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WorkingPaperSeriesNo.19

StandardsofToday–InnovationandInteroperability

PeterGrindley1EdwardSherry2DavidJ.Teece319May2017

1ManagingDirector,BerkeleyResearchGroupLLC2ChiefEconomist,ExpertResearchAssociates 3ThomasTusherProfessorofGlobalBusiness&Director,TusherCenteronIntellectualCapital,HaasSchoolofBusiness,,UniversityofCalifornia,Berkeley;Chairman;BerkeleyResearchGroup,LLC.Email:dteece@thinkbrg.com.

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1. Introduction

Inthenottoodistantpast,standardswereseenastechnicalissuestobelefttocommitteesandR&Ddepartments.Thesegroupsworkedonsafetyandqualitystandardstoassureconsumersthatproductswerereliable,anddefinedspecificationsthatallowedproductslikeplugsandscrewthreadsfromdifferentmanufacturerstobeusedtogether.Formalstandardsbodiesoversawtheseactivitiesatnationalandinternationallevels,buttheiraimswereprimarilythoseofharmonization.Thingshavemovedforward.Today,whilekeepingtheoldresponsibilities,standardsettinginsomeindustrieshasbecomeanincreasinglycomplexaffairandisoftencentraltobusinessstrategyandpolicy.Standardizationisintimatelyentwinedwithtechnologicalinnovation,andtimingandinteractionsbetweenfirmshavebecomecritical.Infact,insomeindustrieslikemobilecommunications,standardssettingisamisnomer.Whatisinvolvedistechnologydevelopmentthataimsatmassiveimprovementsinperformance.Thistechnologythengetsencapsulatedinastandard.Putdifferently,theactivityismoreproperlythoughtofastechnologydevelopmentforstandards(orstandardsdevelopment).Standardsensuretheinteroperabilityofmajornetworksinindustriessuchasinformationandcommunicationstechnology(ICT)andalsocoordinatetheinnovationofnewsystemstechnologies.Beingacceptedasanindustrystandardmaybethesinglemostimportantfactorinthesuccessofanewtechnology,andviceversa.Productsnotconformingtothestandardmaynotfindamarket,andastandardnotsupportedbyleadingtechnologymaynotgetadopted.Thelicensingofstandards-relatedIPhasbecomebigbusiness,andoftenthesubjectoflawsuitsandregulatoryintervention.

Inthischapter,Section2discussesthewaystandardssettingintechnologicallyadvancedindustriescombinestwomainfunctions:toensureinteroperabilitybetweenproductsfromdifferentfirmsandtocoordinatethedevelopmentofnewtechnology.Itdescribeshowstandardsaddvalue,reviewscharacteristicsofdifferenttypesofstandards,anddescribesmechanismstofocustechnologiesandagreeonstandards.Somestandardsrelymainlyonmarketforcestoestablishaleadingstandard;othersrequireincreasinglyclosecollaborationacrossanindustryviaavarietyofstandardsorganizations.Thesectiondistinguishesdifferenttypesofstandardsorganizationssuitedtotheparticularneedsofthestandards.Itthenconsiderswhatmakessomestandardsmoresuccessfulthanothersandstrategiesthatfirmsmayfollowtoestablishstandardsandoptimizereturns.Itdetailssomestepssponsoringfirmsmaytaketoensureanappropriatereturnfromtheirdevelopmenteffortssothatbenefitsdonotjustaccruetoimplementersandconsumers,butalsoprovideincentivestodevelopers.Theideaofbalancebetweenthereturnstothevariousparties(developers,implementers,serviceproviders,andcustomers)runsthroughstandardsstrategies,policies,andregulations.

Sections3through5presentthreecasestudiesillustratingdifferentaspectsofstandardization.WefocusonstandardsinICTindustriessuchaselectronics,computing,andtelecommunications,whicharelikelytoinvolvemajorinvestmentsbothintechnologydevelopmentandinstandardsimplementation,andthecoordinationissuesforstandardizationmaybeespeciallycomplex.4Thefirstexamplereviewsrecentelectricalconnectorstandards.Theseillustrateatraditionalfunctionofstandardstodefinecompatibilityspecificationsfromalternativeswhosetechnicaldifferencesmaybeimportantbutwhich

4StandardizationinotherareasofICT,suchasthosefocusedmoreonsoftware,isequallyimportant,butisnotconsideredindetailhere.Theseareashavecharacteristicswhichmayleadtodifferenttypesofstandardsorganizationsandprocesses.Withtheincreasing“convergence”ofdifferentaspectsofICTthesedistinctionsmaychange.

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addvaluelargelyfromcommonalityandconvenience.Thesecondexamplereviewsthestandardscontestsinvideocassetterecorders(VCRs)inthe1970s.Itidentifiesimportantmarket-basedstrategiesusedtoensurewidesupportforanewstandard,shapestandardsdynamics,andwincontests.ThethirdexampledescribesthedevelopmentofrecentstandardsinWi-Fiandmobilecommunications.Thesedependcentrallyonformalandinformalstandardsorganizationstocoordinateglobalstandardsamongfirmsacrossmajorindustries.Section6reviewssomepotentialfuturestandardsdirections.

2. TheRoleofStandards

2.1 Howstandardsaddvalue–interoperabilityandinnovation

Therearemanytypesofstandards.Standardshavebeenvitalintheintroductionofsomeofthemostsignificantinnovationsofrecentyears,suchasthevideocassetterecorder(VCR),personalcomputer(PC),computermemory,andmobilecommunications.DespitethemanymillionsofR&Ddollarsspent,standardshavealsocontributedtosomemajorproductdisappointments,suchasdigitalaudiotape(DAT)andTelepointportabletelephonesystem.Theyarecentraltofutureinnovationssuchas4G/5Gmobilecommunications,computeroperatingsystemsandInternet,andtheintegrationofcomputers,mediaandtelecommunicationsnowunderway.Oncenewtechnologyisdevelopedandembedded,standardscontinuetoaffectcompetition.Astandardizeddesign,unlesskeptexclusive,allowseasierentrytothemarket,increasescompetition,makesproductdifferentiationmorechallenging,andmayreduceprofitmargins.Ontheotherhand,thevastmarketsopenedupbystandardsmakerelatedtechnologicaldevelopmentmoreworthwhileandallowfirmstospecializeincomponentsratherthanbuildingthewholesystem.Standardsmakemodularizationpossible,andthisinturnallowsentryintothebusinessbyspecializedfirms.Standardsnotonlyaffectmanufacturers;theyalsoconcernproducersofcomplementarygoodsandservicesandconsumers,noneofwhomwanttobeleftsupportinganobsoletestandard.

Standardsaddvaluetoproductsbycombiningtwomainfunctions:allowinginteroperabilityandincorporatinginnovationfrommultipletechnologydevelopers.Interoperability,orcompatibility,allowsproductsfromdifferentmanufacturerstosharecomponentsandoperatetogetherinnetworks.Compatibilityaddsvaluetothemainproductbyincreasingthesizeofthemarketforcomplementaryproductsandservices—suchascomponents,printers,orsoftwareapplicationsthatconnectwiththemaincomputer—makingthemcheapertoproduceandavailableingreatervariety.Interoperabilityallowscoreproductstobejoinedtogetherinnetworks,suchasinmobilecommunications,withdirectbenefitsofhavingmoreuserstocallandlargerinfrastructures,aswellasprovidingeconomiesofscaleinproductionanduse.Thesenetworkeffectsworkviathedemandside,makingthecoreproductmoreattractivethelargertheinstalledbase.Theyareoftencalled“externalities”becauseeachadoptionbenefitsallusers,notjusttheindividual.

Standardsmayalsoaddvaluebyguidingandincorporatinginnovation—coordinatingtechnologicaldevelopment,selectingnewproprietaryandnon-proprietarytechnologies,andanointingadominantdesign.IndynamicindustriessuchasICT,wheretechnologyismovingrapidly,newtechnology,requiringhundredsofmillionsofdollarsofR&Deffort,isoftendevelopedanticipatorilybeforeimplementersmakeexpensivedownstreaminvestments.Implementersneedanagreedstandardtoavoidcommittingtoadead-endstandardtoosoon.Similarly,technologydeveloperswanttoavoidinvestinglargeamountsofR&Dintechnologythathasnoprospectsofbeingadoptedinastandard.5Theymaynotalwayssucceedindoingso.Forinstance,manytechnologypractitionerscontributedtotheWiMAX5Thisappliestodeveloperswhethertheyhopetoobtainareturnontheireffortsviaout-licensingSEPs,byparticipatingintheproductmarket,orboth.

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standard,butitfailedinitsmainmarket.Tocondensethetotaltimeneededforstandardization,andweedoutunsuccessfultechnologiesearly,developersoftenpromotetheirtechnologycommerciallybeforeitisfullydeveloped.Technologyandstandardsmaybedevelopedconcurrently,atleastasfarastailoringtechnologytotheneedsofthestandard.Onceatechnologicalapproachisadopteditmayhaveagoodchancetobecomethedominantdesignforthatgenerationofstandards.However,aswithWiMAX,thereisnocertaintyofoutcome.Notwithstanding,successfulstandardsmaysavewastefulduplicationofR&Dandfocusfuturedevelopmentonagiventechnologypath,aswellasprovideastablestandardforimplementation.

Theneteffectofboththesefunctionsistomakebothcoreandnetworkproductscheapertoproduceandmoreconvenienttouse,increasingthevalueofproductsandmarketdemand.Therelativeimportanceofinteroperabilityandinnovationdependsonthetechnologyandindustry.Forsomestandardscompatibilitymaybemostimportant;thetechnologymaybealreadydevelopedorrelativelystraightforward,andproductsbenefitmostlyfromconnectivity.Forotherstandards,technologymaybemovingforwardrapidlybutalsodependsoninteroperabilitytobeeffective.Insuchcasesthetimelycoordinationofinteroperabilityandtechnologicalinnovationinstandardizationisvital.

2.2 Factorsinstandardization

Tounderstandstandardsdevelopmentprocesses,weneedtomakeafewpreliminarydistinctions.Thesehelpdistinguishdifferenttypesofstandardsandthestandardizationstrategiesthatmaybeappropriateinagivenenvironment.

Standardizationprocess–Abasicdistinctionisbetweenstandardssetbymarketforces(defacto)andthosemediatedbystandardsbodies(dejure).Somestandardssetdefactobymarketcompetitionmaylaterbeconfirmedasformalstandardsforclarificationandwiderapproval.6Perhapsbecauseoftheawarenessoftheirstrategicimportance,increasingnumbersofstandardsaretodaycreatedbysomeformofdejurecommittee,suchasastandardsdevelopmentorganization(SDO)oraconsortium,ratherthanevolvingwithoutcoordinatedguidance.Manystandardsaresetbyacombinationofmarketforcesandcommittees,usingstandardsorganizationstodefinestandardsbutmixingthesewithmarketforcestospeeduptheprocessandproveconceptsinthemarketplace.Committeestandardizationmayoutperformthemarketascoordinatingmechanismsinsomecircumstances,beingbasedonconsensusandlesslikelytoleadtostandardscontests,butcantakelongerandbelessflexible.Insomecases,hybridsystemshaveadvantages,andinsomesituationsmayavoidthedrawbacksoftheothersystems.7

Productscope–Standardsmayalsodifferinscope—howbroadlythestandardsdefinetheproductfeaturesandwhethertheyarekeycharacteristicsorperipheraltovalueoftheproduct.Thedegreeofstandardizationistheproportionofproductcharacteristicscoveredbythestandardandhowimportantthesearetoproductdemand.Somestandardsmaydefinemostorallrelevantfeatures,withlittlechanceofdifferentiation.Othersmaydefinethemaininterfaces,whichbenefitallproducers,butallow

6Somedefactostandards,thoughproprietary,mayachievewidespreadusewithoutformalstandardization,especiallyiftheyareadd-oncomplementarytechnologiestoestablishedinfrastructureandextendanoriginalstandard.7Farrell&Saloner1988compareextremecasesofstandardssetbycommitteenegotiationandthosesetbyfirmsthatonly“communicate”bymakinginvestmentsinthemarketplace,withoutpriornegotiation.Theyshowthatintheoryacommitteemaybemorelikelytoarriveatacommonstandardbecausenegotiationstakeplacebeforeirreversibleinvestmentsaremadeandthereislesschanceofchoosingfragmentedstandardsby“mistake.”Committeestandardsmaybesetlaterthanmarketstandards,butthecostofdelayismorethanoffsetbythegreaterlikelihoodofagreement.Inthehybridsystem,theabilitytomakepreemptiveinvestmentsstrengthenstheabilityoffirmstomakecommitmentsinthenegotiationprocessandsomaybebestofall.

