.

These are the leaders of a great new industry, and that industry's brains aren't based here, but in Europe. They're based in Europe because America based its industry on monopoly, while a single technical standard forced European carriers to compete.

Call me a patriot, or call me a jingoist, but when I see my country shut out of the brains in a great new industry because of monopoly greedhead attitudes, I'm going to get a little mad on.

There is still a small window in which American entrepreneurs can jump in here, get something started, and start competing. But that will never happen as long as people like Paul Palmieri of Verizon dominate the industry. (Image courtesy Mayhem Ltd., which sells greed heads (among other great products))

Palmieri thinks that Verizon should run the whole channel, from the store to the suppliers to the consumer, and share nothing. It's a fat monopolistic attitude that's working because consumers don't know better. No one is leaving Verizon Wireless for Cingular because Cingular supports Premium SMS billing and Verizon doesn't. It's only when they do that this roadblock will be moved.

But by that time, I suspect, Europeans and Asians will own all the niches. And it's when management, when money, is held in another country that you truly learn what economic dependence is. That's when you become a colony.

America is about to become an economic colony of Europe again, and it's our own fault. If that doesn't get you mad, I feel sorry for you.

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