Startups and garage inventors have been a hallmark of American commerce since the days of Thomas Edison. But the current economic crisis is crippling the sector, which is largely made up of small businesses.
Technology firms last year slashed more than 180,000 jobs; the highest number since 2003, according to the Telecommunications Industry Association (TIA), which represents more than 500 companies. So far this year, the trend is continuing. Even tech giant Microsoft, largely immune from past downturns, has announced up to 5,000 layoffs — the first in its history.
Another pipeline of innovation — initial pubic offerings — has also dried up. In all of 2008, just six companies went public, according to the National Venture Capital Association. That compares with 269 IPOs in 1999, the year before the Bush administration took office. In recent congressional testimony, Grant Seiffert, president of TIA, said, “These numbers illustrate the unwillingness of otherwise independent inventors to take personal financial risks in an uncertain marketplace.”
Fortunately, President Obama has consistently mentioned the importance of the nation’s information technology infrastructure in speeches about the economic recovery. The president seems to understand that the nation’s global competitiveness hinges on robust development of low-cost, high-speed broadband and other telecommunications services.
What the president may not understand is the role small businesses play in the industry. More than 80 percent of the TIA’s members are companies that would qualify as small businesses under federal Small Business Administration guidelines.
Yet policymakers in Washington rarely see past the “Big Four” telecommunications giants: Verizon, AT&T, Sprint Nextel, and T-Mobile. Those companies dominate the sector and deploy an army of influential lobbyists in Washington to keep the playing field tipped in their favor.
During the Bush years, the Federal Communications Commission was a virtual captive of the big telecom players. In 2007, I wrote about the FCC’s auction of telecom’s “beachfront” property: the 700 MHz band of the radio spectrum for wireless broadband. Instead of taking us into the future, the FCC’s auction rules were tilted to take us back to the 1950s.
That’s when Ma Bell owned everything from the wires right down to the rotary telephones in our homes. It stifled innovation for years until a series of lawsuits broke open the market. But today, the wireless market is much the same as telephone service in the era of tail fins and bobby socks.
The major carriers don’t own the phones, but they dictate which ones can be used on their systems. As a result, they tightly control what services and innovations can be offered. That’s why countries like Japan and even France, which support “open access,” are far ahead of the United States in telecommunications services.
If President Obama really intends to make an impact on the economic downturn, he needs to open up the telecommunications playing field much like a more enlightened FCC did in the 1960s. It wrenched the handset out of the hands of Ma Bell and paved the way for a host of innovations like answering machines, fax machines, and touch-tone dialing; all of which we take for granted today.