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with a glut of infrastructure investments

Although it is sometimes argued that the venture capital invested in industry is supplanting traditional mechanisms for achieving innovation, venture capital represents development funding, not research funding. Leading-edge developers that have a profit requirement will quickly curtail their research directions in favor of achieving corporate financial goals. Moreover, the surge in funding that peaked in 2000 has fallen off almost as quickly as it appeared. Total telecommunications venture funding peaked at nearly $5 billion in the second quarter of 2000 before dropping back down to roughly $560 million per quarter just 2 years later—a level that has remained fairly constant into 2006.

Despite venture capital’s important role in the U.S. innovation system and its many contributions to U.S. leadership in high technology, including telecommunications, its role is not to supply the basic and applied R&D that has fueled many of the major telecommunications advances mentioned in this report and elsewhere. Instead, it seeks to fund specific product innovation that can deliver short-term returns. Venture capital funds typically have a lifetime of 5 to 7 years, and investors seek significant commercial returns in that time frame. In contrast, major telecommunication advances can require longer-term efforts often continuing for a decade or more and requiring risk-taking, broad-based, interdisciplinary, multifaceted support—such as that historically provided by the Bell System or provided today when federal agencies fund long-term academic research. Over the long term, the venture capital model itself depends heavily on being able to select promising areas for investment from a stream of results from long-term research.
Another major change in the telecommunications industry has been a major shift from basic, high-margin, wireline telephony services provided by the public switched telephone network (PSTN) to wireless and broadband services that both complement and compete with the traditional services and are associated with lower margins.14 As a result, revenue is shifting

TIA’s 2004 Telecommunications Market Review and Forecast (Telecommunications Industry Association, Arlington, Va., 2004) observes that (p. 33) “[t]he local exchange market is declining for the first time since the Great Depression. Consumers are beginning to cancel wireline services and rely on wireless
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2021-04-20 08:19:06, views: 23, Comments: 0
   
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