Carl Shapiro Hal R. Varian Standards Wars Carl Shapiro Hal R. Varian

Examples Before RR gauges Edison(DC) v. Westinghouse(AC) NBC v. CBS in color TV CDMA(US) v. GSM(Europe) in Mobile phones Now; Samsung v. LG in 3D TV

Classification of Wars With current Technology (how big is the switching cost or adoption cost?) Rival Technology (B) is; Compatible Incompatible Your Technology (A) is; Rival Evolution Ex) AC vs DC w rotary converter Evolution (A) v. Revolution (B) Ex) MS vs Apple w CISC chip, MS Office files compatible Revolution (A) Evolution (B) Revolution Ex) 3D TV

Examples Rival evolution Rival revolutions Evolution v. Revolution IBM Examples Mac Rival evolution Video machines, various UNIX systems Rival revolutions Nitendo64 vs. Sony PlayStation Evolution v. Revolution IBM + DOS v. Apple Macintosh (After CISC, OS still not compatible) IBM with DOS Apple: Graphic Interface + Mouse (1984) Mac with BootCamp Mac with Windows 8

Recent Standards Wars FM vs. AM stereo: Failed (이온층) FM vs. AM stereo: Failed Auto industry invested, radio stations didn’t Digital wireless phones: GSM Won. Europe: GSM(Global System for Mobiles) US: GSM, TDMA (cousin of GSM), CDMA TDMA: 5 million, GSM: 1 million  TDMA+GSM: 6 mil. CDMA: 2.5 million 6 mil vs 2.5 mil?  6 mil won! (굴절) Nokia TDMA Phone

Standards Wars Ericsson (TDMA) has AT&T, SBC , Bellsouth Qualcom (CDMA) has Bell Atlantic, US West, etc Performance play strategy How big are the network externalities? Geographic scope Investment is sunk, systems interconnect Size matters in Std wars

Standards Wars, cont’d. 56K modems X2 by US Robotics  attempted preemption KFlex by Rockwell/Lucent Expectations management, switching costs V.90 standard merged X2 and KFlex in Dec 97: triple size of market

Key Assets to Win a Std War Control over an installed base Intellectual property rights Ability to innovate First-mover advantages (Low cost) Manufacturing abilities Strength in complements Reputation and brand name No one asset is decisive.

Two Basic Tactics Preemption (Ex: LTE-A) 4G=260*3G 5G=100*4G =26,042*3G Preemption (Ex: LTE-A) Build installed base early But watch out for rapid technological progress Expectations management ex) 5G Manage expectations But watch out for vaporware

Once You’ve Won Stay on guard Minitel(French On-line transaction network; 35mil users) vs. Internet Offer a migration path for users of other tech to connect to your network (from Analog TV to Digital TV) Commoditize complementary products Commoditized printers for Intel CPU computers Competing against your own installed base to improve performance (faster and faster innovation to overcome saturated mkt) Intel again Durable goods monopoly  if less and less sales, upgrade!

Once You’ve Won, cont’d. Protect your position by attracting important complementors (game programmers to the exclusion of ur rivals): watch out for anti-trust law Ex) MS and computer makers, Apple and Adobe Leverage installed base Expand network geographically Stay ahead Develop proprietary extensions to improve your tech. Ex) Active-X, iCloud, iPhone magnifying glass iOS Android

What if You Fall Behind? Adapters and interconnection Target niche mkt (ex: DC) or interconnect w/ larger network (ex: CDMA to GSM) WordPerfect, Borland v. Lotus (conversion to Word) Survival pricing: doesn’t work. Signals your weakness Hard to pull off, Different from penetration pricing Legal approaches (if all fails, sue!) SUN v. Microsoft over JAVA; MS paid SUN $20 mil

Capstone Case: Microsoft v. Netscape Rival evolutions Low switching costs, Small network externalites Strategies Preemption (IE comes w Windows) Penetration pricing (free) Expectations management: MS makes OS. Google is #1 search engine. Alliances (Netscape-AOL in 2002 for registered users of Netscape)

Lessons Understand the type of war Rival evolution Rival revolution Revolution v Evolution Strength depends on 7 critical assets Preemption is a critical tactic Expectations management is critical

Lessons, continued When you’ve won the war, don’t rest easy If you fall behind, avoid survival pricing 11-16-18

LTE-A LTE Advanced 2009년 국제 전기 통신 연합에서 ITU-T 표준 4G 시스템 후보로 제출 IMT-어드밴스드로 승인되어, 2011년 3월에 3GPP가 릴리즈 10을 기반으로 완성한 WCDMA 계열의 4세대 이동 통신 롱 텀 에볼루션 (Long Term Evolution, LTE)의 본래 규격