How to Really Scare Away Business

Skype provides a cheap way for people around the world to make phone calls through the Internet. So a move by the United Arab Emirates to shut down the Internet phone provider was greeted with outrage.

The crackdown was unannounced and prompted by Etisalat, the primary telecom and Internet provider for the Emirates. The company was losing money to Skype and other Internet phone companies. Its rationale for the shutdown was that Skype and other Internet phone companies had no license to sell phone service in the Emirates.

The local press went wild. An editorial in a newspaper considered to be pro-government, Gulf News, complained that the ban would stifle technology that should be embraced. Expatriates railed against the shutdown and complained it hurt foreign businesses and families.

Predictably, Etisalat’s profitability rose after the ban. Its second quarter profits jumped $403 million, 30 percent more than the same period a year earlier. Its third quarter profits were even more spectacular at $427 million, a 41 percent increase.

But the UAE is far from the only country to ban Internet telephony. Bahrain is the only Gulf state that has not made the service illegal.

Harvard law professor John Palfrey, who has studied Internet censorship, says he has received several reports of Internet telephony blockage or censorship in a wide variety of countries from North Africa, China, Southeast Asia and former Soviet republics.

Palfrey says blocking efforts by countries ultimately fail because people will always find ways around a ban. He advocates finding ways to monetize the new technology even at the expense of the “old industry”.

Unfair bans may kill competition, but they also prevent the betterment of business. If you have competition, there is constant pressure to improve your services and technology; the customers win and so do the best businesses. As with any decent service, if it’s good enough people will find a way to use it. If you learn to compete with strong competition, you’ll build a stronger business.