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Wireless networks are universal, pervasive, and heterogeneous. They are a fertile testbed for interoperability-driven innovation. Text messaging is but one example of how complex event sequences enable interoperability.
So far, we’ve seen how interoperability made SMS the most common global messaging app. We analyzed interoperability’s role in the success of Twilio and ZipWhip and its role in Twilio’s subsequent acquisition of ZipWhip.
But the story of messaging and interoperability is much older than that.
A Very Brief History of Messaging
Gugliemo Marconi built and controlled the first transatlantic texting network. This control made Morse code the world’s first instant messenger. Fixed radio transmitters on either side of the Atlantic transmitted radio signals in minutes. It also created a monopoly.
In 1912, Marconi could charge a penny a word (29 cents/word today). In today’s dollars, transmitting this sentence would have cost you $3.19. Nine years later, the Marconi Telegraph Company became the Radio Corporation of America (RCA). The rate had increased to 25 cents per word ($4.02/word in today’s dollars). The same sentence now cost you $44.22—a fourteen-fold increase!
Today, thanks to interoperability, the open Internet, and our limitless desire to connect, the same message is free. Yet, messaging is a bigger industry today than a century ago.
None of this was automatic. An expanding customer base, a competitive business environment, and an active regulator worked (often adversarially) to create an open, interconnected system. This allowed for interoperability, enabling the wealth of competitive solutions we continue to see today.
While wireless networks have benefitted from interoperability, their lessons can apply to any industry.
The Startup and the Incumbent
The startup and the incumbent are alike. Both are competitors vying for complete domination. For one to succeed, the other has to fail. It is brutal industrial warfare often waged in secrecy.
To win, a startup has to do the usual activities: create a crisp product, have a tight narrative, and build an efficient distribution model. But it must also have a plan when the incumbent finds that the startup has been using its platform in unsanctioned ways.
Twilio, for example, found itself in an adversarial position when it filed its Title II petition with the FCC. Its size and large customer base became its defense. A lesser player would have been driven out of business or forced into mediocrity. Aereo, on the other hand, bet it all on court litigation. When that didn’t play out, their efforts to make peace with the cable providers came too late.
For the incumbent, monitoring unexpected use of its platform is a competitive necessity. Not all non-compliant use needs to be squashed. If one upstart breaks the rules, there will be others. Given enough time, one of them will succeed in extending the platform in valuable ways. The incumbent has to decide whether to buy or copy the startup.
The User
In the gladiator fight between the incumbent and the startup, the user decides who wins. The incumbent is big because the user made it so. If the startup offers a lousy product, it wouldn’t survive.
When Twilio went head-to-head with the carriers, the most vocal group in its camp was its users, who even petitioned the FCC. Aereo, on the other hand, while a high-quality product, didn’t have a user base that couldn’t do without its service. If Aereo didn’t exist, they’d go back to TiVo or just the actual antenna over their house. In Aereo’s case, the user was silent.
If the dominant provider shuts down the disruptor, the user must get vocal. It is the loudest voice the regulator will hear. For this, the user has to do nothing more than demand better products from the competitors and better protection of their choice from the regulator.
The Regulator
The regulator’s role in protecting interoperability cannot be overstated. If interoperability is about starting on the ground floor, the regulator ensures that the ground floor exists. The regulator’s job is to ensure the playing field is equitable and benefits the user. While the marketplace participants try to outsmart each other and win at all costs, the regulator watches out for everyone. This includes the kid in the garage disrupting the old ways of doing things.
Hailed by Peter Drucker as “the most effective decision maker in US business history,” AT&T President Theodore Newton Vail saw the critical role of the regulator. Commercial enterprises, he reasoned, are driven by one goal: to become big. When they become too big to fail, the government overreacts and either takes over their management or creates a state-sponsored competitor. This is an unnatural state for a government and therefore untenable.
Instead, Vail recommended a common-sense regulation framework. A regulator that uses “intelligent review” to ensure the “conservation and protection of the interests of all.” This regulator operates like a company board but with a broader public mandate. In fact, Vail believed that principled public regulation was vital to the preservation of his company.
Yet, the regulator doesn’t always get it right. On March 14, 2002, the FCC decided that the cable companies didn’t have to share their lines with other Internet providers. Twenty one years later, America is still paying the price. Large swaths of the country continue to have only one internet provider. The argument was that it was the early days, and the best ways to deliver connectivity weren’t decided yet. So there was no reason to require cable companies to interoperate with anyone. The FCC called it wrong. Twelve years after that decision Chairman Michael Powell admitted to as much.
The regulator’s job is bound to get more complicated. Zero-Knowledge proofs will require the regulator’s forbearance with free market dynamics and active protection of such self-sovereign technologies from big tech’s money firewall. Most of all, it will require that they understand before they regulate.
Protecting the Adversary
I started on this journey of understanding interoperability when I chanced upon Cory Doctorow’s polemics for the Electronic Frontier Foundation. Doctorow unequivocally attacks all big tech. This is tough to endorse completely.
Competition is about competence, and if big tech remains big tech because they’re the most competent, so be it. It’s not Mark Zuckerberg’s or Jeff Bezos’ job to think about being equitable. They are in the game to win, like everyone else.
I agree with Doctorow that adversarial interoperability needs to be protected. The ability for new services to plug into existing ones “without permission or cooperation from the operators of the dominant service” is under threat. This despite, as he points out, almost every big tech story has an adversarial interoperability story behind it.
The way to regulate Facebook is not to police it but to make it easy to build new social networks. Creating a new social network that still allows users to keep in touch with their Facebook friends without logging in. Very much like Facebook did with MySpace.
This is Personal
This is also personal. My cohort is not only my CallFire (EZ Texting) cofounders but also Jeff Lawson, Ben Chestnut, and John Lauer (to name a few). We all started our companies around the same time, piggybacking on the same technological innovation that was coming of age.
The carrier networks were open thanks to Asterisk, OpenSIPS, and SMPP specs. I doubt the carriers knew this, but they were laying the groundwork for a new phase of interoperability. While the outcomes of our ventures follow a Normal distribution, we all benefitted from the interoperability that the early 2000s unleashed. Therefore, it is incumbent upon us that the new generation of leaders continue to benefit from equitable access.
Finally
Interoperability is the gateway to disruption. First, you connect to the existing system. Then, you change it. The method and speed of change depend on the interoperability you practice.
Free markets work when one participant focuses on equitable access. So while everyone has a role in enabling interoperability, the regulator has the singular job of protecting it.
Author’s Note: This is the sixth and final installment on interoperability. Links to the entire series: I, II, III, IV, V, VI