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productstodifferinorcompeteonotherfeatures.Forexample,petroloctaneratingsalmostcompletelydefinetheproductandradicallychangedthefocusofcompetitionwhentheywereintroduced.Directnetworkssuchastelephonesorrailwaysalsoneedahighdegreeofstandardizationattheinterfaces,andproductsgainbenefitsfromthat,buttotalproductvaluealsodependsonfeaturesoutsidethestandarditself.8Technicalstandardsmayalsooperateatdifferentdesignlevels(i.e.,the“depth”towhichstandardsareintegratedintothetechnicalfunctionalityoftheproducts).9

Marketextent–Standardsmayapplytodifferentproductandfirmgroups.Multifirmstandardsareadoptedbydifferentfirmsproducingsimilarproducts.Multiproductstandardsapplyacrossproductsfromthesameproductareawithinthefirms.Multi-vintagestandardsapplyoverdifferenttechnicalgenerationsofaproduct.Atypicalissueforgenerationalstandardsiswhether,orhow,toachievebackwardcompatibilitywithproductsthatuseearlier-generationstandards,andviceversa.

Fragmentation–Astandards-relatedmarketmayfragmentintodistinctstandards,eachwithitssupportgroups.Oneextremeisthemonolithicstandard,asinglestandardforthewholeindustry.Alternatively,severaldifferentstandardsmaysharethemarket.Tosurvive,eachstandardneedstohaveacriticalmasslargeenoughtocompeteinthelongtermagainstotherstandards.Forexample,personalcomputers(PCs)havesupportedtwostandardsinstableequilibrium:WindowsandApple;mobilephonesalsofocusontwomainstandards:AndroidandiPhone.VCRgravitatedtoasingleVideoHomeSystem(VHS)standard.However,splittingthemarketbetweenseveralsmallstandardsmaymeanthatnonegetsthefullvalueofstandardization.Oneaimofcooperativestandardsdevelopmentistoavoidfragmentation.

Standardscontrol–Akeystrategicdistinctionisthecontrolfirmshaveoveraccesstoastandard,whetherproprietaryoropen.Withaproprietarystandard,afirmorgroupoffirmsmayhavekeyintellectualproperty(IP)rightsoverfeaturesinthestandardandmayusethistorestrictadoptionbyotherfirms.10Withanopenstandardnorestrictionsareplacedonotherfirmsadoptingthestandardandimitationisusuallyencouraged.IPismadeavailableforuseinopenstandards,andIPrightsareeitherwaivedorlicensedforfees.Thecommitmentthatmanystandardsorganizationsrequirefromownersofstandardsessentialpatents(SEPs)tolicensetheseforuseinopenstandardsonfair,reasonable,andnon-discriminatory(FRAND)terms,asaconditionforincludingthetechnologyinthestandard,mayreflectthis.11Asecondaspectistheleadershipofthetechnologicaldevelopmentofthestandard—whetherafirmdevelopsoradopts.Eventhedevelopmentofopenstandardsislikelytobe

8Forexample,mobilephonesbenefitfromwirelessstandards,butthevalueaddedbythestandardizedtechnologymaybeoutweighedbythatfromthenon-standardized(patentedandnon-patented)technologyinthephone.9Communicationsstandardsoftendealwithinterfacesandallowproprietarytechnologiestobe“deep”withinthedevices.Theinterfaceitselfmayrequireverydetailedspecification,toallowinteroperabilitybetweendeviceswithdifferentinternalarchitectures.10A“proprietarystandard”referstospecificationsthatarecontrolledbyonecompany.IfaproprietarystandardsuchasWindowsiswidelyused,itmaybecomea"defacto"standardeventhoughitisnotgovernedbyastandardsorganization.http://www.pcmag.com/encyclopedia/term/49870/proprietary-standards11Afewstandardsorganizationsrequire,orprovidetheoptionto,memberstolicensetheirpatentsonFRANDRoyalty-free(FRAND-RF)terms,suchastheWorldWideWebConsortium(W3C),OrganizationfortheAdvancementofStructuredInformationStandards(OASIS),andInternetEngineeringTaskForce(IETF).Thesetendtobeinthesoftwarearea.MostSDOsallowpatentownerstoobtainroyaltiesfortheirinventionsintypicalcircumstances.Kesan&Hayes2013.AdiscussionofmanyofthedetailsofIPpoliciesandFRANDisoutsidethescopeofthischapter.

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ledbykeydeveloperswhohelpdefinethestandardandleadfurtherchanges.12

2.3 Standardsorganizations

a) SDOs,consortia,andSSOs

Variousorganizationsareusedtodevelopstandards.Organizationsthatcreatestandardsviacommitteedifferpartlyintheextenttowhichmarketforcesareinvolvedinstandardization.Somestandardsmaybesetdefacto—almostpurelybymarketforces,asdiscussedabove.Othersmayrequiremoreformalcoordinationwithinstandardsorganizations.Inpractice,majorstandardsmaybedevelopedbycombiningsomeformofdefactomarketactivityrunningalongsidethedejurestandardsdevelopment,tospeedupstandardizationandinnovation,assesscompetitioninmarketconditions,andformalliances.

Onedistinctionthatisoftenmadeisbetweenformalstandardsdevelopmentorganizations(SDOs)andinformalindustryconsortia,alliances,andspecialinterestgroups(SIGs).13Incommonparlancethesearealltypesofstandardssettingorganization(SSOs),thoughwehavefurthercommentsonterminologybelow.FormalSDOstypicallyhavespecificstructuresandformalpoliciesintendedtocoordinatethedevelopmentandimplementationoftechnologyandstandards,andtobalancetheinterestsofthedevelopersandimplementers.Althoughtherearevariations,SDOsaretypicallyaccreditedbynationalandglobalstandardsinstitutionsandconformtotheirpolicieswithinthenationalorinternationalstandardizationstructures.Standardsaretypicallyopen,andmostIPpoliciesrequiredisclosureofessentialIPandthecommitmenttolicensethistoanyfirmwishingtoimplementthestandardonFRAND(orequivalent)terms.Proceduresarebasedonvoluntaryparticipationandconsensus.14Reportsonprocessandthestandardsthemselvesareusuallypubliclyavailable.

ConsortiaandalliancesdevelopstandardsoutsidetheSDOstructures.Forfast-changingtechnologies,formalSDOprocessesmaybetooslowandtimeconsuming,andconsortiaareincreasinglyusedasfaster,moreflexiblealternatives.Consortiacantakevariousforms,fromlargeorganizationsthatmatchmanyofthefunctionsofformalSDOstosmalladhocworkinggroupsoffirmssetuptocreateanarrowstandardortestanewfield.15TheymayhaveanyIPpolicytheylikewithintheconfinesofcompetitionandotherlaws.Standardsmaybeopenorproprietary.Proceduresmaytakemanyformsandneednotbereportedpublicly.

AdvantagesofSDOstandardsarethattheyaredevelopedfollowingwell-knownprinciplesofopennessandvoluntaryconsensus.Standardsmaybereliedonforbroadsupportandglobaladoption.SDOsoftenhavebroadmemberships,includingdevelopers,implementers,serviceproviders,customers,andregulators.However,SDOprocedurestakealongtimeandneedtoreconcilewidelydifferentinterests.Bycomparison,consortiacanoperateflexiblywithoutcumbersomestructuresandmaybebettersuitedforfast-movingnewtechnologies.Conversely,theymayhavelimitedsupportandlackthecredibilityof

12Inadditiontothetechnicalaspects,thedirectiontakenbyopenstandardsmayalsobeledandsupportedbygovernmentsandusers.TheEUplayedanimportantroleinETSIstandardization;certaingovernmentsinAsiahavebeenactiveinchoosingwhichstandardstodevelopandadoptwithintheirboundaries.Inaddition,communicationcarriers,astheultimateusersofcommunicationstandards,playapivotalroleintheadoptionofstandardsthataredevelopedbyothers.13Updegrove2007;Cargill2002.14Consensusincludestheuseofvotingprocedurestoresolveissuesifneeded.Governmentsmayalsoinfluencestandardsonoccasion.(Seefootnote12above).15Inpractice,consortiaarelikelytohavenarrowermembershipthanSDOs,whichareopentoallfirms,developers,orimplementers,aswellasconsumersandgovernmentrepresentatives.Someconsortiaaregovernedmainlybydevelopers;othersmaybegearedtowardtheinterestsofimplementers.

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formalSDOs.SDOsmaybemoreeffectivewhereinvestmentsarelargescale,standardsneedtoencompassthewholeindustry,anduniformcomplianceandcoordinateddevelopmentareofgreatestimportance.Consortiamaybemoreeffectivewheretechnologyisasyetundefined,thereareonlynarrowinterests,andstandardsaremoreexperimental.

Insomecases,SDOsandconsortiacooperate,usingconsortiatodevelopmanyofthetechnicalaspectsofastandard,andifsupportedbroadlyenough,transferringtoSDOprocessesforformalstandardization.Weseethisinsomeofthecasestudies.AlsothedistinctionsbetweenSDOsandconsortiaareblurringaseachtakeonbroaderroles.

b) Standardsdevelopmentandstandardssetting

Wemakeafurtherterminologicaldistinctionbetween“standardsdevelopment”and“standardssetting.”Theseapplytothescopeofaparticularstandardratherthananinstitution.Somestandardsgodeepintothetechnologydesignandmakeacentralcontributiontotheperformanceoftheproduct(e.g.,theradiointerfaceinmobilecommunicationsandthespecificationofCDMAversusTDMAwirelesstransmission).Generatingthesestandardsinvolvesthedevelopmentofnewtechnologiesaswellasensuringinteroperability.Thetechnologiesmayhaveadirectimpactonthevalueoftheproductsinadditiontothevalueaddedbynetworkeffects—theymaybe“fundamental”toproductdesign.Otherstandardsmaybeprimarilyconcernedwithcompatibilityandinterconnection,andthechoiceofdominanttechnologymaynotbeespeciallycritical(e.g.,apinlayoutformemorycomponentsorelectricalplugs).Thesestandardsarelikelytohavesometechnologydimensionsbutmayinvolveachoicebetweennearalternatives,andderivemostoftheirvaluefromcompatibility—everyonedoingthesamething.Thefirsttypeofstandardizationwecall“standardsdevelopment”andthesecond“standardssetting.”Insomecases,theymaytakeplacewithinthesameorganizationaccordingtothestandards.

Recentpracticehasbeentorefertoallstandardsorganizations—whetherSDOorconsortium,standardsdeveloperorstandardssetter—asSSOs.Insomecases,however,thiscanbemisleading,asallstandardsorganizationsarenotalike.Oneofthemainfunctionsofstandardsdevelopmentorganizationsisinnovation,aswellasinteroperability,andcallingthemallstandardssettingorganizationsblursandignoresthis.16ThetermSSOmayimplyincorrectlythatstandardizationisjustaquestionofselectingbetweencandidateswithnoroleindevelopmentoftheunderlyingtechnology.ThedistinctionbetweenSDOsandSSOsisnotjustsemantic,becauseitmayaffecthowdevelopersandimplementersrelatetoeachother.Asusedherein,thetermSDOreferstoformalstandardsorganizationsinvolvedindevelopingstandardsandincorporatingnewtechnologies.Ifused,thetermSSOreferstoorganizationsthatsetstandardswithoutastrongtechnologydevelopmentdimension.Consortiadistinguishstandardsorganizations,outsidetheformalSDOorganizations.Thegeneraltermisstandardsorganization.

2.4 Whatmakesonestandardmoresuccessfulthananother?

a) Dynamicsofstandardization

Adiscussionofstandardsstrategymuststartwiththedynamicsofstandardization.Standardsmarkets

16WhentheSocietyofAutomobileEngineers(SAE),nowSAEInternational,createdthe"SAEseries"tounifypreviouslyfragmentedscrewthreadsizesintheUSintheearly20thcentury,itwasactinglargelyasanSSO,selectinganappropriatestandardforinterchangeabilityfromamongstexistingtechnicallysimilardesigns.WhentheEuropeanTelecommunicationsStandardsInstitute(ETSI)coordinatedthedevelopmentandstandardizationofGSM2Gmobilecommunicationsstandardsfromthemid-1980sonwards,itwasactingasanSDO.http://www.nationalpubliclibrary.net/articles/SAE_International;http://www.etsi.org/technologies-clusters/technologies/past-work/cellular-history;Teece2016.

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donotacteconomicallylikemanyothertypesofproducts.Normalproductsmaycoexistinthemarketandcompetewitheachotheroverthelongtermformarketshare.Forstandardsproducts,thebenefitsofbelongingtoaleadingstandardareoftensogreatthattheentiremarketmaytiptowardasinglestandard,orafewstandards,leavingotherswithlittleornoshare.17Strategyfocusesoninfluencingthisprocessinonestandard’sfavor,oftenwithinanarrowtimewindowasanewstandardisbeingintroduced.18Aprimaryneedevenforstandardsproductsisfirsttodevelopadesignthatisacceptabletothemarket,butatsomepointastheproductisintroducedthestandardseffectstakeover.Thesecanmakeorbreakanewproduct.

