investment in telecommunications research

Today, for commercial technologies, most of the investment is made by supply-side equipment vendors and semiconductor and software companies. Service providers and equipment vendors primarily support research leading to near-term incremental additions to their own products and services, and are likely to keep the results of their short-term research programs proprietary in the interest of gaining competitive advantage.

Although demand-side entities are generally more likely to direct their research investments toward more fundamental and long-time-horizon opportunities, a major economic impediment to doing so is so-called free-riding. Since the goal of a demand-side entity is typically not to gain proprietary advantage, but to make innovative solutions available through the totality of its suppliers, demand-side investments in research usually benefit everybody, that is, all suppliers and other demand-side entities. Thus, companies or entities failing to invest in research can still benefit from the investments of others, and there is a temptation to gain a free ride on those investments—and a disincentive to invest in results that become largely a public good.

In the early 1970s, following years of resistance to the idea, the Federal Communications Commission (FCC) began setting aside a range of radio frequencies for radio telephony. Near the end of that decade, a trial of cellular phone technology had been conducted in Chicago, and the world’s first commercial cellular phone service was introduced in Tokyo, Japan.

By the early 1980s, the FCC was issuing wireless telephony licenses and setting up metropolitan and rural jurisdictions (so-called metropolitan statistical areas and rural service areas), and, by the middle of the decade, first-generation wireless systems were being deployed in the United States. These systems were based on analog cellular technology using the advanced mobile phone system (or AMPS) technology that had been developed by Bell Labs. Cellular technology was being deployed in other countries, as well, although the technology and standards adopted internationally were very different from those used in the United States. Thus began one of today’s most vibrant and competitive industries—competition among wireless providers in today’s market is fierce, and new products and services emerge almost on a daily basis now.

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