26 September 2007

Walled gardens and innovation

The topic of "walled gardens" comes up here (and elsewhere) from time to time (see this, for example).  So, you might find this article, by economist Tom Hazlett interesting.  As his article points out, there is a tension here ... on the one hand, people seem to like their "walled gardens" -- that is, closed systems where the user experience is controlled.  Recent examples include the iPod-iTunes, AT&T-iPhone, or the Microsoft Zune "gardens". 

On the other, these systems often lead to systems that can be viewed as restrictive and/or anticompetitive.  The recent EU antitrust actions and the interest in structural separation and "wireless Carterfone" are also examples of this.

I don't agree completely with Hazlett.  I think that the pursuit of walled gardens promote innovation.  By analogy, consider the competitive era in US local telephony (1894-1920). A winner-take-all battle drove network investment and innovation.  When the battle was over, innovation lagged.

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