Thebasicmechanismdependsonnetworkeffects,whichmakestandardsmorevaluableastheinstalledbaseofusersgrows.Thelargertheactualorexpectedinstalledbase,themoreattractiveadoptionofthestandardistonewusersandtoimplementersandinnovators.Thismakesmorecomplementsavailableandincreasesthecredibilityofthestandard.Inamarketsituation,thisleadstomoreadoptionsasnewconsumersandinnovatorsfocusontheleadingstandard.Thismayleadtowinner-take-allsituations.Analternativeifthisprocessisinterrupted,orseveralstandardsareabletoestablishthemselves,ismultipleorfragmentedstandards.Insomecases,dependingontherelativeimportanceofnetworkeffectsandthecostsofimplementingthestandard,severalstandardsmayco-exist.Inothercases,eachofthestandardsmaybetoosmalltoachievethefulleconomiesofscalepossiblewithasinglestandard,buttheiradoptersmaybeunabletoswitchduetotheirsunkinvestments.Developers,implementers,andconsumerswanttoavoidbeinglockedintopoorlyperformingstandardsandgotolengthstoanticipateandavoidthis.Theyfocustheiradoptiondecisionsonafewleadingstandards.

Figure1:Standardsreinforcementmechanism

17Tippingconcentratesthemarketonafewleadingstandardsbutdoesnotalwaysmeanasinglestandard.Thenumberofstandardsabletocoexistdependslargelyontheimportanceofnetworkeffectsandthecostsofimplementation.Forexample,fordigitalcompression,whereadoptionofasoftwareprogramischeap,multiplestandardsexist.Fortelecommunications,highinfrastructurecostsandtheriskofbeinglocked-intoapoorstandardtendtomeanthatonlyasinglestandardprevails.18Forfurtherdiscussionofstandardsdynamicsandstrategies,seeGabel1987;David&Greenstein1990;Farrell&Saloner1992;Besen&Farrell1994;Grindley1995(Chs.1–3);WikiBooks2012.

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ThestandardsreinforcementmechanismisillustratedinFigure1.Thelargertheinstalledbaseofusers,thelargertheproductmarket—leadingtomorecomplementaryproducts,moreuserstointeroperatewith,andmoreinnovatorsandmanufacturerssupportingthedesign.Alargerbasewithmoredevelopmentandimplementationincreasesthecredibilityofthestandard—importantforexpectationsearlyinthestandardsadoptionprocess.Thisattractsmorenewusersandinnovators,whichfurtherincreasesthesizeoftheinstalledbase.Growthacceleratesforthestandardwiththelargestbase,and“bandwagon”effectstakeover.Inacontest,theleadermaysoonhavesuchalargeadvantagethatallnewuserschooseit,“tipping”supporttowardtheleadingstandardandsweepingthemarket.Onlyifotherstandardshavemanagedtobuildasufficientinstalledbaseoftheirowntosurviveindependentlybeforethishappens,orarestronglydifferentiated,cantheymaintainanypresence.

Whenintroducinganewstandard,earlyadoptiondecisionsdependcriticallyonexpectationsofwhetherastandardislikelytosucceed.Userswanttoavoidbeingstrandedwithaminority,unsupportedstandard,whilemanufacturersanddeveloperswanttochoosethestandardwiththegreatestmarketpotential.Iftheproductisnew,expectationsarebasedonwhateverinformationisavailable.Asmallinitialadvantagemayhelpsetthecumulativesupportprocessinmotion,makingchanceeventsaswellasstrategyimportant.Togetthestandardizationprocessmoving,firmsmaymakeinitialinvestmentsincomplementsandsubsidizeearlyusers.Theymayinfluenceadoptersbypreannouncementsandusereducation,buttheseneedbackupwithprovenfeatures,evidenceofcommitment,manufacturingcapability,andcomplementarysupport.Givenuncertainties,aninitialinstalledbasemaybethestrongestindicatorofthestandard’schances.Credibilitymaybelessimportantlater,oncetheprospectsforthestandardshavebecomeclearerandthephysicalinstalledbaseeffectstendtotakeover.

Aresultisa“windowofopportunity”duringwhichfirmsmayinfluencethestandard,fromthetimeanewproducthasbeendevelopedtosomebasiclevelofuseracceptabilityuntilsomestandardhasbuiltadominantlead.Often,thereisaperiodofrapidtechnicaldevelopmentofseveralcompetingproducts,untiloneormorehavereachedsomelevelofmarketacceptability.Thedynamicsthentakeover,andoncethebandwagonfavorsaparticularstandard,a“dominantdesign”emergesrapidly.

b) Establishingsuccessfulstandards

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Firmsmayinfluencethesedynamicsinanumberofways.Thebasicobjectiveforasuccessfulstandardistobuilditscredibilityandinstalledbaseofsupportduringtheintroductoryperiod,morequicklythancompetingstandards.Someoftheeffortsmayneedtotakeplacebeforestandardsarelaunched,othersinthecriticalearlystages.Firmstrategiesaimtoensurethesuccessestablishingastandardasawholeandtooptimizetheirpositionandearningswithinthatstandard.Wediscussoverallstandardsstrategiesfirst.

Stepsareequivalentwhetherstandardsaredevelopedviamarketforcesorwithinastandardsorganization.Formarket-basedstandards,firmsmaybemorelikelytoneedprivatealliancestogatherwidesupportandtoorganizeprivatemeanstoestablishcredibilityandinstalledbase.19Inindustriesdominatedbyformalorganizationalstandards,thetaskforthefirmmaybemorefocusedonestablishingitspositionwithinthestandardandinfluencingthestandardasawhole,tohelpensurethatitprevailsagainstcompetingstandards.Otherwisemoststepsapplyineithercase.

Anumberofkeyenablingstrategiesmaybeusedbysponsoringfirmstoattractothermanufacturersanduserstoastandardandtoestablishasuccessfulstandard(seeTable1).

Table1:StandardsEnablingFactors

Type FactorBasicmechanism Installedbaseandcumulativesales Credibility TechnologicaldesignGainingsupport Timing Sponsorship Alliances OfficialstandardsbodiesCompetingwithalternatives Introductionpricing

Reduceadoptioncosts Preannouncements

Linkageandindirectroutes

Buildtheinstalledbase–Amainpriorityistobuildtheinstalledbaseandestablisha“criticalmass”ofusersquicklytostartthenetworkeffects.Itisimportantthatthestandardgetsofftoagoodstartandmaintainsmomentum.Strategiesincludestrongpromotion,liningupmanufacturinganddistributioncapacityandpricingaimedatadoptionratherthanimmediateprofits.Anobviouswaytobringinsupportersisifthestandardisopen.Thoughthismeansacceptingcompetition,itmaybetheonlywaytoestablishastandardiffacedwithastrongalternative.Akeymeasureofprogressiscumulativesales.Salesandevenmarketsharemaybeincreasing,butifacompetitorhasanevenlargershareanditsbaseisgrowingfaster,itwilleventuallydominatethestandard.

Establishcredibility–Earlypurchasersandco-producersmaketheirdecisionsbasedonexpectationsofthestandard’sprospectsbeforetheinstalledbaseandcomplementarymarketshavebuiltup.Expectationsmayberaisedbyadvertisingandpromotion,educatingthemarket,andfastpublicationof

19Forexample,theGoogle-ledOpenHandsetAlliance(OHA)betweenmobilehandsetmakers,applicationdevelopers,somemobilecarriersandchipmakers,setupin2007todevelopopenstandardsformobiledevices.http://www.openhandsetalliance.com/oha_faq.html

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favorablemarketresults.Aproblemisthatnewproductshavenotrackrecord,andfirmswithexcellentreputationsinanoldtechnologyhaveoftenfailedinanewone.Itdependsonputtingtogetheraconvincingpackageofsuitableproduct,manufacturingcapacity,financialbacking,maintenancesupport,andtheavailabilityofcomplements.

Broadenthedesign–Thewinnerofastandardscontestisnotnecessarilythemosttechnologicallyadvancedbuttheonethatwillgainthebroadestsupport.Technologicalperformanceiscentraltoastandard.However,oncetheproductisdevelopedtoapointofuseracceptabilityitcanbecomerelativelylessimportant.Theaimmaybeastandardthat“satisfices”ratherthanoptimizesthedesign,afterwhichotheraspectsofstrategytakeover.Thestandardshouldifpossiblebebroughttothispointbeforeitislaunched.Aconstantlyshiftingdesignconfusesthemarket,andareliable,stablestandardmaybemoreimportantthanstate-of-the-artdesign.Technologymaystillbeamajorelementinastandardscontest,forcostreductionandaddingperformancefeaturesoutsidethestandard.Therearealsoimportantopportunitiestoimprovethebasicstandardonceitisestablished.GenerationsofstandardsimprovementsareacommonfeatureinICT.

Timingiseverything–Timingiscritical;strategydependsonnotjusttheactionsbutalsowhentheyhappenandhowlongtheytake.Skillcomesinrecognizingthe“windowofopportunity”betweenbeingpremature,launchingthestandardbeforeitisacceptablebythemarket,andbeingoverdue,oncesomeotherstandardistoostrongtochange.Thisinvolvesflexibilityaswellasspeed.Ausefulabilityisbeingabletorealizewhenitistoolateforthefirm’sstandardtowinthecontestanditistimetoacceptanotherfirm’sstandardsregime.Thereisalsoaquestionofrisk,andwhentocommittoastandard.Afirmwhichinveststoosooninanunsuccessfulstandardmayloseitsinvestment.Itmightdecidetowaittoseewhichstandardislikelytoprevailandadoptthat.

Sponsorco-producersandinitialusers–Togetoverthecoordinationhurdleofensuringcomplementsfortheinitialusers,themanufacturermayneedtosponsorearlyco-production.Itmaydothisbyprovidinginformation,educationandtraining,andotherincentives,orformpartnershipswithco-producers.

Formalliances–Establishingasupportbaseforastandardalmostalwaysneedsalliancesbetweendevelopers,manufacturers,distributors,andserviceproducers.Thesehelpspreaddevelopmentandothercosts,andensureadequatemanufacturingcapacityanddistribution.Theymayalsohelpavoidfragmentedstandards.Thebroadestcoalitionsarethoseforopenstandards,sometimesagainstaproprietarythreatthatfirmscouldnotopposeindividually.Alliancesalsoaddtothecredibilityofthestandardandmayreassureusersinvestingincomplementarygoodsandtraining.

Standardsorganizations–Firmsmaytrytoavoidexpensivestandardswarsbyusingstandardsorganizationstodevelopandagreestandards.Thisisamajorstrategicdecisionforthefirm,reflectingitschoiceofanopenorproprietarystrategyandotherconsiderations,discussedbelow.Thetypeoforganizationisalsoimportant.TheremayatradeoffbetweenthespeedofdevelopmentandflexibilityavailableinthemarketorprivateconsortiumversusthebreadthofsupportandreputationofformalSDOs.Whichtousedependsontheindustryandthetechnology.

Priceformarketexpansion–ConventionalproductsfromasinglefirmareoftenintroducedathighpricestorecoverR&D;pricesaregraduallyreducedovertimeasvolumesriseandcostsfall.Forstandardsafirstpriorityistobuildaninstalledbasequickly.Lowintroductionpricing,postponingtherecoveryofR&Dcosts,mayincreaseinitialvolumesandmarketshares.Ifthestandardissuccessful,theinvestmentshouldeventuallybepaidback.Thismayrequirehighupfrontinvestment,foregoingthe

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optiontorelyonhighintroductionpricestorecoverR&Dcostsandfundfurtherdevelopment.20

Reduceadoptioncosts–Thefirmmayalsoconsiderthecostofadoptionbyimplementers.Thesecanactasbarrierstomarketacceptanceofthestandard.Thesponsoringfirmmighttrytoreducethese,suchasbydeveloping“gateways”topreviousstandardstoenableuserstoupgradeatlowcost(seeindirectroutes,below),providingsupportfordevelopersofcomplementaryproductsandservices,orintroducingthestandardinphasestospreadouttheinvestments.

Usepreannouncements–Productpreannouncementsareaparticularwayofinfluencingexpectations.Sincestandardsareoftenanticipatory,usersmayhavelittletogoonandneededucationanddemonstrationsoftheproduct.Butpreannouncementsmustbeusedwithcare.Announcingproductsthatneverappearisnotagoodwaytoestablishcredibility.

Useindirectroutes–Theinitialinstalledbasemaybeincreasedindirectlybymakingthenewproductcompatiblewithanexistingstandard.Thisisanadvantageformultigenerationalstandards.Adaptersortranslatorsmaybeneededforcompatibilitywithanexistingbase.Evenso,thereisalimittoevolutionarystandards.Adaptersmaybeexpensive,andstandardsmaybecomelockedintoanobsoletedesign.Eventuallyaradicalbreakisneeded.

Thesuccessofastandardandthestrategiesfirmsusedependoncombinationsofthesestrategiesandtheenvironmentalfactorsaffectingtheindustry,market,andtechnologies.Eachsituationislikelytobedifferent.Themosteffectivestrategiesmaybethosethatcanadaptflexiblyandrapidlyasthemarketdevelops.Thebasiceconomicmechanismsofstandardizationmaybeunderstood,buttheapplicationsalwaysseemtoprovidenewperspectives.Asusual,thedevilisinthedetails.

c) Firmpositioningandprofitability–openorproprietary?

