13 There is no categorical efficiency in using “the price system” to purchase inputs from outside suppliers nor in integrating to supply such products internally. This choice-making process applies with equal force to contracts that define options for consumers to substitute other components in place of those selected or produced by the firm. How much of the final product a firm seeks to create, and what components it relies on other suppliers to produce, reflect the benefits of scope economies, on the one hand, and gains from specialization, on the other. The analytical framework developed by Ronald Coase in 1937 12 models firm scope and structure decisions in a cost-benefit analysis.
Vertical Integration in General and in Mobile wireless market offered a “mixed picture.” 7 On the one hand, operators had “succeeded in bringing wireless telephony at competitive prices to the public.” 8 On the other hand, carriers were “aggressively controlling product design and innovation in the equipment and application markets, to the detriment of consumers.” 9 To counter these asserted inefficiencies, Wu proposed a “Wireless Carterfone” regime: In early 2007, Columbia University law professor Timothy Wu argued in an influential paper that the U.S. 5 A New York Times Magazine article asks: “Can the cellphone help cure global poverty?” 6įor all this excitement, cellular phone networks are being harshly critiqued-as per their structure and performance-in the United States. “The cell phone is the single most transformative technology for development,” opines Jeffrey Sachs, Professor of Economics at Columbia University. 4 Indeed, the most exciting growth opportunities for “online” applications are riding on connectivity via the “wireless web.” Organizations such as the World Bank look to such emerging markets as driving economic growth. 3 This mass-market success puts mobile penetration far above fixed line telephony, with a mere 1.3 billion subscribers, and fixed line Internet access, with about 1.5 billion subscribers. By year-end 2007, wireless networks enlisted 3.3 billion subscribers globally, more than one-half of every living man, woman and child. Mobile phones are the “killer app” of the Information Age. Tim Wu, Professor of Law, Columbia University 2 The wireless industry was once and is still sometimes called a “poster child for competition.” That kind of talk needs to end.
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