• http://www.arussell.org Andy

    Yow. Great?!? I am a fan of the end-to-end principle, but it’s hard to see how the cellphone network was ever end-to-end. It seems like Mossberg has a fundamental misunderstanding of how markets work in the cellular industry. In this industry, we have a market where the dominant carriers have the freedom and market power to refuse to let just anybody sell services over private networks: it’s totally inaccurate to imply, as Mossberg does, that markets aren’t working. (NB: It drives me nuts when people say markets do this or don’t do that. Markets don’t do things, they are institutions through which *people* do things.) The cellular market is working in a way that markets tend to work when scarcity is a central concern: entry is more costly (as Larry pointed out in his rather generous translation), and the conditions and characteristics of innovation are different (i.e. less fluid and more likely to become concentrated within a small number of firms).

    The end-to-end principle seems to work fine in markets where scarcity is not so acute (i.e. the Internet) and where there exist fewer incentives for dominant firms to restrict entry; but e2e never has and probably never will be the fundamental feature of the architecture of ‘smart’ cellular networks. If an outside innovator wants to get into these markets, they have to shell out the money to build their own network; or they can design a modular innovation (handset, service, etc.) that conforms to technical standards and market realities. That’s the way it is, like it or not.

    Referring to firms who are dominant in cellular markets as ‘Soviets’ may (for reasons I don’t quite understand) make for good copy in the Journal; but it won’t change the underlying history and economics of networks in the cellular industry. Oligopolists don’t care if you call them names. I’m surprised to see such a blunt understanding of cellular markets in the Journal.