Themostbasicstrategychoiceforadeveloperisbetweenanopenandproprietarystandard.Ifthestandardsproductshavestrongcustomerappeal,canbeproducedinquality,haveaheadstart,andhavestrongIP,afirmmaybeabletoestablishaproprietarystandardunderitscontrol.Withoutcompetitors,andwithitscustomerslockedinbynetworkeffects(e.g.,duetointeroperabilitywithproductsandservicesdevelopedspecificallyforthatstandard),aproprietarystandardcanbeveryprofitable.ThishasworkedforApple,withproprietaryoperatingsystemsanddesignsincomputersandmobilephones,forexample,insomemarketsegments.21

Inmanyothercases,afirmmaynothavesufficientresourcestodevelopallthetechnologyneededforastandardorestablishthemarketonitsown,andanyattempttodosowouldfacestiffcompetitionfromotherfirmsandstandards.Ifsothefirmmaydobettertoopenthestandardtootherfirms,andsharethedevelopmenteffort,soastodevelopthetechnologyandbuildtheinstalledbasemorequickly.Thisalsoaddstothecredibilityofthestandard,andensuresthatitwillbesuppliedwithplentyofcomplementarygoodsandservices.Theadditionalcompetitionmeansthatpricesandmarginsforanopenstandardmaybelowerthanforaproprietarystandard,butthemarketislikelytogrowmorequicklyandbelargeroverall.Thefirmmayhaveasmallersharebutofalargermarket.Ataskforanopenstandardsponsoristokeepaslargeashareofthemarketaspossibleandnotletitsfirst-moveradvantagebelostasotherfirmsadoptandimitatethetechnology.

Implementers,complementaryproducers,andusersfacesimilarchoicesastowhichstandardhasthebestchanceofsuccessandwillofferthemthebestreturns.Thebasicpositioningdecisionsdetermine20Standardsmaylivealongtimesoeventhoughrecoveringsunkinvestmentmaytakelongerduetoasmallerprofitmargin,thismaybeoffsetbythelargervolumesoveralongertimethancaseswithoutstandardization.Thisisalsotrueforroyaltiesonstandardcompliantproducts.21ApplealsoimplementsinitsproductsmanyopenstandardsdevelopedinSDOs,suchasforradiointerfaces.

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eachfirm’scontributiontothestandardandthecontrolitislikelytohaveoverthestandard.

Twokeydecisionsforallfirmsare:

(a)Leadership—whetherthefirmdevelopsitsownstandardoradoptsfromoutside

(b)Access—whetherthestandarditsupportsisopenorproprietary

FouroptionscombiningthesestrategiesareshowninFigure2anddescribedinTable2.

Figure2:Strategicpositioning

Positioning Access Proprietary OpenLead(Develop)

Exclusivestandard

Sponsor,

ContributeIP

Follow(Adopt)

LicenseIn

Clone,

FRANDlicense

Table2:Standardspositioningstrategies

Exclusivestandard Developaproprietarystandardandrestrictitsusebycompetitors,chargingsignificantlicensefees

Sponsoropenstandard

Encouragecompetitorstouseanopenstandardincorporatingtechnologycontributedbythefirm,contributeIPwithFRANDorotherlicensingassurances

Licensein Adoptaproprietarystandardcontrolledbyanother(competing)firm

Clone/Adopt Adoptanopenstandard,acceptFRANDorotherlicensingconditions

Theleadershipdecisiondependsonwhetherthefirmisabletodevelopafeasibledesign(orpartofadesign)comparedtocompetitors,andontheintellectualpropertyrightsthefirmholds.Theaccessdecisiondependsmostlyontheprospectsforestablishingthestandardasopenorproprietary—anopenstandardislikelytohaveadvantagesofbroadermanufacturingandcustomersupportcomparedtoproductadvantagesaproprietarystandardmayhave.Thebasictradeoffisthatanopenstandardmayleadtoalargertotalmarketwithalongerproductlifeduetousers’switchingcosts,butthefirmmustsharethiswithmorecompetitors.Unitprofitsmaybehigherwithproprietarycontrolandthefirmneednotsharethemarket,butanopenstandardmarketislikelytobemuchlarger.Openstandardsmayalsoshiftthebalanceofpowerinfavorofimplementersandusers,whichavoidsbeingdependentonasingle

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supplier,furtherloweringthepricesofcoreproductsandcomplements.22Togetherthesedeterminehowcompetitionforthestandardisorganized.

Manyindividualfactorscontributetothepositioningdecisions.Inpositioningitself,eachfirmmustbalancethechancesofthestandardbeingadoptedagainstitslikelyreturnsineachcase.Tradeoffsinmakingthesedecisionsamongthelikelihoodofadoption,marketsize,marketshare,profitmargins,anddevelopmentcostsareshowninFigure3.Thepositivebenefitsofchoosingtoleadthedevelopmentofaproprietarystandardarehighmarketshareandhighunitmargins.Negativeconsiderationsincludethelowlikelihoodofwinningastandardscontestwithoutoutsidesupportersandthecostofsponsoringcomplementaryproductionandinitialusers.Foraleaderofanopenstandard,thepositiveeffectsaregreaterlikelihoodofacceptanceandlargertotalmarket,counteredbythenegativeconsiderationsofincreasedcompetition,lowmarketshare,andprobablylowmargins.

Figure3:Strategicpositioning—costsandbenefits

Proprietary OpenLead

+Protectedmarket+Highmargins+Highshare+Highlicenseearnings-Lowchanceofwinning-Limitedexternalsupport-Highcost-Smallnichelikely

+Highchanceofwinning+Largemarket+Broadexternalsupport+Sharedcosts-Lowshare-Lowmargins-Highcompetition-Modestlicenseearnings

Follow

+Provenmarket+Possiblealliance-Secondaryposition-Highlicensefees-Emulationlag-Transfercosts(adaptation)

+Bestchanceofwinning+Equalizedcompetition+Modestlicensefees-Highcompetition-Undifferentiatedproduct-Transfercosts(adaptation)

IPisanimportantfactor.Dependingonitsbusinessmodel,ifafirm’sIPisstrongenough,aleadingdevelopermaybeabletoclaimanappropriateshareofothers’profits,withintheconfinesoftheirlicensingcommitment,vialicensing.23Itmaybeabletodifferentiateitsownproductsinsomewaywithotherfeaturesortechnology,asworthapremium,oraimtoleadfurtherdevelopmentofthetechnologytokeepahead.SometimesthecompanycontributingtothestandardseffortmaydecidetomakeitsIPavailableonalowroyaltyorroyalty-freebasistohelpdriveadoptionofthestandard,inthe

22Asmentionedabove,complementaryproductsareproductswhicharesoldseparatelybutusedtogether,suchascomputersandcomputerprinters,ormobilephonesandmobileapplications.Thecomplements,meaningthesecondaryproducts,maybeproducedbyseparatefirmsbutcanconnecttothemainproductsfromdifferentmanufacturersbycomplyingtotheinterfacestandards.Thelargerthenumberofmainproductsthelargerthepotentialmarketforcomplements,makingthemgenerallycheapertoproduceandavailableinmorevariety.23Therearemanyfactorsaffectingthechoiceofalicensingstrategy.ManydeclaredSEPsendupbeingfoundinvalidornotessential.Obtainingareturntoinnovationvialicensingisgenerallysubjecttomanyrisksanduncertainties.Teece1986.

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hopeofparticipatinginanexpandedproductmarketplace.

Toattractotheradopters,theinnovatormustalsogivecredibleassurancesthatitwillcontinuetomakethestandardsessentialtechnologyavailable,includingfutureenhancements;otherwiseotherimplementersandcustomerswillfearthatthesponsorwilltrytotakebackcontrolofthemarketoncethestandardisestablished.ThisneedtokeepthestandardopenispartofthelogicbehindtheFRANDcommitment.TheIPholdersguaranteethattheywillmakeIPavailabletoanyonepracticingthestandard,andatFRAND(orequivalent)rates.

Otherstrategiesmaybeusedaroundtheopenstandard.Adevelopermayspecializeinthecoreproductandleaveotherstoprovidecomplements.Strangely,analternativemaybetobecomemoreverticallyorhorizontallyintegrated,ifthisproducesamoreconsistenthigh-qualityproduct.Oradevelopermightchoosetofocusontechnologydevelopmentonlyandseekreturns,consistentwithitslicensingcommitment,vialicensing.

Firmsthatloseastandardscontestorwereneverinvolvedinthecontestfacechoices,too,ofwhichstandardtosupport.Theirthinkingissimilartotheleader,ofwhichstandardhasthebestchanceofbeingestablishedinthemarketandwhatstepsthefirmmaytaketoprofitusingthestandardithadadopted.Thismightincludeproductdifferentiation,superiormanufacturingandmarketing,orcontributingtothefurtherdevelopmentofthestandard.

Firmsshouldalsorememberthatstandardizationisnotasinglegame.Itwillberepeated,andtheremaybeachancetoimproveone’spositionovertime.Onceastandardisestablished,firmscompeteforsharewithinthestandardandmaydevelopfurtherenhancements.Moststandardsareimprovedimmenselyduringtheirlifetimewithregularupdates,additions,andreplacements.Intergenerationalcompetitiongivesfirmsanopportunitytoenterthemarketorincreasetheirsharebyleadingthedevelopmentofthenextstandard.

Thesizesofthecostsandbenefitsforthefirmdependontheindustryandthestandard.Themoreadvancedthedevelopmentofacompetingstandardandthestrongerthemanufacturing,marketing,andfinancialcapabilitiesofcompetitors,thelowerthechancesofaproprietarystandardwinningacontest.AproprietarystrategyalsorequiresstrongIPtoprotectthestandardfromunwantedimitation.Similarly,thethreatofastrongproprietarystandardincreasestheattractivenessofanopenstandardtotheweakerplayersandraisesitschancesofrecruitingenoughsupporttowinthecontest.Theselectionfactorsincludethelikelyeffectivenessoftheenablingstrategies.

3. CaseStudy1:Electricalconnectorstandards

3.1 Introduction

Manyaspectsofmodernproductsdependonelectricalconnectors.Devicesneedpower,andmanyneedtocommunicatewithotherdevicesandsendandreceivesignals.Computersandperipheralsareconnectedtosignalsourcesandinteroperateinnetworks.Themainvalueofconnectorstandardsislikelytocomefromcompatibility.Thedesignoftheconnectorsthemselvesmaynotbecriticaltothevalueofthefinalproduct,butthefactthatplugsandconnectorsfromanymanufacturercaninterconnecttopowersuppliesandeachotherisfundamental.

Totakeabasicexample,electricalplugsareusuallystandardizedonanationalbasissothatappliancescanconnecttothepowersupply.Thespecificdesignoftheplugisnotcritical;manydesignsmightbeadequate.Indeed,althoughtheyallhavethesamefunction,plugsfromdifferentcountrieshaveslightlydifferentshapes,andadaptersareneededwhentravellinginternationally.Whatmattersmostisthat

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theyarecompatible,atleastnationally.24

Thisisnotacompleteseparationbetweencompatibilityandtechnology,asevenheretheconnectorsarenotisolatedfromtherestofthesystem.DomesticelectricalpowerwiringintheUKmostlyusesaringcircuit,whichhasacentralcircuitbreaker,buteachplugcontainsaseparatefuse.25Othercountries(andlightingcircuitsintheUK)usearadialcircuitwithfuseskeptcentrally,notintheplug.26Plugsalsohavetocontendwithdifferentsupplyvoltages—110to120voltsintheUS,220to240voltsinmostothercountries—andaredesignedaccordingly.

Computerconnectorsshowmanyofthesamedistinctions.Althoughthedesignofthedifferentstylesofconnectorsisnottrivial,itmaynotbeamajorcontributortoproductvalue.Themainpurposeisefficientinterconnection,andamaineffortistocoordinatetheadoptionofagivendesignfordifferentproducts.Thisagainisnotquitesosimple.Designsmaybedevelopedprivatelyforspecificapplicationswithdifferentperformanceaimsandmaybeincompatiblewitheachother.Designsmaybeproprietaryoropen.Theymayalsohavedifferentimplicationsfortherestofthesystem.Somecomputerconnectors,includingthosediscussedbelow,requiredevicestoshareinterfacemanagement,onapeer-to-peerbasis.Othersmanagetheinterfacewithinthehostcomputerandmustbeabletooperatewithawidevarietyofconnecteddevices.

Thissectionlooksatthestandardsdevelopmentoftwoofthemostwidelyusedcomputerconnectors.FireWireserialbuswasoriginallydevelopedbyAppleandalsotransferredtotheInstituteofElectricalandElectronicsEngineers(IEEE)fordevelopmentasaformalopenstandard.UniversalSerialBus(USB)wasdevelopedbyagroupofelectronicscompaniesasacooperativestandardandmaintainedasanopenstandardbyanalliance,theUSBImplementersForum(USB-IF),setupbythem.FireWirewasdesignedoriginallytofitApple’sneedsbuthasbeenadoptedbyotherfirms.USBwasdevelopedasacollaborativeventuretoreplaceandunifyaplethoraofearlierparallelandserialportconnectorsandiswidelyused.Bothstandardshavebeenfurtherdevelopedovertime,especiallyUSB,whichhashadanumberofgenerationswithimprovedperformance.FireWireisnowlittleused;USBhastakenthemainconnectorrole,andApplehasshiftedtoanewconnectorthathasbeendeveloped,Thunderbolt.

