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August 30, 2004
Corporate Power Squashes Free Enterprise
Because I believe in the power of free enterprise and the good it can create for a society, I get discouraged when reading about collusion between large corporations and government to limit or even eliminate competitive markets. Such is the case in the story told in an article in Forbes by Scott Woolley about the radio broadcast industry.
"For decades the radio industry has crushed incipient competitors by wielding raw political muscle and arguments that are at once apocalyptic and apocryphal. Radio station owners, who formed the National Association of Broadcasters in 1923, have won laws and regulations that have banned, crippled or massively delayed every major new competitive technology since the first threat emerged in 1934: FM radio."
While television and the recording industry have been transformed by the digital age, radio broadcasting has used its duplicitous relationship with politicians of both parties to freeze out new technologies and the entrepreneurs that have tried to make an entry into "their" market.
It now appears that satellite radio may have persevered long enough to have some chance of breaking through the eighty year anti-competitive, anti-entrepreneurial government/corporate blockade. XM and Sirius may create the crack in the armor that will finally let the competitive marketplace work in this industry. If they succeed, watch the floodgates of innovation open. Devices that create convergence with digital networks, super cell phones that provide information like real time traffic reports, internet radio that really works, and replay devices like that work like TiVo for radio are just some of the innovations on the horizon.
However, the fight for entrepreneurial competition in radio broadcasting is far from being won. "If you can't compete, get a bill to outlaw the competition. The NAB may yet win this battle." Sadly, there are numerous other instances of corporations and entire industries that try to stifle the very economic freedom that gave them birth. And there is no shortage of politicians from both parties eager to help.
As a footnote, this piece also is a good example of why it is so difficult for large corporations to "become entrepreneurial." While wonderful new opportunities for innovation are springing up all around them, innovations that could lead this industry to new heights, all the broadcast giants see are threats and their strategy is to protect the status quo at any cost.
Posted August 30, 2004 06:05 AM
Comments
Your article highlights an important difference that has been on my mind lately, that is the difference between free enterprise and run-away, monopoly capitalism. Until we understand this distinction, the concept of capitalism is muddled and the road to fascism becomes shorter. Thanks for your article.
Posted by: S. Smoot at August 30, 2004 01:38 PM
I find it interesting and encouraging that forced monopolies can be toppled by new innovations. XM and Sirus used simple common place, readily available parts and services (GPS, radio, satellite bandwidth) to compete with well established radio community. Nothing they did was ingenious or unusual – they just did it. They can stand against the industry giants though consumer demand. They reached literally “above” where FM/AM could reach, and I am glad that they did.
Posted by: Daniel B. Rose at September 7, 2004 12:07 PM
at Belmont University in Nashville, Tennessee. He consults with a variety of businesses on start-up and growth related issues, and with larger corporations on re-establishing entrepreneurial cultures within their organizations. Dr. Cornwall's current research interests include entrepreneurial finance and entrepreneurial ethics. He has authored or co-authored four books.
