Disruptive Technologies and Schumpeter s Creative Destruction Model

Disruptive Technologies and Schumpeter's Creative Destruction Model

Just as a number of jurisdictions awarded Western Wireless "Eligible Carrier Status," signaling improved competitive operating conditions for wireless providers versus land-line carriers, the FCC and the National Telecommunications and Information Administration (NTIA) have both publicly exclaimed in numerous speeches, press statements, and written documents their dissatisfaction with the speed with which traditional land-line carriers are deploying broadband capability to "last mile customers." ^[5] To this end, the FCC, in 2002, is ardently conducting tests of an extremely disruptive wireless technology—ULTRA WIDEBAND RADIO (UWB). ^[6] This technology is literally so robust that Intel Corporation is working on a 500 MBPS UWB chip. ^[7] That data rate is the approximate equivalent of 11 T3s coming to a laptop or other device wirelessly. Other wireless technologies are also pushing the broadband envelope, as shown in Table 5. ^[8]

Table 5: Wireless Technology Comparative Table

Year	1974	1988	2001	2003	2005	2002	2002
Stage	1G	2G	2.5G	2.75G	3G	4G	5G
Frequency	RF	RF	RF	RF	RF	RF	RF and FSO
Standard	AMPS	GSM/TDMA/CDMA	GPRS/1XRTT	EDGE/1XRTTDO	WCDMA/CDMA2000	iBurst UWB MeshNetworks Spitfire Navini IP Wireless	Terabeam AirFiber UWB
Bandwidth	Narrow	Narrow	Narrow	Narrow	Broad	Broad	Broad
Circuit/packet	Circuit	Circuit	Packet	Packet	Packet	Packet	Packet
Analog/digital	Analog	Digital	Digital	Digital	Digital	Digital	Digital
Speed: 4G and 5G definitions are not yet agreed upon	9.6 KBPS	9.6–14 KBPS	20–144 KBPS	60–384 KBPS	384–2000 KBPS	2000–20,000 (Japan defined) 5000–100,000 KBPS (U.S. defined)	>100,000 KBPS

This competitive technology landscape is somewhat particular to the United States and several other countries. That is, in the United States, when one obtains a wireless license from the FCC, the FCC stipulates frequencies, bandwidth, channels, and power authority. That is, in the United States, regulators decoupled technology from the license itself. This is at odds with most other non-U.S. wireless regulators, where the license authority also specifies the technology, i.e., 3G licenses in Europe require W-CDMA technology. This fundamental state in the United States drives Schumpeter's "creative destruction" model. ^[9] That is, no technology is sacrosanct, and as soon as something newer and better comes along, U.S. businesses have been quick to change and envelop the new—without regulatory encumbrances. Intel championed Schumpeter's concept of "creative destruction" by constantly introducing newer and better chip solutions before their existing offerings have run their respective full lives. ^[10] Such competitive actions permitted Intel to strategically manage prices, moving back and forth from what Michael Porter refers to as "pricing by differentiation" and "pricing to cost." ^[11] And, Texas Instruments just announced development of a single-chip wireless communications device by 2005. ^[12] Additionally, we can see from figures that product development and technology adoption rates are taking place in shorter time frames, thereby increasing the chance for miscalculations.

Further defining the competitive landscape and "time-to-market" imperatives, a survey of wireless system and product design engineers indicated a significant compression of development cycle times. ^[13] This survey yielded the data in Table 6.

Table 6: Development Cycle Time Survey Results

Perceived Development Time	1999	1997
1 to 3 months	16.1%	7.0%
4 to 6 months	29.6	18.5
7 to 12 months	27.8	26.0
1 to 2 years	24.3	33.9
>2 years	2.2	14.5
Source: Wireless Design. Adopted by J. Nugent, 1999.

Charting these results emphasizes how dramatically professional opinions have changed concerning development times and "time-to-market" imperatives. As we can see, opinions have virtually flip-flopped in just two years regarding development cycle time. Complementing cycle time reductions, we also see newer, disruptive technologies generally being adopted at faster rates.

^[5]http://search.ntia.doc.gov and http://www.fcc.gov.

^[6]See http://www.time-domain for an excellent tutorial on ultrawideband radio.

^[7]http://www.intel.com.

^[8]http://www.fcc.com—the FCC generally defines broadband as 200 KBPS in both directions.

^[9]Hunger, J. D., & Wheelan, T. L. Strategic management (7th ed.) (p. 300). New York: Prentice Hall.

^[10]The New York Times, Intel Corporation insert, June 4, 2002.

^[11]The New York Times, Intel Corporation insert, June 4, 2002, p. 62. For a complete explanation as to how to use Porter's discrete competitive models in conjunction with one another versus as opposite solutions, see Nugent, J. H. (2002). Plan to win: Analytical and operational tools—Gaining competitive advantage. New York: McGraw-Hill.

^[12]The Dallas Morning News, September 3, 2002, and http://www.ti.com.

^[13]Wireless System Design, March 1999, p. 9, as adapted by J. Nugent.