Thesestandardsshowdifferentprocessesfordevelopingandcommercializingstandards,bothproprietaryandopen.Theyalsoillustratecombinationsofprivateandpublicstandardsdevelopment.TechnologiesandstandardsdevelopedinprivatefirmsmaybesubmittedtoSDOsforformalstandardizationordevelopedinconsortiaactinginmanywayssimilarlytoSDOs.

Theymayalsogivesomeinsightsintotherelativeimportanceofinnovationandinteroperability.Connectorsmaynotbeverysignificanttosomeproducts,suchaselectricalappliances,solongastheycanconnecttoapowersource—otherindependentfeaturesoftheproductsaremoreimportant.Productfeaturesmaybelefttomarketcompetitiontodevelopandtheconnectivitystandards(e.g.,plugstandards)agreedasneeded.

Interconnectionmaybemoreimportanttootherproducts,suchasmobilephonesormoviecameras,whichdependmorecentrallyoninteroperability:ahigh-qualityconnectormaybeabigadvantagefortheproduct.Inthatcase,connectorstandardsarevitalandlikelytobedevelopedinparallelwiththe24Thewidevarietyofterritoriallyincompatibleelectricalplugsandelectricaloutletsaroundtheworldillustratespotentialproblemscausedbyalackofinternationalstandardization.Thismayornotbeamajorhindrancetotradeortraveldependingonhowinconvenientitistoconvertbetweentypes.25Latimer,D.W.M.2007.26Withradialcircuits,thecablecomesfromtheconsumerunitandtravelstoeachsocket,similartotheringcircuit.However,whenthecircuitreachesthelastsocket,thecableends,whereasaringmaintravelsbacktotheconsumerunit.https://www.diynot.com/pages/el/el011.php

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technology.Thismayincludeformalcooperationbetweenfirms,aswellastheuseofmarketforces.Forelectricalappliances,connectivitystandardsmaybeestablishedasaconvenienceforthemarketasawhole,butformobilecommunicationsinteroperabilitymustbebuiltintotheproductfromthebeginning.Weseesomeoftheseissuesinelectricalconnectorstandards.

3.2 FireWire

ApplebegandevelopmentofFireWirearound1986.ItwasintendedasaserialreplacementfortheparallelSCSIbus,whilealsoprovidingconnectivityfordigitalaudioandvideoequipment.Itwasintendedasarelativelyinexpensive,high-speedconnectionthatwaseasytouse,butAppledidnotoriginallyintendthetechnologytobeusedasaconnectionforexternal(non-Apple)devices.27

FireWirewasusedbyAppleinsomeofitsownproductsandbyothercompaniessuchasSonyforsomeyears,butwasalsobroughttoIEEEforformalstandardization.28ThisstandarddevelopmentwasdrivenmainlybycontributionsfromApple,althougheffortswerealsomadebyengineersfromTexasInstruments,Sony,DigitalEquipmentCorporation,IBM,andINMOS/SGSThomson.ThestandardwasratifiedinJanuary1995astheIEEE1394HighSpeedSerialBus.Sincethen,therehavebeenanumberofenhancementstoIEEE1394standards,thelatestbeingIEEE1394-2008.

FireWirewaspopularforaudioandvideodeviceslikedigitalcamcordersmainlybecauseofitshighspeeds,withadatatransferrateofupto400Mbits/sontheoriginalFireWire400standard,comparedtothefirstversionoftheUSBstandardin1998ofonly12Mbits/s.Thishadclearadvantageswhentransferringlargefiles.SpeedcontinuedtofavorFireWireforoveradecade.WhenUSB2.0arrivedin2000witha480Mbits/stransferrate,FireWirerespondedwiththeFireWire800withan800Mbits/stransferrate.WhenUSB3.0arrivedin2008withspeedsofupto5Gbits/sFireWirecouldnotmatchthis;itbecamelessattractiveandwaseventuallysupersededformostuses.

MostAppleMacintoshcomputersbetween2000and2011includedFireWireports.AppleintroducedthefirstcommerciallyavailablecomputerwithThunderboltinFebruary2011andstoppedusingFireWireinitscomputersinlate2012.ThunderbolthaseffectivelybecomethesuccessortoFireWireintheAppleecosystem.ApplealsousesitsversionofUSB3.0calledUSB3.1typeC.29

ThunderboltwasmainlydevelopedbyIntel.ItwasinitiallynamedLightPeakandfirstsoldin2011.LightPeakwasatfirstintendedtorunonopticalcabling.However,itwasdiscoveredthatconventionalcopperwiringcouldsupportthedesired10Gbits/sperchannelspeedatlowercost.Thiscopper-basedversionoftheLightPeakconceptwasco-developedbyAppleandIntel.AppleregisteredThunderboltasatrademark,butlatertransferredthemarktoIntel.30Thunderbolt1and2usethesameconnectorasMiniDisplayPort(MDP),whereasThunderbolt3usesUSBType-C.

3.3 UniversalSerialBus(USB)

TheUSBisafamilyofstandardsthatwasdevelopedoriginallyin1996byagroupofsevencompanies:Compaq,DEC,IBM,Intel,Microsoft,NEC,andNortel.Itaimedtoreplacethemanylegacyportsonacomputer,includingserialports,parallelports,PS/2,gameports,andothers.Thesealluseddifferentplugsandneededtobeconfiguredseparately.USBmakestheadditionofperipheraldevicesquickandeasyforanenduserusingasinglestandardizedinterface.Peripheraldevicessuchaskeyboards,mice,printers,scanners,massstoragedevices,telephones,modems,digitalcameras,videocameras,andaudiodevicescanbepluggedintoacomputerUSBportandhavethemautomaticallyconfiguredand27Smith2011.28IEEE1394interfacehasbeenmarketedbySonyasi.LinkandbyTexasInstrumentsasLynx.29Wuerthele2016.30Shah2011;Oliver2012;9to52011.

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readytouse.USBhasbecomethedefactoindustrystandardforconnectingperipheraldevicestoPCsandlaptops.31

USBhasbeensubstantiallyimprovedandenhancedsinceitwasfirstdeveloped.Intermsofdatatransferrates,USBVersion1.0(June1996)hadamaximumspeedof12Mbits/s.Version2.0from(April2000)hadamaximumspeedof480Mbits/s.Version3.0(November2008)hadamaximumspeedof5Gbits/s.ThelatestVersionUSB3.1(July2013)hasamaximumspeedof10Gbits/s.

Thereareanumberofdifferentformvariants.TherearethreebasicformatsofUSBconnectors:thedefaultorstandardformatintendedfordesktoporportableequipment(e.g.,USBflashdrives),theminiintendedformobileequipment(littleusednow,otherthantheMini-B,usedonmanycameras),andthethinnermicrosize,forlow-profilemobileequipment(mostmobilephones).32

TheUSBImplementersForum(USB-IF)wasformedin1995bythegroupofcompaniesthatdevelopedUSB,asanonprofitorganizationtopromoteandsupportUSB.ItsmainactivitiesarethepromotionandmarketingofUSB,WirelessUSB,andUSBOn-The-Go,andthemaintenanceofthestandardsspecificationsaswellasacomplianceprogram.33

3.4 ComparingFireWireandUSBstandards

a) TechnicaldifferencesbetweenFireWireandUSB

ThereareseveraltechnicaldifferencesbetweenFireWireandUSBthatshowthatconnectionstandardsarenotsimplyaquestionoftheexternalshapeoftheplugbutmaydefinesignificantlydifferentalternativeapproachestothedesignoftheinterfacesystemasawhole.

OneimportantdistinctionisthatFireWireandUSBusedifferentsystemsarchitectures.ThisinitiallyfavoredFireWire,butwithconstantimprovementsUSBeventuallymatchedandexceededitsperformance.FireWireusesa"peer-to-peer"typeofarchitecturewhereeachdevicecontrolsitself,ultimatelyreducingtheloadonthemaincomputer.ThisallowedFireWiretohavehighersustainedtransferspeedscomparedtoUSB2.0.StandardUSBusesamaster-slavearchitecturewherethemaincontroller(computer)isresponsiblefordataflowandotherfunctions.34

BecauseFireWireusesa"peer-to-peer"architecture,theendsofstandardFireWirecablesarethesame,becauseunlikeUSBthereisnotamasteroraslave.Thisallowstheusertoconnectarangeofdevicestogether;forexample,Camcorder-ExternalHardDrive,Camcorder-Computer,Camcorder-Camcorder.Bycontrast,USBhasdifferent-shapedplugsfortheperipheralandthecomputersothattheydonotgetreversed.

b) Comparativestandardsdevelopmentprocesses

ForFireWire,Appledevelopedthetechnologyandstandardprivately,andthenbroughtittoIEEE1394workinggrouptobedevelopedasaformalopenIEEEstandard.ThebenefitsofbecominganSDOstandardpresumablyincludeanincreaseinthecredibilityofthestandardandthecommitmenttomakeitavailabletoallcomers,andtheconsensusprocessthatensuresthatitmeetstherequirementsofa

31USBconnectorscurrentlycomeintendifferentformfactors(typeA,typeASuperSpeed,typeB,typeBSuperSpeed,Mini-A,Mini-B,Micro-A,Micro-B,typeC,andMicroBSuperSpeed)inawiderangeofsizes.Thenumberofpinsrangesfrom4to24.http://www.usblyzer.com/brief-usb-overview-and-history.htm;https://www.techopedia.com/definition/2320/universal-serial-bus-usb32Ngo2016.33http://www.usb.org/about34http://guides.macrumors.com/Firewire;http://www.computer-solutions.co.uk/info/Embedded_tutorials/usb_tutorial.htm

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widerangeofpotentialusers.

Bycontrast,USBhasalwaysbeendevelopedbyaprivateallianceoffirmssharingacommoninterestinasingleconnectortoreplacethethenexistingplethoraofdifferentcomputerconnectors.Havingbroadsupport,itwasnotnecessarytobringthestandardtoanSDOforformalstandardization.ItisnowmaintainedandimprovedundertheauspicesoftheUSB-IF,aprivateusergroupsupportedbytheoriginaldevelopers.

c) Differencesinadoption,rollout,royalties

FireWirehasbeenrelativelysuccessfulinnotonlyAppleproductsbutalsothoseofothermanufacturers,notablyincamcorders.Itwasthemosteffectivehigh-speedcomputerconnectorofitstypebetweenabout1996and2008.After2008,USB3.0matchedFireWirespeeds,andFireWirefelloutofuse.

WhenUSBwasintroducedin1996,itwaslowspeedanddidnotatfirstattractmuchindustryinterest.ItalsohadtoovercometheinstalledbaseofexistingconnectorsandmanufacturersunwillingtocommittothenewUSBunilaterally.ItisclaimedthatUSBdidn'tgetwideindustrysupportforyearsuntilSteveJobsrevealedtheoriginaliMacwithUSB1.1,in1998.35Thisonlyhadonetypeofinterface,USB,andprovidedthebaseformanufacturerstostartofferingUSBproducts.AsUSBperformanceandcapabilitiesimproved,itestablisheditselfastheleadingcomputerconnectorandisnowfoundinalmostallpersonalcomputersandotherelectronicproducts.

AsanopenformalSDOstandard,FirewireIEEE-1394isavailabletoallimplementersasanopenformalstandardavailableforlicensingonFRANDterms.CompaniesholdingIEEE1394patentsout-licensetheseviaapatentpooladministeredbyMPEGLA.MPEG-LAisanagentmakingavailablelicensesforpatentportfoliosfrommultipleholdersinaone-stopshop.Underthetypicalpatentpoollicense,aroyaltyofUS$0.25perunitispayablebythemanufacturerperfinishedproduct.36

TheUSBstandardisroyaltyfree,butmanufacturersneedaVendorIDandProductIDfromtheUSBImplementersForuminordertobecertifiedasUSB-compliantandusetheUSBlogos.EachtypeofUSBproductrequiresspecifictestingtobecertifiedandgetontheIntegratorsList.TheForumcurrentlychargesnon-membermanufacturersabiannualfeeof$3,500fortherighttousetheUSBtrademark.Themembershipfeeiscurrently$4,000peryear.Althoughthesesumsaremodestforalargecompany,therehavebeenquestionswhethertheymightpenalizesmallstartups.TheForumrejectedsuggestionsthatthesystembechangedtoopensourceinOctober2013.37

4. CaseStudy2:VideoRecoding–VHSvs.Betamax

4.1 Introduction

ThecontestbetweenVHSandBetamaxvideocassetterecorder(VCR)formatsinthelate1970sisoneofthemostfamousstandardscompetitions.Togetherwiththeintroductionofthepersonalcomputer(PC)inthe1980s,itisprobablythebattlemostresponsibleforbringingstandardstogeneralattention.Thisperhapssetabackgroundtothemajorlitigationsfromthe2000sonwardsthathavepunctuatedthe

35Wuerthele2016.“TheiMac’ssolerelianceontheUSBinterfacemeantthatMacusershadtothrowoutalltheiroldmice,keyboards,scanners,printers,andexternaldrives.…,theiMacprovidedthefirstkickstartUSBneededtoreallygetofftheground.ThankstotheiMac,manyperipheralmanufacturerslaunchedtheirfirst-everroundofUSBcomputeraccessories.”Edwards2008.36http://www.mpegla.com/main/programs/1394/Pages/FAQ.aspx37Smith2013.

