Online Change Isn't Just Good -- It's a Necessity

By Gary Shapiro

Change is hard -- whether it’s a new job, an old relationship, or even a break in a daily routine. We fight as humans to keep the status quo, even though life itself, from birth to death, is about change.

Our economy only grows from change. In fact, positive change through innovation is part of our national DNA. But this change can pose a serious threat to existing businesses, which often turn to the government to protect the status quo. As a result, our political system tends to interfere with nascent technology, threatening our nation’s greatest innovative companies, our economic recovery and our global dominance of technology.

As prominent venture capitalist Brad Burnham aptly noted in a recent speech, technology is disruptive, and victims of change -- those who refuse to innovate on their own -- increasingly “ask policy makers and regulators to change the rules in ways that tilt the market in their favor.” Regulators need to resist these calls and let the market work. 

In the tech industry, “innovate or die” is the key for our crown jewel American innovators to survive and thrive. Yet overzealous regulators in the Obama administration -- specifically, the Federal Trade Commission (FTC) and Department of Justice (DoJ) -- seem to want to punish companies for innovating and for trying risky new ventures.

In early April, the DoJ said it was challenging Apple’s entry into e-books because Apple insisted on a 30 percent cut and specific favored pricing from publishers. The iPad was not even two years old, and Apple was the new entrant in the e-reader market, yet our government interjected itself. Regulators are also hinting that they might rule that Google is anticompetitive for adding new tools to its search functions, and are investigating its privacy practices.

Armed with nuclear antitrust weapons, U.S. regulators not only hurt our nation economically, but they also demonstrate a sad misunderstanding of how innovation works. Were consumers better off back when Amazon just sold books? Should Netflix have stuck to mailing red envelopes and not bothered with streaming video? Would consumers have preferred that Apple not have added a phone, apps and a browser to the iPod? Of course not. America should be encouraging the kind of constant innovation that has made these and other companies so successful -- and long-term business success in technology simply demands it.

Technology constantly changes consumer expectations. The evolution of search shows that Internet users are no longer satisfied with the old format of static links to other websites, and search engines like Bing, Google and Yahoo! have since adapted to make search friendlier, more efficient and simply better. If a user needs to find a location of a business, a map may be the most useful answer for them. Or, if they are looking to purchase a plane ticket, all three of the major search engines provide tools within their results to help users find the best flights available -- all without ever having to click to another website.

And if you’re one of the millions of Americans who rushed out to buy an iPhone 4S, just ask Siri where to find the closest coffee shop or restaurant and you’ll see firsthand where the future of search is headed.

Ultimately, if an online business is forced to slow its pace of innovation, the company will suffer the same fate as Alta Vista, Infoseek and countless other search engines that didn’t survive. The Internet’s open design, consumer choice, and the nature of competition and free markets almost guarantee it. Technology and innovation have made it incredibly simple to switch to a competing service -- from Pinterest to Facebook, Bing to Google Search, Hotmail to Yahoo! Mail -- it’s all simply one click away.

Regulators need to understand the unique and extraordinary dynamism of the tech industry, which results in “unassailable” market leaders being upended on a regular basis. Companies like IBM, Microsoft and Netscape have all, at some point, been labeled monopolists. In each case, the remedy was not regulation, but new competitive innovation.

We are living in a strange world when politicians proclaim their love for innovation from one side of their mouths, while suggesting that innovation might cause problems for regulators from the other side. In order to permit the engine of innovation to drive our nation’s economic recovery, Washington needs to remember that innovation is about change -- and get out of the way.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times bestselling book, The Comeback: How Innovation Will Restore the American Dream.

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