Hazlett on Property Rights and Innovation

Josh Wright —  5 October 2007

My colleague Tom Hazlett has a characteristically insightful essay in the Financial Times this week entitled “How the Walled Garden Promotes Innovation.” In response to critics that argue that “only a device that is optimised for any application and capable of accessing any network is efficient,” Hazlett offers Apple and DoCoMo as examples of how markets work best to respond to consumer preferences when “independent developers, content owners, hardware vendors and networks vie to discover preferred packages and pricing.”  More on DoComo’s success:

Economist Len Waverman, of the London Business School, writes that DoCoMo initiated three significant controls never before used in wireless: limiting prices charged by independent vendors; showing customers their charges for content in real time, as incurred; and restricting bandwidth-hogging applications.  Rejecting “neutrality”, iMode proved a rousing success, attracting over 35m subscribers by mid-2003. DoCoMo’s mobile rivals responded with managed web platforms of their own. Today, customers choose from bountiful, competing gardens.

Innovators such as DoCoMo and Apple bask in the opportunity to craft custom products and business models. Liberal spectrum policies that invigorate markets intensify that creative dynamic. Regulations that foist preordained structures on consumers and suppliers do not.