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licensingofstandardsessentialIPinmobilephonesandcomputing.Sony’sBetamaxwasintroducedin1975andJVC’sVHSin1976.Thoughsimilarindesign,tapesfromoneformatcouldnotbeplayedontheother’smachine.Despiteitslaterstart,VHSoutstrippedBetamaxandeventuallydroveitfromthemarket.VHS’ssuccesswasclearasearlyas1978asitssalesincreased,yetitwasanothernineyearsbeforeSonyadmitteddefeatandbeganproducingVHSformatin1987,althoughitcontinuedtoproducesomeBetamaxmachinesfornichemarkets.Producersoftheonlyothersystemlaunched,V2000inEurope,hadalreadyadoptedVHS.Thatonlyasinglestandardprevailed,ratherthandividingthemarketbetweenstandards,showsthepowerofstandardization,whichcaneventuallyovershadowotherproductdifferences.

ThissectionsummarizesthehistoryofVCRdevelopmentandthestandardscontestbetweenVHSandBetamax.Itreviewsthestandardsstrategiesofthetwofirmsandtherelationshipbetweenthese,thetechnologicaldevelopmentofthetwoformats,andtheexpansionofthemarket.ThesethreeaspectsworkedtogethertoensurethesuccessofVCRandinparticularoftheVHSstandard.BothJVCandSony,andothers,haddevelopedattractivenewproducts,butthecombinationofstepsfollowedbyJVCforVHSwasmosteffective.Althoughtechnicaldifferencesbetweentheformatswererelativelyslight,theywereenoughtomakeVHSmoreattractiveasaconsumerproductandenabledittoenlistothermanufacturersandtobemoresuccessfulinthemarketplace.VHSovercameBetamax’searlymarketlead,andoncenetworkeffectsbeganworkingstronglyinitsfavorittookvirtuallythewholemarket.PartlybecauseofJVC’sopenstandardstrategy,VCR,asVHS,becameoneofthemostsuccessfulconsumerelectronicsproductsofalltimeandledtosubstantialprofitsforJVCandtoothersintheindustry.

4.2 HistoryofVCR

a) DevelopmentofVHSandBetamax

ThekeydatesinthehistoryofVCRsaresummarizedinTable3.38ThemaindevelopmentphasesofconsumerVCRsoccurredbetweenabout1970,whenJVCandSonybeganworkonadaptingprofessionalrecordertechnology,and1976,whenJVClaunchedVHS.Therewasashort-livedtechnology-sharingagreementbetweenSony,Matsushita,andJVCin1970,aimedtoperfectthecassettemechanismultimatelyusedintheSonyU-matic.Thisgavesomecommonalitytothebasictechnology.Becauseofcompetitivepressures,thefirmsreturnedtoindependentdevelopmentafter1971.39BetamaxlaunchedinJapanin1975,whileVHSlaunchedin1976.Fromthestart,VHSwaslicensedtoseveralofthelargestJapanesemanufacturers.Inresponse,Sonyattemptedtocatchupandmadesomeless-extensivemanufacturingarrangementsin1977.

Table3:TimetableofMainEventsforVCR

Date Event1956 Firstaudiovisualtape(AVT)—Ampex1970 FirstprototypeofconsumerVCR1971 JVCbeginsdevelopmentworkonhomevideorecordingsystem1972 VHSDevelopmentMatrixsetsoutmainfeaturesandspecifications1973 FirstVHSprototypesbuiltinsecret1974 Betamaxprototype—Sony(1hour)

SonyproposesthatMatsushita,JVCadoptBetamax

38ForVCRhistory,seeGranstrand1984;TotalRewind1990;Cusumanoetal.1992;Grindley1995(Ch.4);Moulding1996;Maybury1997;Sony1996;Wielage&Woodcock2003;Milestones2006;Panasonic2014.39Granstrand1984;Cusumanoetal.1992;Wielage&Woodcock2003.

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1975 BetamaxlaunchinJapanandUSA(1hour)1976 Hitachi,Sharp,MitsubishiadoptVHS

MITIproposesJVCadoptBetamaxVHSlaunchinJapan(2hour)

1977 MatsushitaadoptsVHS,dropsVX-2000Sanyo,Toshiba,ZenithadoptBetamaxVHSlaunchinUSSonyrecorderlaunched—JapanandUSA(2hour)

1978 EuropeanlaunchforVHSandBetamaxJ2Tagreement-JVC,Thorn,Telefunken,alsoThomson

1979 Pre-recordedsoftwarereportedimportant—1000BetamaxtitlesPhilipslaunchesV2000inEurope

1983 PhilipsstartsproductionofVHS1985 Miniaturecamcordersintroduced—8mm,VHS-C1988 SonystartsproductionofVHS1989 Sonyintroducespalm-sizedcamcorder

SonyhadadaptedtheU-maticdesigntoaconsumerdeviceandwasreadytolaunchtheproductin1975.JVChadatfirstfollowedsuit,butthendecidedtostartfromscratch,withthefirststepits“VHSDevelopmentMatrix”in1972,whichsetouttwelvefundamentalobjectivesforanewconsumerVCR.ThedevelopmentofVHSwasbasedontheseaims.Criticalfeaturesplannedfromthebeginningincludedatwo-hourrecordingtime,affordablecost,andhigh-volumeproduction.40ThesebecamethebasisforJVC’ssubsequentstrategy.

Chancealsoplayedapart.JVCalmostdroppedoutofVCRin1972duetocostproblems,butateamcontinueddevelopmentinsecret,andJVCeventuallysupportedVHSofficiallywhenaprototypewasdevelopedin1973.During1974,JVCwasshownaprototypeBetamaxrecorder,andSonyrepeateditsoffertoJVCtojoinwiththemanddevelopBetamax.JVCrealizedthatBetamaxwaslargerthanitsownprototypeandcouldonlyrecordforonehour,halfaslongasVHS.JVCnowhadevenmoreconfidenceinitssystemanddecidedtocontinuealone.

SonylaunchedBetamaxintheUSinApril1975.AwareofVHS,SonyprevailedontheJapaneseMinistryofInternationalTradeandIndustry(MITI)toaskJVCin1976toabandonVHSandjoinwithSonyratherthanriskadamagingformatwar.41UnfortunatelyforSony,JVCwasbythistimebackedbyMatsushitaandalsopersuadedHitachi,Mitsubishi,andSharptobackVHS.AlthoughSonyhadbynowlaunchedBetamaxinJapan,thesupportforVHSeventuallyledMITItodropitspushforasingleJapanesestandardandletthemarketdecide.

40KeyperformancefeaturesJVCbelievedwereneededincludedcompatibilitywithanyTV,broadcastpicturequality,atleastatwo-hourrecordingcapacity,interchangeabletapesbetweenmachines,andversatility(e.g.,abletotapefromTV,playpre-recordedtapes,andreadfromvideocameras).Consumerandmanufacturingrequirementswerethatplayersshouldbeaffordable,easytooperate,andhavelowmaintenancecosts.Theyshouldbecapableofbeingproducedinhighvolumes,partsmustbeinterchangeable,anddecksmustbeeasytoservice.JVCalsorecognizedthattheVCRwouldhaveanimportantroleinthe“informationsociety.”Maybury1997;Knight2015.41MITIatthistime,especiallyduringaperiodfromitsinceptionin1949untilthemid-1980s,wasapowerfulinfluenceonJapaneseindustrialpolicy,withrolesinsteeringinvestments,resolvingdisputes,andactingasaregulator.ItsinfluenceinsupportingnewproductsandstandardsinJapaneseindustrycouldbedecisive.Johnson1982;Bloom1984.AlsoseediscussionsofMITI’sroleinselectingstandardsforVCRinSection4.3andsubsequentsections,below.

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JVCfollowedwithVHSinOctober1976.JVChadarrangedUSdistributionofVHSmachinesbyRCA,tobemanufacturedbyMatsushitainJapan.AlthoughSonyhadlicensedZenithtodistributeBetamaxintheUS,thiswasnosubstituteforRCA’shugedistributionnetwork.VHSovertookBetamaxinitssecondyear.By1981,italreadyhad80percentoftheUSmarket.BothproductswereintroducedtoEuropein1978,thistimewithVHSaheadofBetamax.TheoriginalsupportersofBetamaxandthePhilipsV2000soonswitchedtoVHS.SonyeventuallybeganproducingtoVHSstandardaswellasBetamaxin1988.42

b) Technicalcomparisons

BothVCRformatsweredevelopedfromsimilartechnology,basedoncross-licensedresearchanddevelopmentbySony,Matsushita,andJVCin1970.Theyreliedona“helicalscan”systeminwhichtherecordingtrackwaswrittenacrossthetapebyarotatingmagnetichead.Thetwosystemswereneverthelessincompatible—tapesfromonecouldnotbereadbytheother.ThemostobviousdifferenceisthatVHScassetteswerelargerthanBetamax,withalongertape.Afterlaunchandasthemarketdeveloped,therewereaseriesofincrementaltechnicalinnovations,whichimprovedthebasicdesigntoapointwhereitbecameamajorconsumerproduct.Competitioncenteredonasequenceofimprovedfeatures,inwhicheachfirmtriedtomatchorleapfrogtheother.43

Asequenceofproductimprovementsfocusedonseveralfeatureareas,notablyplayingtime,programming,andotherfeaturessuchasfreeze-frame,slow/fastmotion,scanning,andhi-fisound.Forexample,playbacktimeforBetamaxwasinitiallyonehourin1975,butwasincreasedtotwohoursby1977.VHSwasintroducedin1976withtwo-hourplayback,butby1977hadalreadyintroducedamodelwithfour-hourplayback.VHSintroduced24-hourprogrammingin1977andseven-dayprogrammingin1978.Itwas1979beforeprogrammingwasintroducedforBetamax.

Foreachoftheproductfeatures,competitioncontinueduntilfurtherimprovementmadelittledifferencetotheproduct.Competitionthenmovedtoanotherfeature.Forexample,themostcriticalfeatureinitiallywasplayingtime.TheconsumerbreakthroughcamewhenJVCintroducedVHSwithaplayingtimeonasingletapeoftwohours—longenoughforafeaturefilm.Furtherextensiontofourhoursgavesomeaddedadvantage,butanyfurtherimprovements(e.g.,toeighthours)madelittledifferencetotheuser.Thefeaturehadbecome“saturated.”VHSsystemswerethenintroducedwithautomatictimersandsophisticatedpre-programming.Oncepre-programmingcouldbesetforaweekinadvance,withseveraldifferentrecordingperiods,therewasnoadvantageinextendingthisfacilityanyfurther.

Intheearlystages,JVCledSonyinfeaturescriticaltoconsumeracceptance:playingtime,size,andpre-programming.Itwasalsopreferredontheotheraspects:price,easeofmanufacture,andeaseofservicing.Manufacturingsimplicitymadeiteasiertoout-license,whichincreasedthesupplyandvarietyofVHSproductsoffered,andraisedthecredibilityofthestandard.44Cheapermanufacturingalsohelpedbringdownprices,furtherenlargingthemarket.Inthecrucialstages,Betamaxhadonlyoneproductadvantage:itsslightlyhigherpicturequality.However,thisprovedtobenotsignificantenoughtobenoticedbymostconsumers,forwhomVHSwasadequate.

Eventually,SonymatchedalltheVHSfeaturesandbegantoleadthedevelopmentinsomeareas.Itwasthefirsttointroducehigh-speedscanning,hi-fisound,and1/2and1/3speed(extra-longrecording).Itintroducedahigh-definitionversion,Betaplus,in1983.Sonyendedupwithatechnically“better”productintermsofimagequalityandfeatures.Unfortunately,thiswastoolatetoovercomeVHS’s

42Maybury1997;Bylund2010.43Cusumanoetal.1992;Grindley1995(Ch.4);Maybury1997;Wielage&Woodcock2003.44Thisappliesthegeneralconceptthatthatearlyandopenlicensingcanleadtosuccess,discussedabove.

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entrenchedpositionastheindustrystandard.JVCinturnmatchedSony’sinnovations,andmadesomeadvancesofitsown.ItintroducedcompactVHS-Cforvideocamerasin1982.In1987,whenitaddedSuper-VHS,withhighimagequalitycapableofhandlinghigh-definitiontelevisionandequaltolaserdiscandBetaplus,Betamax’slasthopeforVCRwasgone.

4.3 Thevideorecordingformatcontest

a) Productandstandardizationstrategies

TounderstandtheVHSversusBetamaxstandardscontest,weneedtostartwiththedevelopmentoftheformatsinthemid-1970s.Bothformatswereacceptedasstandardsin1976byMITI,whichcontrarytoitsnormalpolicyleftthemarkettodecidewhichformatshouldprevail.45ThisledtothebattlebetweenVHSandBetamaxtobecomethedominantstandardinVCR.ThecaseillustratesmanyofthestandardsstrategiesoutlinedaboveinSection2.

AcentralreasonforVHS’ssuccessisthatJVCfollowedamoreeffectiveopenstandardstrategyforaligningothermanufacturersandmovieproducers.JVCwasmoresuccessfulthanSonyinfindingpartners.Itdidsobyprovidingasystemthat,althoughsecondonthemarket,wasmoreacceptabletoconsumers:thisconvincedamajorsectionofJapanesemanufacturersthatVHScouldcommandawidemarket,whichinturnhelpeditscustomercredibilitywhentheproductwaslaunched.

