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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 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!

11. 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

12. 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

13. 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)

14. 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

15. Lessons, continued When you’ve won the war, don’t rest easy
If you fall behind, avoid survival pricing

16. 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