Transcript Marketing of High-Technology Products and Innovations

Economics of Electronic Commerce
Chapter 3:
Internet Infrastructure and Pricing
Infrastructure
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Random House Webster’s Unabridged Dictionary:
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The basic, underlying framework or features of a system or
organization
The fundamental facilities and systems serving a country,
city, or area, as transportation, and communication system,
power plants, and schools
The American Heritage Encyclopedic Dictionary:
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An underlying base of supporting structure
The basic facilities, equipments, services, and installations
needed for the growth and functioning of a country,
community, operation, or organization
Examples of Infrastructure
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Transportation
Electricity/Power utility
Telecommunication
Cable TV
Cellular Network
Satellite network
Personal Computer
Consumer Electronics
Information Appliance
Set-box
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Language
Education system
Currency
Judicial system
Institutional structure
Industrial organization
The patterns of infrastructure
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Top-down spreading
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Coordinative adoption
behavior
Collective utility
Large scale investment
Inter-connectedness and
compatibility
High negotiation cost
Centralized planning
Announcement of de jure
protocol
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Bottom-up aggregation
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Adoption mostly by selfdecision
Stand-alone usage
Small-sized investment
Inter-operability
Trojan-like penetration
Market-oriented
competition
Dominance by de facto
standard
Internet pipelines
Traffic control on the Internet
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Packet switching
IP addresses
Transmission Control Protocol, UDP
Unicast, broadcast, multicast
The Key Value Layers of
Telecommunication Infrastructure
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Five value layers
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Content—Disney, Wall Street Journal
Packaging—AOL, Time Warner, Disney, HBO, MTV
Transmission—AT&T, MCI, NYNEX, TCI
Manipulation—Microsoft, AT&T, IBM, SUN
Terminal—Apple, Sony, Sharp, Motorola
The Key Value Layers of
Telecommunication Infrastructure
Content
Terminal
Packaging
Manipulation
Transmission
Digital Convergence on
Telecommunication Infrastructure
Disney
AT&T
before
deregulation
Nintendo
Content
Terminal
Packaging
Manipulation
SUN
Cisco
Window
+IE
Transmission
Teledesic
+Window
CE
Infrastructure convergence
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The backbone
The last 100 feet (the last miles)
Interoperability
The Trends of
Telecommunication—Broadband
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PSTN (public switched telephone network)
ISDN (integrated services digital network)
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xDSL (x-type digital subscriber line)
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IDSL, SDSL, ADSL, HDSL, VDSL
CATV
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T-carrier—T-1, T-3
HFC (Hybrid Fiber Coax systems)
Cable Modems
Set-top-box
FTTH (Fiber to the Home)
The Trends of PAN/WLAN
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802.11a—transmission at 5GHz (11Mb~54Mb)
802.11b(Wi-Fi)—2.4GHz (11Mb)
802.11g—extension of 802.11b (20Mb~54Mb)
802.11e—mediation of 802.11x
Bluetooth—2.4GHz (1Mb)
HomeRF—2.4GHz (1.6Mb)
HomeRF2.0—2.4GHz (10Mb)
HyperLan2—European protocol, 5GHz (54Mb)
Wi-Max
The Trends of Satellite
Communication
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Geosynchronous satellites
Low/medium earth orbit satellites (LEO/MEO)
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Iridum—66 LEO satellites by Motorola, 64kbps
Globalstar—48 satellites
Orbcomm—35 satellites
Teledeisc—288LEO satellites by McCaw &
Microsoft, 64/2Mbps
The Last 100 Feet
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Competition on penetration rate
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Server-client mode of microcellular network
Decentralized local wireless loop
The use of existing electrical power lines for high-speed
communications to home—converter on the existed
infrastructure
The local rooftop community network: free, high-speed
radio network access communities
Promise of satellite broadband services
Congestion and infrastructure
pricing
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World Wide Wait
Tragedy of the commons
Open but free
Effective pricing scheme
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Individual rationality
Incentive compatibility
Different pricing schemes
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Dynamic optimal pricing
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Perfect information and dynamic prices adjusted along about the
flow status of Internet highway and users’ demand requests
Static priority pricing—fixed alternatives provided with
differentiated prices
Smart-market approach—an auctioning price
Connection-only approach—a contracted fee
Flat-rate approach—a usage-based pricing
Voluntary user declarations—by ex post inspection and
enforcement
Strategies in the Convergent Era
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Approaching to the customer value
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Looking for the common platform
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What is the new opportunity?
Where is the most popular, standardized, and
open-access installed base?
Positioning on the gateway
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Which layer is the competing area?
Integration between open platform and critical
value for dominating the gateway
Competition between
Infrastructures
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Institutions
Institutional inducement
Industrial organization
Natural endowments