Phoning from the edge

John Hagel and John Seely Brown
17 Jan 2008

The peripheries of the global business world are the spawning grounds of new innovation. In these vital locations edges emerge and consolidate before giving rise to new edges of their own. Executives who stay mindful of these dynamics can make the most of their innovation strategies.

The telephone business provides a classic example. Two decades ago, wireless telephone networks created a vibrant new edge to the wire-line telephony business. Many analysts at the time viewed mobile phones as a fringe event, something that would never take hold in the mainstream telephone business, except perhaps as a status symbol among the very wealthy.

Twenty years later mobile telephones are ubiquitous in the U.S. despite continuing challenges in service coverage, particularly in buildings. In many other parts of the world, these devices have replaced the old wire-line phone as the primary means of communication. What was on the edge has now become the core.

Google initiative

While highly innovative in many dimensions, the mobile phone business in the U.S. in at least one respect represents a curious throwback to a previous era. In 1968 the Federal Communications Commission issued a landmark decision known as the Carterfone ruling, deciding that any communication device could be connected to the wire-line phone network as long as it did not damage the network.

But no such ruling applies to U.S. wireless networks, where service providers retain the right to determine which mobile devices are permitted to connect to their networks. The edges, in this case represented by mobile device manufacturers, have remained tightly controlled by the core. This stands in sharp contrast to another major wireless telephone market, China, where the freedom to connect into wireless networks has spawned rich innovation by device manufacturers.

China's mobile network operators were responding to the proliferation of bootleg phones connecting to their networks without authorization. Without any effective ability to enforce restrictions on mobile device manufacturers, the network operators decided that it would be better to let these devices hook up 'legally' rather than simply have them 'steal' bandwidth. This choice, born of necessity, opened up a flood of innovations, including robust audio short message service (SMS), and multiple screens both within and outside a phone to allow selected information to be displayed without opening the device, and private information to be displayed within.

A player from the edge of the communication business is now challenging this anomaly in the U.S. through a series of innovative initiatives. Google (GOOG), a highly successful Internet company but a novice in the phone business, has decided that the mobile communications business will become much more innovative if device manufacturers can be freed from the control of network operators.

Coming together

In a bold effort to reshape the mobile communications business, Google has harnessed a series of edge plays. First, it has targeted the 700-megahertz portion of the wireless spectrum that had been allocated for use by television stations and will now be made available for mobile telephone service in an auction scheduled for Jan. 24.

In an effort to influence public policy, Google indicated it would be prepared to bid for this spectrum if the FCC would agree to a number of rule changes, including the requirement that any mobile device manufacturer would be able to freely connect into services provided over this spectrum.

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