WhenBetamaxwasintroducedin1975,itwasmanufacturedonlybySony.SanyoandToshibaadoptedBetamaxin1977.WhenVHSwasintroducedinlate1976,itwasmanufacturedbyJVCbutsoonjoinedbyHitachi,Sharp,andMitsubishi—firstmarketingJVCmachinesandthenmanufacturingtheirowninlate1977.Matsushita,themajoritystockholderinJVC,publiclyadoptedVHSinJanuary1977andbeganmanufacture.46SonyintroducedBetamaxintheUSinFebruary1976,andJVCfollowedwithVHSinJanuary1977.ThekeytoUSsuccesswasdistribution.AturningpointforVHSwasitsadoptionbyRCAinmid-1977.RCAmarketedVHSmachines,manufacturedinJapanbyMatsushitabutsoldwithanRCAbadge.Sonyhadsetupaless-effectivemarketingagreementwithZenithinMarch1977.

JVChadplannedforthisinacomprehensiveapproachcombiningtechnology,productdesign,andstandardssupport.VHSwasdesignedformarketappealratherthantechnologicalperfection,andwasaimedateaseofmanufacture.Itout-licenseditsformat,asinitiallyitdidnothavesufficientmanufacturingcapacitytocovertheexpectedmarket.Althoughwellknowninaudio,JVCwasarelativelysmallcompany,unknownintelevision,andknewthatitwouldhavetorelyonoutsidemanufactureanddistribution.Thesimplerconstructionmadeiteasierforthemanufacturerstoadopt,whileitslowercostincreaseditspotentialmarketpenetration.JVCmadeVHSstandardsavailabletoothermanufacturersonliberaltermswithminimalrestrictions.

Itsroleas“underdog”mayhavebeenanadvantage—itapproachedmanufacturersaspartners,notexpectingunreasonablemarginsandnotthreateningtheotherfirms’positions.JVCdidnotaimatmarketdomination.Itaimedatbroadacceptanceofthestandardratherthantryingtoearnhighinitialrents.ThereturnswouldcomeoveralongperiodonceVHSwasestablished.VHSalsokeptentrypriceslow,aimedatmarketpenetration.EspeciallyintheUS,pricecompetitionwasverystrong,andVHSundercutBetamaxfromthebeginning.

Sony,alargercompany,initiallyfollowedaproprietarystrategyandonlyreluctantlylicensedothermanufacturersinresponsetoVHS.IthadledtheearlydevelopmenteffortandwasthefirsttomarketamoderatelypricedVCR.ItfeltitcouldestablishBetamaxastheleader,andthenbringinother

45ForanindicationofMITI’sroleinselectingandsupportingnewproductsandstandards,seefootnote41above.46MatsushitaElectricIndustrialCo.changeditsnametoPanasonicCorporationin2008.

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manufacturersonitsownterms.Sonyofferedjointmanufacturingandmarketingbutnotcollaborativedevelopment.UnfortunatelyforSony,althoughitwasfirst,itsproductwasnotquitereadyforthemassmarket.Itsone-hourrecordingtimewastooshort,andthemachinewasbulky.Itpersistedingoingaheadalone,investinginmanufacturingandcommittingitselfinthemarketplace.Bymovingtooearly,Sonywastiedtoaninferiorsystem,takingallconsiderationsintoaccount.

b) Pre-recordedmovies

Complementaryproducts,intheformofpre-recordedmovies,becameanissueintheirownrightforthefirsttimeasearlyas1978.Initially,VCRsweremainlypurchasedfortime-shiftviewingandacertainamountofmovies.By1978,theinstalledbaseswerelargeenoughtobeworthproducingpre-recordedfeaturefilms,aswellastheuseofvideoclubsandprivateborrowingtosharethetapes.ThiswasaidedbyaUSSupremeCourtdecisionin1984thatallowedtheuseofVCRsfor“timeshift”viewingasfairuseandnotliableforcopyrightinfringement.Pre-recordedtapeswereavailableineitherformat,butasVHS’sinstalledbasegrewthisbegantoattractagreaterrangeofmovies.Later,Betamaxwasrestrictedto“blockbuster”movies.Oncepre-recordedtapesbegantoappearprimarilyinVHSformat,salesofBetamaxfellprecipitately.

Althoughtheavailabilityofcomplementaryproductssuchasmoviesmakesaleadingformatmoreattractive,thisdoesnotseemtohavebeenclearlyeffectivehereasameansofcompetition.Moviesupplyseemstohavereactedtotheinstalledbaseandconsequentdemand,ratherthanhavingbeenusedactivelytopromoteoneformattotheexclusionoftheother.SinceVCRscoulddomanythings,theirusefulnessdidnotdependsolelyonpre-recordedcontent.Also,giventheeasewithwhichtitlescouldbepirated,pre-recordedcontentwasadifficultmarkettocontrol.Thusthetendencywasforsoftwaretofollowthehardwarebase,confirmingtheleaderratherthanbeingacriticaltoolagainstacompetitor.

c) Effectoflawandregulations

ThefateofVCRwasalsoinfluenced,inthiscasepositivelyandpossiblydecisively,bylegalevents.AchallengetotimeshiftingwasraisedintheBetamaxcaseintheUS,inwhichtwomajormoviestudios,UniversalandWaltDisney,suedSony,contendingthatthecommonconsumerpracticeofusingVCRstotapebroadcastTVshowsandmoviesforlaterviewingwascopyrightinfringementandthattheVCRmanufacturerswereliableforcontributorycopyrightinfringementorinducementtoinfringebyprovidingtheVCRdevicesthatenabledconsumerstoperformsuchhometaping.TheSupremeCourt’srulinginSonyCorp.ofAmericav.UniversalCityStudios,Inc.,464U.S.417(1984)thatsuch“timeshifting”wasfairuseunderUScopyrightlawandthatVCRmanufacturerswerenotliableforcopyrightinfringementwasasignificantfactorinthecommercialsuccessofVCRs.Thedecisionwasreportedlyacloseone.47Hadthedecisionbeentheotherway,itislikelythattheindustrywouldnothavedevelopedasitdid.

d) TechnologicaldesigncriticaltoVHSstandard

StandardsstrategieswereacentralreasonforthesuccessofVHSasitwasbeingintroduced.ThisshouldnotdetractfromtheimportanceoftheVHSdesigninshapingthestandardandattractingsupport,andtheinteractionbetweentechnologydevelopmentandstandardization.TherewereimportantdifferencesintechnicalperformanceandmarketphilosophybetweentheformatsbeforetheywerepresentedtoMITIandtheothermanufacturersforapproval.48ItisoftenclaimedthatBetamaxwastechnicallyequivalentorsuperiortoVHSandlostthecontestbecauseofJVC’ssuperiorlicensing

47Samuelson2006;Volk2008.48Bylund2010.

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strategyinattractingothermanufacturers.49ThisglossesoverthefactthatVHSwasalsomoresuitedtotheneedsofamassconsumerproductformanufacturinganduse.TheseweredecisivefactorsinattractingothermanufacturerstoVHSastheonewiththemostcustomerappealandinthesubsequentmarketcompetition.

Sony’sBetamaxhadadaptedacompactversionoftheU-maticindustrialVCR,introducedin1971,foraconsumerproduct.JVChadcollaboratedwithSonyonU-maticandfollowedasimilartechnology.However,havingbeenshownBetamaxprototypesbySonyin1974,JVCbelievedchangeswereneededforaneffectiveconsumerproductandcontinuedtodevelopitsownadditionaltechnologiesforVHS.Technicaldifferencesincludedasimpler“M-loading”tapemechanismcomparedtoBetamax’s“U-loading”system,andcircuitdevelopmentsthatjointlyenabledasmaller,lower-costmachinewithlongerplaybacktime.50

Farfrombeingcost-cuttingexercises,thesewerepartofacompletesystemsapproachbyJVCwithfeaturesthatitconsiderednecessaryforasuccessfulconsumerVCR.ContrarytopopularhistoryandSony’sclaims,differencesinthetwoformats’picturequalitymayhavebeenminorandnotsignificanttoconsumers.51Consideringthewholeproduct,theadditionalfeaturesmadeVHSsuperior.

Theinteractionbetweendevelopmentandstandardizationcontinuedaftertheformatshadbeenintroduced.Thereweremanytechnicalandmarketinginnovationsasfirmsplayedcatandmousetotrytogetaheadoftheircompetitorswithnewfeatures.Theseincludedlongerplayingtimes,front-loadingforBetamax,freezeframeandfastrewind/forward,remotecontrol,andtimeshiftprogramming.52Theseimprovementsbuiltontheinitialdesigntofurtherdevelopthestandard.Somecamefromlicensees,thoughmostweredevelopedbyJVCitself.AlthoughBetamaxendedbymatchingVHS’sadvantages,itcouldnotovercomeVHS’smomentum.VHSbecametheleadingplatformforfurtherdevelopmentsofvideorecordingtechnologyandhelpedtransformthecontentindustries.

e) Standardsandprofitability

AlthoughVHSovercameBetamaxasastandard,thismightnotmeanthatJVC’sstrategywasoptimal,orthatSony’swasafailure.ThisdependsonwhetherJVCcouldnothaveexpectedtoearnhigherreturnswithanyotherstrategyandwhetherSony’sresultwasduetoitsstrategies,notchance.JVC’sopenstrategyensuredthesuccessofVHS,butthiswasatacostofsharingthemarketwithseveralothermanufacturers.CouldJVChaveearnedmorebyadoptinganexclusivestandardandfacingSonydirectly?OrbyjoiningSonywithBetamax?Similarly,wasSony’sexclusivestrategythebestitcouldhavedoneinthecircumstances,eventhoughiteventuallyhadtoabandonBetamax?

ForJVC,theopenstrategyseemstohavebeenoptimal.In1974,itwasarelativelyunknowncompanywithmostofitssalesinaudioequipment.ItwasmuchsmallerthanSony,withoutitsfinancialandmanufacturingresources,oritsbrandreputationanddistributionchannels.ThesecouldhavebeendecisiveadvantagesforSonyinanewmarketthatinthefirstinstancehadtobeconvincedthatVCRwasaviableproduct.

EventhoughVHSwaspreferredtoBetamaxincustomeracceptabilityandcost,aloneJVCwouldnothavebeenabletoestablishVHSbeforeSonycouldcatchup.Theopenstandardensuredadequatelevels

49Sony1996;Morita1986.Cusumanoetal.1992focusonstrategicmaneuveringofVHSsupporters.50Milestones2006;Bensinger1981.M-loadingandU-loadingwrapthetapearoundthehelicalscanningdrumindifferentways,withM-loadingsomewhatsimplerandmorecompact.CircuitdevelopmentsforVHSenableddatatobepackedmoredenselyonthetape.51Sony1996;Schofield2003.52RCA’smarketingskillsarenotedasanadvantageforVHSintheUSindirectingfurtherfeatures.

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ofmanufacturingandmarketacceptance,thekeystoVHS’ssuccess.Further,althoughitlicensedmanycompetitors,JVCmanagedtoretaincontrolofalargeportionofthemarket.Itdidsonotbyplacingrestrictionsonitslicenseesbutbyconstantproductimprovement,keepingitaheadofitscollaboratorsandexpandingthemarket.ItspartnersleftmostofthetechnicalinnovationtoJVC,concentratinginsteadonmanufacturingandmarketing.Thiswasanimpressivecombinationofopennessandinnovationleadershiptomaintaindominanceofastill-growingmarket.

TurningtoSony’sstrategy,wouldithavedonebettertohaveusedamoreopenstrategyforBetamaxfromthebeginning?ShouldithaveswitchedtoVHSassoonasitbecameapparentthatBetamaxhadlittlechanceofsurvivinginthelongrun?IfithadmatchedJVCbymakingitsownstandardfreelyavailablefromthebeginning,itmighthavebeenablelineupasmanymanufacturersasJVC.Ifithadnotrushedaproprietaryformat,itmighthavedevelopedamorewidelyacceptableproduct.ThiscouldhaveneutralizedJVC’sstrategy.WithBetamaxandVHScompetingonsimilarterms,Sony’smarketstrengthcouldhaveprevailed.SonymightthenhavebeeninJVC’sposition,withalargeshareoftheworldmarket,acontinuingincomestream,andlicensingearnings.

Thequestioniswhetherthiswaslikely.AproblemwasnotjustthatSony’sapproachwasonesided,butthatBetamaxdesignhadfundamentalproblems.Giventhereservationsabouttherecordingtimeandequipmentsize,in1974itmighthavebeendifficultforSonytohaveattractedsupportersonanyterms.Conversely,BetamaxmightnothavereachedmarketintheformitdidhadSonybeenconvincedoftheneedforbroadsupport.Evenin1974,therewastimeforproductredesignbeforethearrivalofVHS,twoyearslater.InsteadSonythoughtthatitcouldforcetheissue,andtookahighrisk.Itmayhaveunderestimatedtheimportanceofmarketacceptabilityandoverestimatedtheimportanceofbeingfirst.

