Bundling, Differentiation, Alliances and Mergers: Convergence Strategies in U.S. Communication Markets

Convergence is a multi-facetted phenomenon affecting the technological basis of information and communication industries, the boundaries of existing and new markets, and the organization of service providers. Convergence in substitutes will tend to increase the intensity of competition but convergence in complements may have the opposite effect. Given the economics of advanced communication industries, convergence necessitates strategies to overcome the risk of commodification at the level of networks, applications, and services. The paper examines bundling, differentiation, alliances, and merger strategies adopted by North American service providers in response to convergence. Service providers'opportunities and risks in the emerging environment differ considerably, with cable and telephone service providers presently in stronger positions than wireless service providers, broadcasters, and satellite service providers. New entrants such as Vonage, Skype, Google, and Yahoo have high disruptive potential but remain disadvantaged without their own access networks.convergence; bundling; differentiation; alliances; mergers

Geographically Differentiated NGA Deployment

This paper studies the incentives of an unregulated monopolist to undertake the socially optimal investment in NGA networks when it takes into account the fact that the NGA deployment is a two-dimensional investment decision concerning both the quality (or equivalently, technology) and the geographic coverage. It is found that both the privately and the socially optimal investment decisions result in a geographically differentiated NGA deployment implying that different quality NGA networks are deployed in different geographic areas. In particular, NGA networks of higher (lower) quality are deployed in the more (less) densely populated geographic areas. Although such geographically differentiated NGA investment leads the monopolist to provide a nationwide NGA deployment, it is found that the monopolist underinvests compared to the socially optimal levels of both technology and geographic coverage. In addition, since the objectives of the Europe 2020 Strategy concern both the NGA technology and the NGA coverage, this paper shows that the first objective of providing all Europeans with access to much higher internet speeds of above 30 Mbps is feasible when the demand for NGA-based services is significantly elastic, whereas the second objective of providing internet connection speeds of 100 Mbps to 50% or more of European households is not a feasible goal

Unbundling Policy in the United States Players, Outcomes and Effects

Building on attempts during the 1980s to establish principles of Open Network Architecture (ONA), unbundling obligations became a cornerstone of the framework for local competition devised by the Telecommunications Act of 1996. Several of the regulations developed by the Federal Communications Commission (FCC), including the impairment test to assess whether a network element had to be unbundled, the TELRIC pricing method, the obligation to re-bundle network elements to service platforms and the unbundling provisions for broadband networks were challenged repeatedly in court. In response to multiple defeats of earlier rules, the FCC had to refine its approach and define unbundling obligations more narrowly. Effective as of March 11th, 2005, unbundling obligations will essentially be limited to the local copper loop, dedicated interoffice transportation on routes connecting small markets, and high-capacity loops in small markets. Carriers presently using unbundled network elements that do not qualify under the new rules will have to transition to alternative solutions within 12-18 months. During this period, the FCC has set higher ceiling prices for these unbundled network elements. The Commission affirmed the elimination in 2003 of its unbundling obligations in broadband markets.Unbundling; voice; broadband

Broadband Openness Rules Are Fully Justified by Economic Research

This paper responds to arguments made in filings in the FCC’s broadband openness proceeding (GN Dkt. 09-191) and incorporates data made available since my January 14th filing in that proceeding. Newly available data confirm that there is limited competition in the broadband access marketplace. Contrary to some others’ arguments, wireless broadband access services are unlikely to act as effective economic substitutes for wireline broadband access services (whether offered by telephone companies or cable operators) and instead are likely to act as a complement. Nor will competition in the Internet backbone marketplace constrain broadband providers’ behavior in providing “last mile” broadband access services. The last mile, concentrated market structure, combined with high switching costs, provides last mile broadband network providers with the ability to engage in practices that will reduce social welfare in the absence of open broadband rules. Furthermore, the effect of open broadband rules on broadband provider revenues is likely to be small and can be either positive or negative. Unfortunately, various filings have misstated or mischaracterized the results on the economics of two-sided markets. Contrary to what some have argued, allowing broadband providers to charge third party content providers will not necessarily result in lower prices being charged to residential Internet subscribers. This is true under a robust set of assumptions. Despite some parties’ mischaracterization of the economic literature, price discrimination by broadband providers against third party applications and content providers will reduce societal welfare for numerous reasons. This reduction in societal welfare is especially acute when price discrimination is taken to the extreme of exclusive dealing between broadband providers and content providers. Antitrust and consumer protection laws are insufficient to protect societal welfare in the absence of open broadband rules.Network Neutrality, Internet, Discrimination, Prioritization, Two-Sided Market, Market Power, Termination Fee, Broadband

Triple Play Time

Abstract: Digital convergence thrusts telephony, television and the internet into the socalled 'triple play' offerings, creating new forms of rivalry between cable operators and telephone companies. Markets participants feel compelled to enter new industries to survive, even though their core competencies are limited to their primary market. The outcome of triple play competition is likely to depend on the speed of the development of new technologies and the adaptation of the regulatory environment. In the short run, telephone companies will enjoy an advantage attributable to switching costs. However, this advantage will erode as younger subscribers switch to telephony on the internet.triple play; bundling; digital convergence; broadband access; television and telephone

Show Me the Money: Contracts and Agents in the Service Level Agreement Markets

Delivering real-time services (Internet telephony, video conferencing, and streaming media as well as business-critical data applications) across the Internet requires end-to-end quality of service (QoS) guarantees, which requires a hierarchy of contracts. These standardized contracts may be referred to as Service Level Agreements (SLAs). SLAs provide a mechanism for service providers and customers to flexibly specify the service to be delivered. The emergence of bandwidth and service agents, traders, brokers, exchanges and contracts can provide an institutional and business framework to support effective competition. This article identifies issues that must be addressed by SLAs for consumer applications. We introduce a simple taxonomy for classifying SLAs based on the identity of the contracting parties. We conclude by discussing implications for public policy, Internet architecture, and competition

A Broadband Access Market Framework: Towards Consumer Service Level Agreements

Ubiquitous broadband access is considered by many to be necessary for the Internet to realize its full potential. But there is no generally accepted definition of what constitutes broadband access. Furthermore, there is only limited understanding of how the quality of end-to-end broadband Internet services might be assured in today?s nascent multi-service, multi-provider environment. The absence of generally accepted and standardized service definitions and mechanisms for assuring service quality is a significant barrier to competitive broadband access markets. In the business data services market and in the core of the Internet, this problem has been addressed, in part, by increased reliance on Service Level Agreements (SLAs). These SLAs provide a mechanism for service providers and customers to flexibly specify the quality of service (QoS) that will be delivered. When used in conjunction with the new standards-based technical solutions for implementing QoS, these SLAs are helping to facilitate the development of robust wholesale markets for backbone transport services and content delivery services for commercial customers. The emergence of bandwidth traders, brokers, and exchanges provide an institutional and market-based framework to support effective competition