11 - Entrepreneurship and Government in Telecommunications

Summary

INTRODUCTION

Entrepreneurship is usually seen as the solution to the key structural problem bedeviling traditional economies in which large and sluggish firms are protected by a subservient government. Entrepreneurs breach the protective walls erected by government and bring forth innovation and efficiency. Joseph Schumpeter's metaphor of the creative destruction of capitalism has thus become a governing cliché, even though Schumpeter himself did not single out small entrants as the destabilizing agents. In the classic view, government is a tool of established firms, and its laws and regulations favor the entrenched incumbents. If the legal barriers are removed through deregulation, the economic barriers set by the incumbents tumble like the Berlin Wall after the withdrawal of Soviet tanks. This notion of government protecting incumbents from entrepreneurs widely prevails. But is it correct?

The subject of entrepreneurship is too large to fit generalizations. One should look at it on a sectoral level, and this chapter will do so for telecommunications. It concludes that entrepreneurial firms exist in this sector not despite government but rather because of it. No matter how creative the nation's entrepreneurs, an unregulated market equilibrium in the telecommunications sector would not likely have much room for entrepreneurial firms. It takes continuous support from governmental policy to create and maintain room for viable entrants and participants. Therefore, without entrepreneurship policy only a little actual business entrepreneurship would occur in telecommunications. This is a conclusion I reach with much reluctance, having supported competition, both as a scholar and as a policymaker.