Concentration in Internet Access and Entrepreneurial Truncation of Innovation

Abstract

With a concentrated supply of broadband Internet access, will the future of the Internet be as innovative as the past? This essay reconsiders contemporary debates that view broadband providers as gatekeepers. Instead, it offers an alternative perspective, viewing carriers as platform leaders. That framework focuses attention on the importance of platforms for innovation, and highlights issues missed in contemporary debates. The essay stresses the differences between open and proprietary systems, and between systems with overlapping but competing leadership. Viewed through this lens, platform leadership leads to lower transactions for affiliated partners, but a narrowing of the range of innovation by young firms in comparison to an open and unrestricted structure, a process labeled as “entrepreneurial truncation.” Platform leaders with market power also provide uneven degrees of transparency, use more discriminatory practices, and put unaffiliated business partners at disadvantages, which can deter entrepreneurial innovation as well. The essay concludes that innovation arises in all systems, so the exaggerated claims of contemporary debate lack merit. However, contemporary debate also misses the key point addressed by this essay: that open platforms are superior at addressing a wider and unexpected set of exploratory activities, and that policy can, and should, play an important role in fostering openness.