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The Telecom Economy Dude

Posted by: Michael Mandel on May 26

James Enck of EuroTelcoBlog has what he calls “big problems” with my recent post on telecom, where I argued that “This is the beginning of the telecom revolution, not the end.”

Despite the fact that I quote him approvingly, Enck seems to have several strong objections, including this one:

Yes, dude, telecom is undergoing a revolution, but revolutions are intended to depose those in power, and revolutions frequently kill lots of people and give rise to all sorts of other dislocations which few could have foreseen earlier. Revolutions never result in the former ruling class having a higher standard of living as a result.

Oddly enough, I agree with that statement 100% (despite the fact that he called me ‘dude’, which is how my teenage kids often refer to me). A telecom revolution to me means exactly the same thing that it means to him—massive dislocations and disruptions.

However, here’s where we disagree. Enck says that

I believe the overall effect will be profoundly deflationary in the aggregate.

Deflationary? No. Prices may be falling, but in the end, any breakthrough technology, almost by definition, creates new uses, and new revenue streams, which no one thought of before.

The share of the economy going to communication hasn't risen in recent years, which has created the intense competition and struggle, as the pie is split between existing players and new players. However, from a historical perspective the communications share is almost inevitably going to increase, perhaps by a lot, as people figure out new things to do with the increased capabilities.

Of course, as Enck says, it may not be the incumbents who benefit, but from a macro point of view that's irrelevant.

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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