Open Competitive Marketplace

1
Open Competitive Marketplace

• U.S. Telecommunications Act of 1996
• Eliminate Telco/Cable Cross-Ownership Ban
• Transfer from Monopoly to Free Competition
• Key Questions
• New Communications Infrastructure
• Provision of Information Services at Competitive
  Prices
• History Railroads and Highways Switching and
  Network Service Management

2
Content

• Fragmented, Specialized, Different Logistics
  (News, Stock Market Quoting)
• Broad Distribution to Multiple Markets
• Current Production, Different Distribution
• Application of New Technology (Internet News)
• New Modes of Creativity (Dream Works)
• High-Quality Content Providers High Leverage
  Power, Independent of Distribution

3
Packaging

• System Integrators (_at_Home) Standards,
  Manipulation Infrastructure
• Distribution Packagers (AOL, MTV, HBO) Bundling,
  Economies of Scale, Monopolistic (Gateway) and
  Fragmented (Segmental), Superpackagers and Niche
  Packagers
• Customer Control Content, Brand Name, Early
  Mover, Virtual Communities
• Vertical Scope Content and Transmission
  Integration, Contracts and Alliances, Standards
• Technical Capabilities and Acumen

4
Transmission

• Local Networks, Customer Service, Long-Distance
  Business, Broadband, Packagers
• Wireless Telephone, PCS, Complement to Wireline,
  Data Transmission, Coverage
• Cable Broadband, Interactive Telephone Service,
  Internet Access, Investment, Partnership with
  Telcos for Switching and Network Service
  Management
• Long-Distance Networks Wholesale and Resale,
  Local Loops, Packagers, Customer Contact, Network
  and Terminal Manipulation

5
Manipulation

• Information Superhighway Software Intelligent
  Networks (Real-Time Response), Intelligent
  Terminals (Man-Computer Interfaces, Client or
  Server)
• Traditional Manipulation Software Operating
  Systems, Applications, Architecture, Standards,
  Economies of Scale, Network Externalities
• Processing/Storage Software Central or Local,
  Usage Frequency/Volume/Time Dependence, Real-Time
  Processing and Data Volume

6
Terminals

• Fragmented, Specialized
• Consumer and Industrial Markets
• Mass and Niche Markets
• Horizontal and Vertical Differentiation
• Product Design and Innovation
• Consumer Electronics Marketing and Distribution
• Digitization and Horizontal Reconfiguration

7
Capture Valuein Information Services

• Infrastructure Providers
• Hardware Manufacturers
• Software Producers
• Network Service Providers
• Content Providers
• Business Users and Consumers

8
Value Chain

• Seller-Buyer-Partner Links
• Smaller
• Redefined
• Virtual (Gather, Organize, Select, Synthesize,
  Distribute)
• Web Sites
• Direct (Public/Private)
• Indirect (through Intermediaries/Being
  Intermediaries)
• Agent (Push/Pull)

9
Internet Commerce

• Agents/Appliances Virtual Value Chain
• New Intermediaries Value Reconfiguration
• Commerce Applications Hard Goods, Information
  Products, Services
• Commerce Infrastructure Security, Payment,
  Certification, Publishing, Metering, Directories,
  Gateways, Real-Time Multimedia
• Network Infrastructure Physical Networks and
  Terminals and Management

10
Tech and Value Configurations

• Value Chain Transformation of Inputs into
  Products
• Interlinked Chains, Sequential Processes
• Long-linked Technology
• Value Shop Solving Customer Problems
• Referred Shops, Cyclical and Spiralling Processes
• Intensive Technology
• Value Network Linking Customers
• Layered and Interconnected Networks, Simultaneous
  and Parallel Processes
• Mediating Technology

11
Transaction Costs

• Search Costs Finding Counterparts in Open
  Disorganized Markets
• Information Costs Quality, Price, Preferences,
  Legitimacy, Credibility
• Bargaining Costs Negotiation, Contracting
• Decision Costs Evaluation, Approval
• Policing Costs Monitoring, Negotiation
• Enforcement Costs Penalties, Arbitration,
  Litigation

12
Governance Market vs. Hierarchy

• Uncertainty, Specificity, Frequency
• Self-Interest Parties, Discrete Activities,
  Externalities
• Identification, Authority, Coordination
• Bounded Rationality
• Information Asymmetry
• Opportunistic Behavior and Moral Hazard
• Boundaries? Nodes and Links?
• Functions Internalized or Outsourcing?

13
Efficiency

• Information Technology
• Communications
• Data Storage
• Processing
• Reduction of Transaction Costs
• Goods and Services
• Hierarchy and Market
• Industrial and Business Transformation
• Disintermediation and Disaggregation
• Outsourcing and Downsizing
• Mergers and Acquisition

14
Virtual Marketplace

• Players, Products, Processes
• Public Goods Nature
• Internet as Equalizer?!
• Reputation Transfer, Third Parties
• Initial Investment, Economies of Scale, Ceilings,
  Average Cost, Pricing, Market Share
• Quality, Product Differentiation, Niche Market
• Information Ingredients and Products
• Infrastructure, Standards, Taxation, Laws

15
Network Externalities

• Network Links nX(nX-1)/2 X(X-1)/2 n2 1
• Complementarity, Dominant Platforms
• Connectivity and Compatibility
• Common Carriers Economies of Scale, Natural
  Monopoly, Amortization
• Monopolization Software Output Restriction?
• Vertical Integration
• Anticompetitive Behaviors Tie-Ins, Bundling
• Regulations? Free Competition?

16
Content and Advertisement

• Search Services Complete, Accurate, Relevant,
  Objective
• Advertising Broadcast, Signal Control and Usage
  Monitoring, Revenues from Advertisers
• Consumers Preferences, Opportunity Cost,
  Information and Privacy
• Mass Media and Internet
• Free and Flat-Fee Services Distortion, Abuse