German Innovation Stalled at Home | Business| Economy and finance news from a German perspective | DW | 13.12.2004
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German Innovation Stalled at Home

Internet calling, the biggest innovation in communications since the invention of the telephone, was "Made in Germany." But while the international market is booming, regulation has stalled its domestic advance.


Telecommunications is not what it used to be

Until recently, the invention of the cell phone was the biggest advance in personal communications since Alexander Graham Bell invented the analog telephone. Twenty years ago, it seemed almost impossible to imagine that mobile phones, which would soon be available in ever shrinking varieties, would make most people reachable almost anywhere in the world -- at a cost.

But new technology, so-called Internet calling services, or Voice Over Internet Protocol (VoIP) as it is called in the business, is set to challenge both traditional analog and cellular services. The reason is simple: it's cheap, cutting the cost of a call to next to nothing per minute. Experts estimate VoIP phones will soon make traditional phones a relic of the past.

But while this forward-thinking technology was "Made in Germany," it has been slow to catch on at home. In this particular case, Germany has both lived up to its reputation as a country committed to developing cutting-edge technology and a place where innovation is hampered by excessive amounts of regulation and the fear of change.

Berlin birthplace of Internet calling

Voice over Internat Protocol (VoIP) allows people to make telephone calls using a broadband Internet connection instead of a regular or analog phone line. VoIP converts the voice signal from a telephone into a digital signal that travels over the internet before it is converted back at the other end so people can speak to anyone who has a regular phone number.

The technology was the brainchild of German-born Henning Schulzrinne, who first thought of it while on an exchange to Columbia University in 1992. As they say, necessity was the mother of invention, and the cash-strapped Schulzrinne was looking for a cheap way to stay in touch with his family in Germany.

Upon returning home, he further experimented with Internet calling at Berlin's Fokus Institut, eventually developing a protocol known as Sip, which has become the basis for most Internet calling services around the world.

News of Schulzrinne's discovery was soon picked up by large American communication giants like AT&T, Lucent and MCI. In Britain, BT expressed an interest in adopting Internet calling.

Germany sits out tech revolution

VoiP Telefonie

Voice over Internet Protocol changes the way telefoning takes place.

Meanwhile, Henning's advance was widely greeted with suspicion in Germany. Communications companies like Telekom feared losing out on long distance profits to start-up Internet service providers. While foreign phone companies were looking for ways to develop VoID services to their own benefit, German companies took a more obstructionist approach.

The German government and its communication regulatory agency have done little to smooth the way. For one, they have not taken action to force service providers like Telekom to "de-bundle" telephone and Internet services. Until now, those who want to have a high-speed DSL Internet line, which is needed for VoIP calling, are forced to have it bundled -- i.e. part of a package of services -- with a traditional phone line.

Experts fear a repeat of the MP3 fiasco, the technology for which was also developed in Germany, although German firms did not develop lucrative business applications for it. Similar resistance to digital music means that most Germans who buy and download music online use foreign services, like iTunes, with German online music platforms struggling to catch up.

Internet calling could prove to be another missed opportunity.

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