And I think you're completely right about incumbents. But government can make the problem of entrenched incumbents better or worse.
The reason I think you're right is that I published just last year some research with one of my PhD students, Kathy Fogel, and Bernard Yeung of New York University, where we looked at the list of leading companies in every country in the world in 1975, and then we looked at how many of them died. What we found is that countries whose leading firms of 1975 were more likely to die during the subsequent decades had much higher productivity growth than countries that kept the same leading firms decade after decade.
What that says, I think, is that Joseph Schumpeter is right about innovation. Innovation where creative firms rise up and destroy stagnant firms is where growth comes from. So both the rise of RIM and the fall of Nortel are signs of a healthy economy.
Government can come in with regulations that entrench incumbents, and you asked, for instance, is this going to be the only thing we need to do? Absolutely not. We have to look at the way we regulate the whole telecom industry, because we can allow foreign entrants, but if we give incumbents the power to exclude people from that final loop of copper wire into people's homes or to charge exorbitant rates for it, the entrants aren't going to do much good.
We need to look at how other countries do this, how other countries allow joint ventures between the owners of the copper wire and other companies to upgrade equipment, and so on. But I do think foreign ownership is a first and very important step towards getting our telecom sector to become more productive, and I do worry that our foreign entry restrictions make the incumbent entrenchment problem worse than it would otherwise be.