isen.blog

A truism circulating in the halls of Bell Labs in the 1980s and 1990s was that the pharmas and the telcos had higher operating profits than other business sectors because they both had huge upfront costs driven by research and development and long times between risk and reward.

The telcos got blind-sided by the Internet, and now they (and the cablecos, and soon the cellcos) are in a life or death struggle to bring the Internet under control via privatization, traffic discrimination, IMS, DRM, anti-competitive mergers and innovations aimed at law enforcement and emergency calling. Meanwhile, as the telcos embrace such sustaining legal and technological innovations, they fight other innovations that threaten them because they strengthen the public's access to the Internet. These most notably include the complete re-thinking of spectrum regulations and the growth of municipally controlled networks. The telcos point to economic imperatives while the Internet's proponents emphasize freedom to innovate and freedom of speech.

A recent article by Nobel Prize winner economist Joseph Stiglitz, points out a parallel struggle between Big Pharma and its beneficiaries. He writes

What would we think of a Scrooge who could cure diseases that blighted thousands of people's lives but did not do so? Clearly, we would be horrified. But this has increasingly been happening in the name of economics, under the innocent sounding guise of "intellectual property rights."

Stiglitz outlines the fact that generic drugs (e.g., for AIDS) can cost 100 times less than the same drugs that are protected by intellectual property rights, and many die as a result. He attacks Big Pharma's claim that such monopolization spurs big research spending by noting that drugcos spend more on advertising and marketing than they do on research, and they're far more likely to fund research on "lifestyle drugs" than on killer diseases that afflict poor countries.

Stiglitz notes,

We tolerate such restrictions in the belief that they might spur innovation, balancing costs against benefits. But the costs of restrictions can outweigh the benefits.

[See illustration -- David I]

The antidote Stiglitz proposes is a medical prize fund to reward the development of public-domain cures for low-profit-potential diseases like malaria. This, he says, could be one of several ways to promote innovation where it is needed.

The right organization to offer such a prize, I think, would be the Bill and Melinda Gates Foundation.

Hmmm. How could we motivate similar thinking about how to keep the Internet free in ways that transcend current telco thinking, to avoid the danger that the telco business model's restrictions on free speech and little guy innovation do not hang heavier than its economic benefits. Should there be a prize? If so, perhaps there's a Big Pharma tycoon out there who'd fund it.

Thanks to Rob Berger (via IP and DewayneNet) for the link to Stiglitz.

Technorati Tags: DisruptiveTechnology, Economics, Organizational Culture, Telco, WalledGardens