One of the things you’ll see me kvetch about every once in a while here at The Glittering Eye is the sorry state of entrepeneurship here in the U. S. of A. these days. The voice communications segment is a case in point.
Some of you out there may think that Internet telephony is a great technical breakthrough. That’s hooey. Internet telephony, voice connectivity via voice over Internet protocols (VoIP) as provided by the Vonages, Skypes, and so on is a Rube Goldberg that exists solely as an artifact of the pricing schemes of the voice communications service providers (which may in turn be at least in part an artifact of regulatory requirements). They exist because there’s a price point for them to exist. In principle the big carriers can knock them out of the market any time they choose simply by closing down that niche.
But that’s not how the big carriers are choosing to combat these upstarts. Rather than compete with them they’ll litigate them to death:
NEW YORK – Internet telephone company Vonage Holdings Corp. disclosed Friday that it’s the target of yet another patent lawsuit from a telephone company, in this case AT&T Inc.
That makes AT&T the third major phone company to sue Vonage, which until recently was a leader in selling phone service that rides the customer’s broadband connection.
Shares of Vonage fell 13 cents, or 7.8 percent, to $1.54 in Friday’s trading, before losing another 26 cents, or 17 percent, after hours.
In a filing with the Securities and Exchange Commission, Vonage said AT&T filed the lawsuit Wednesday in U.S. District Court in Madison, Wis. It said it has been in discussions with AT&T to resolve the dispute but can’t guarantee the case won’t go to trial.
Whether the complaint is justified or not may well be moot—the litigation costs will probably be enough to put them under. And it’s not just the big guys going after the fledgling challengers. It’s the established big guys going after each other as well:
WASHINGTON—Gary Forsee, CEO and President of Sprint Nextel, told lawmakers on Oct. 2 that a competitive, high-volume business telecommunications market is unfairly rigged to favor AT&T and Verizon. As a result, Forsee said, the nationwide rollout of broadband is faltering.
Wholesale availability—known as special access—to the nation’s two largest carriers’ networks is a critical component of virtually every competitor to AT&T and Verizon. Access to these dedicated circuits allow competitors to connect their networks and reach their customers.
“Despite this central role in telecommunications and broadband deployment, the special access market is a failure,” Forsee told the U.S. House Subcommittee on Telecommunications and the Internet. “[The failure] is apparent in the overwhelming and increasing market share of the two dominant special access providers, AT&T and Verizon.”
[…]
“The FCC has the tools, the evidentiary record and the Congressionally mandated obligation to ensure that special access prices are just and reasonable,” Forsee said. “I urge this subcommittee to let the FCC know that it must meet its obligation by reducing special access rates to reasonable levels.”
Subcommittee Chairman Rep. Ed Markey noted a General Accountability Office study that found the FCC’s deregulatory policies have resulted in higher special access prices and limited competitive choice.
“Because prices today are higher than what a truly competitive market would support, current and future wireless providers will expend funds on special access that would be better spent reducing prices to consumers or deploying more and better broadband facilities,” Markey said.
If you can’t beat ’em, regulate ’em.
In theory being an entrepeneur means undertaking risks to bring goods and services to the market. Nowadays entrepeneurship has been replaced by managers who mitigate their risks through lobbying and litigation. Rather than bringing creative new solutions to the market at a lower price it’s certainly a lot safer and easier to bring the same old products to the market at their same old high prices now, isn’t it?
Consumers certainly don’t benefit by these arrangements. Only lawyers and politicians.
