1. Economics of Electronic Commerce Chapter 3: Internet Infrastructure and Pricing

2. Infrastructure Random House Webster ’ s Unabridged Dictionary: 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: 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

3. Examples of Infrastructure Transportation Electricity/Power utility Telecommunication Cable TV Cellular Network Satellite network Personal Computer Consumer Electronics Information Appliance Set-box Language Education system Currency Judicial system Institutional structure Industrial organization

4. The patterns of infrastructure Top-down spreading Coordinative adoption behavior Collective utility Large scale investment Inter-connectedness and compatibility High negotiation cost Centralized planning Announcement of de jure protocol Bottom-up aggregation Adoption mostly by self- decision Stand-alone usage Small-sized investment Inter-operability Trojan-like penetration Market-oriented competition Dominance by de facto standard

5. Internet pipelines

6. Traffic control on the Internet Packet switching IP addresses Transmission Control Protocol, UDP Unicast, broadcast, multicast

7. The Key Value Layers of Telecommunication Infrastructure Five value layers 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

8. The Key Value Layers of Telecommunication Infrastructure

9. Digital Convergence on Telecommunication Infrastructure

10. Infrastructure convergence The backbone The last 100 feet (the last miles) Interoperability

11. The Trends of Telecommunication — Broadband PSTN (public switched telephone network) ISDN (integrated services digital network) T-carrier — T-1, T-3 xDSL (x-type digital subscriber line) IDSL, SDSL, ADSL, HDSL, VDSL CATV HFC (Hybrid Fiber Coax systems) Cable Modems Set-top-box FTTH (Fiber to the Home)

12. The Trends of PAN/WLAN 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

13. The Trends of Satellite Communication Geosynchronous satellites Low/medium earth orbit satellites (LEO/MEO) Iridum — 66 LEO satellites by Motorola, 64kbps Globalstar — 48 satellites Orbcomm — 35 satellites Teledeisc — 288LEO satellites by McCaw & Microsoft, 64/2Mbps

14. The Last 100 Feet Competition on penetration rate 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

15. Congestion and infrastructure pricing World Wide Wait Tragedy of the commons Open but free

16. Effective pricing scheme Individual rationality Incentive compatibility

17. Different pricing schemes Dynamic optimal pricing 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

18. Strategies in the Convergent Era Approaching to the customer value What is the new opportunity? Looking for the common platform Where is the most popular, standardized, and open-access installed base? Positioning on the gateway Which layer is the competing area? Integration between open platform and critical value for dominating the gateway

19. Competition between Infrastructures Institutions Institutional inducement Industrial organization Natural endowments