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Internet Entrepreneurship in Europe

Venture Failure and the Timing of Telecommunications Reform

Niko Marcel Waesche

From its launch in 1997, the Frankfurt technology stock exchange developed spectacularly as did other European technology exchanges. Many Europeans thought that a new age of entrepreneurship had dawned. Following the downturn, however, the search for blame began. Much of this blame was undifferentiated and subjective. Public policy lessons were not drawn. Written by a well-known commentator of the European venture capital community, this book analyses the rise and decline of European internet entrepreneurship. The effects of both the public promotion of venture capital investments as well as the timing of telecommunications reform are examined in detail in various European countries, in particular in Germany and Sweden. The book contains a wealth of unique data on the failure of European internet ventures and draws several technology and telecommunications policy conclusions.
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Chapter 3: Unregulation and the Death of Distance

Niko Marcel Waesche


1 As described in the previous chapter, in the second half of the 1990s, the internet represented a global window of opportunity for new ventures and other small firms. For the cost of setting up an internet site, a small firm could instantaneously achieve a worldwide presence and sell products or services to customers or businesses. Distance-insensitivity was unique at the time, because it stood in strong contrast to the pricing regime associated with basic telecommunication services, in which transnational connections were both distance-sensitive and costly.2 Drawing on a diverse set of literature, including practitioner thinking, economics and sociology, the previous chapter described the formation of two different types of globally connected data networks. One type were the private networks of industrial multinationals and their data-sharing partner companies. These networks served to coordinate worldwide business processes. They replaced the company-only networks of the past. The second type was an emerging, transnational consumer network; the country-only online services of the past were left behind. Both types of networks shared some common characteristics including embracing internet technologies as a worldwide standard. The most innovative internet start-ups dedicated themselves to connecting the two to create seamless business webs (Tapscott et al., 2000). But the business and consumer networks described here shared a further characteristic, which was not discussed in Chapter 2: they were both run over leased lines. By doing so, they bypassed the regulation regimes of basic telecommunication services. This impacted on the pricing of both, and allowed them to be...

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