Inthiscase,theopenstandardseemstohavebeenoptimalforJVC,andtheoppositeforSony.Thatdoesnotmeanthatitisalwaysthecase—itdependsonthesituationandtheindustryatthetime.53

4.4 Lessonsfromthecontest

a) Marketstrategiesforstandards

TheVHSversusBetamaxstandardscontestisoneoftheclearestexamplesofmarketstrategiesforestablishingstandards.Ittookplacealmostentirelyinthemarketasalternativeapproachescompetedtobecomethedefactostandard.Itdemonstrateswhatmaybeneededtoestablishasuccessfulstandardandthelikelyfateofunsuccessfulstandardswithpoorsupport,nichemarkets,andstrandedusers.FactorsatworkforVHSincludedmostofthefactorsinsuccessfulstandardsstrategy,includingbuildingtheinstalledbaseandcumulativesales,establishingcredibility,satisficingthetechnologicaldesign,carefultiming,sponsorship,formingalliances,introductionpricing,productpreannouncements,andcareinhandlingofficialstandardsbodies.

Thecontestalsocontrastsopenversusproprietarystrategies.Inthiscase,JVC’sopenstrategywasmoreeffectivethanSony’sproprietarystrategyinattractingbroadindustrysupportandestablishingVHS’scredibility.ThiswasvitalforthesmallerJVCinbuildingitsinstalledbasemorequickly.VHSwasabletoovercomeBetamax’sinitialadvantagesofanearlierintroduction,allegedbetterpicturequality,andSony’ssizeandreputation.VHSwashelpedbyitslongerplaybacktime(twohoursversusBetamax’sonehour)andsimplermanufacture,loweringcostsandprices.Itwasalsolaunchedwithmorecarefulconsumermarketing,includingeffortsmadebyitslicensees.IttooktimeforBetamaxtomatchthesefeatures—itsoondidsoandexcelledVHSinsomerespects,butbythenthemarketwasrapidly

53Foracounterexample,oneneedlooknofurtherthantheprofitabilityofAppleinmobilecommunicationsandcomputing.

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convergingonasingleVHSstandard.ThestrategywasalsoprofitabletoJVC.Apartfromsharingthemarket,iteffectivelyledfurthertechnologicaldevelopmentandbecameamoresubstantialcompany.

Onefactorthathasnotbeendiscussedmuchaboveistheunpredictableone:chance.Thereareseveralpointsatwhichthestorycouldhaveturnedoutdifferently,butworkedinVHS’favor—suchasJVC’sdecisiontorestartworkonVHSin1972,Sony’sdemonstrationofitsprototypetoJVCin1974,Matsushita’sdecisiontosupportVHSin1977,andtheUSSupremeCourt’sclosedecisionin1984.Itiswrongtocallthisaproductofluckratherthanperseveranceandplanning,buttherewereanumberofcriticalpoints.Thismayhelpillustratetheoccasionalimportanceofsmallchanceeventsindeterminingstandardsoutcomes.54

Inthiscase,JVC’sopenstandardwashighlysuccessfulinestablishingtheVHSformatagainstBetamaxandinexpandingthetotalVCRmarketmorequicklyandextensivelythanifthestandardhadremainedproprietary.Itbroughtseveralmanufacturersintothemarkettoexpandthesupply,helpedreduceproductioncostsandconsumerprices,andwasthebasisforthehugeinstalledbaseofVCRsthatsupportedothercompatibledevicessuchascamcordersandeffectivelycreatedthemarketforpre-recordedmovies.Itwastheforerunnerformanyotherconsumerelectronicsproducts,suchashomevideo,andcancrediblybesaidtohavepioneeredthefuturemarketsforDVDsandhomeviewingviaothermediasuchastheInternet.

ThisalsoensuredthattheVCRmarketgrewmorerapidlythanitmightotherwisehavedone,tobecomeoneofthemostsuccessfulconsumerelectronicsproductsofalltime.TechnologicalcompetitionviastandardshadgreatbenefitsnotjusttoJVCanditssupportersbutalsototherestoftheelectronicsindustry,thefilmandTVindustries,andconsumers.WhatifJVChadn’tdecidedtogoitsownwayandcompetewithBetamax?TheVCRmarketwouldlikelyhavegrownmoreslowlyunderaproprietaryBetamaxstandardandwouldnothaveprogressedtechnicallyandcommerciallyasquicklyorasfarasitdid.

b) Standardsandtechnologydevelopment

Thecasealsoshowsthatstandardsshouldbeseenwithinthecontextofothereconomicfactors,especiallytechnologydevelopment.ThestandardformatswerethemediumforcoordinatinginnovationbySony,JVC,andMatsushita.Theyformalizedthetechnicaldesignsandensuredthatallproductswouldbecompatible.Notealsothatwhenlicensingitstechnologytoothers,JVCwasnotconstrainedbypriorconditionsattachedtothestandard,asitmighthavebeenhadtherebeenaFRANDcommitment.MITIleftthemarkettodecide.Inthiscase,JVCalmostautomaticallychosealiberallicensingpolicy.

TheVHSversusBetamaxstandardscontestwasasmuchaboutestablishingadominantdesignforanewproductascompatibility.Networkeffectswereveryimportant,onthesupplysidetomakemanufacturingcapacityavailableandonthedemandsidebeingabletosharetapesbetweenmachines.ButakeycharacteristicofthewinningVHSformatwasthatitfitconsumerneedsbetter.Compatibilitymeantthateventuallyasingledesignwouldprevail,butanapproachtounderstandingthecontestthatfocusedonlyoncompatibilitywouldmissthecompetingtechnologydevelopmentthatwentonbeforehand.Forexample,ifBetamaxhadbeenestablishedasadominantstandard,therewouldstillhavebeencompatibility,butarguablythedesignwouldnothavebeenassuccessfulasVHS.

c) Generalindications

TheVCRcontestmayillustratesomegenerallessonsforstandardsdevelopment.First,fornewtechnologiesatleast,thedevelopmentofstandardsisunlikelytobeasimplecaseofselectingbetween

54Arthur1989.

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existing,fullydevelopedalternatives.Thealternativesoftendonotyetexist—theyhavetobedevelopedtocreatethestandard.DevelopinganacceptableformatbecamethefocusofinnovationforVHS,todevelopthefeaturesneededforasuccessfulproductandtoconvinceothermanufacturers.JVCandthemanufacturersactedasstandardsdevelopers,notstandardssetters.Thisdistinguishesstandardsdevelopmentandstandardssetting.

Second,thecontestbetweenalternativescanbeverycontroversial,withsupportersoneachside,andlargeeffortsandexpendituresinvolved.Thecontestmaytakeplaceatmanylevels,includingcompetingdevelopmentoftechnology,enrollingsupportfromotherfirms,drawingongovernmentandregulatorsupport,andplacingcompetingproductsinthemarketplace.Thereareoftenlikelytobepotentialalternativesinprospect,especiallyiftheyarebasedonpriorsuccessfultechnologies(e.g.,inthiscaseU-Matic).Manyofthesemaybeeliminatedinthedevelopment/standardizationprocess.Ifdifferencesareunresolvedduringstandardization,remainingstandardsmaycompeteintheproductmarket.Alternativesmayalsoapplyonlytospecificaspectsofthestandard,withtherestofthestandardcommontootherproposals.

Third,fornewproducts,technologydevelopmentmaycontinuelongaftertheinitialstandardisintroduced,withenhancementsandexpansionintoadjacentmarkets.TheoriginalVHSstandardbecamethebasisforimportantfurtherdevelopmentstothestandardandincomplementaryproductssuchascamcordersandaccessories.

Fourth,beingadoptedasastandarddoesnotnecessarilytranslateintomarketsuccess.ItwasnotenoughthatbothBetamaxandVHShadbeenadoptedas“official”standardsandwerebackedbyMITI.Philips’Video2000wasalsoacceptedasastandardbyEuropeanmanufacturersandreportedlytechnologicallysuperiorinsomeways,butcouldnotcompetewithVHS.Productsstillhavetobeacceptedinthemarketplace,andothercompetingstandardsmaywinthatcontest.

Fifth,thecaseshowsthatstandardizationshouldnotbeseenasaseparateactivitytobe“addedin”oncetechnologiesaredeveloped.Standardizationshouldbeseenwithinawiderpictureofinteractionsbetweentechnologydevelopment,productdevelopment,standardization,production,andmarketgrowth.Inthiscase,JVChandledthecombinationofactivitiesmoreeffectivelythanSony.55

5. CaseStudy3:WirelessCommunicationsStandards

5.1 Introduction

Overthepast30years,communicationsindustrieshavebeentransformed.Theyhavegrownrapidlytobecomesomeofthelargestintheworldandsitattheheartofaninformationrevolutionaffectingalmostallindustries.Moderncommunicationsnetworkscombinewired,wireless,andopticalcommunications.Majorsectorsofinformationandcommunicationstechnology(ICT)areconvergingastelecommunications,computing,andmediasharetechnologyandoperateacrossmultipleplatforms.Thesechangeshavereliedstronglyonstandardizationtocoordinatetechnologicalinnovationandensuredevicesandservicesinteroperate.

Thissectiondiscussesthedevelopmentofrecentstandardsintwoareas:computernetworkcommunicationsandmobilecommunications.ThesehavereliedprimarilyontwomajorinternationalSDOs:theInstituteofElectricalandElectronicsEngineers(IEEE)forwiredandwirelessnetwork

55Thereareothercases,suchasanalogHDTVanddigitalaudiotape(DAT)inthe1980s,wherestandardizationstrategiesmayhavebeenadequateinthemselvesbuttheproductwasnotappropriateforthemarketatthattime.OTA1990;Farrell&Shapiro1992;Grindley1995;Shapiro&Varian1998;Eargle1992;Cross2017.

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standards,andthe3rdGenerationPartnershipProject(3GPP)formobilecommunicationsstandards.Therelianceonformalstandardsorganizationsreflectsthesignificanceofthecommunicationsindustriesandtheneedforreliableglobalagreementsandconsistentprocesses.Thishasbeencombinedwithhugeprivateinvestmentsintechnologicalinnovationandvariousformsofmarketcompetitionascandidatetechnologiesjockeyforpositioninstandardscontests.Giventheneedforspeedandflexibilityinstandardsdevelopmentfornewtechnology,firmsoftenhaveusedindustryalliancestodeveloptechnologiesandthenbroughtthesetoSDOsforformalstandardization.

Section5.2reviewspotentialstandardizationprocessesforcombiningmarketsandorganizationsinstandardsdevelopment,asapreludetothecommunicationscasestudies.Sections5.3and5.4thenconsiderthetwocommunicationscasestudies,forcomputernetworkstandardsinIEEEandmobilecommunicationsstandardsin3GPP.Wefindthatmany,thoughnotall,networkstandardsdevelopedwithinIEEEhavereliedonstandardsfirstpartlydevelopedprivatelyviaconsortia,withtheSDOessentiallycompletingtheworkneededtodeveloptheseasformalglobalstandards.Inothercases,IEEEhastakentheinitiativetounifywhatthreatenedtobecomefragmentedprivatestandards.ThedevelopmentofmobilecommunicationsstandardshasmoreconsistentlybeengovernedbytheSDO3GPPthroughoutastheforumforcoordinatingtechnologydevelopmentandinteroperabilitystandards.Thismayreflecttheoverridingimportanceofunifiedstandardsinmobilecommunicationsthatrequirelargeinterlockinginvestmentsindevelopment,manufacturing,andinfrastructure.

5.2 Standardsprocesses–combiningmarketsandorganizations

ThissectionoutlinesgeneralfactorsaffectingcommunicationsstandardsdevelopedasahybridbetweenprivateandformalstandardsandthosedevelopedprimarilywithinSDOs.Hybridprocessesareafeatureofsomecomputernetworkstandards,whilemobilecommunicationsstandardsaredevelopedmostlywithinformalstandardsorganizations.

CommunicationstechnologiesneeddesignandinteroperabilitystandardsearlyintheirdevelopmentcycletobuildcredibilityandavoidwastefulduplicationofR&Dandimplementationeffort.Aproblemishowtoorganizethistokeepupwiththepaceoftechnologychangewhileallowingfortheleadtimesandhighinvestmentsindevelopmentandmanufacturing.Adistinguishingfeatureofsomecommunicationsistheadditionalneedforlong-terminvestmentsandplanningfortherolloutofinfrastructure.ThisappliesprimarilytomobilecommunicationsandtelecommunicationscarriersbutmayoverlapwithotherstandardssuchasWiMAXwhenthesealsodependonwide-scalenetworks.

Therearetwomainpathsbywhichcommunicationsstandardsaredeveloped.Inthefirstpath,technologiesmaybedevelopedprivatelywiththeguidanceofasmallgroupofdevelopersandimplementersinprivatealliancesorinterestgroupsactingasconsortia.Thisallowsrapidandresponsivedevelopment,butsupportforthestandardsmaybelimitedtotheimmediatesponsors.Supportmaybeincreasedbyextendingconsortiummembershiporotherwiseattractingfirms.Thisistimeconsumingand,unlessthestandardisveryattractive,maynotbecredible,forreasonsdiscussedabove.Analternativeishybridstandardization:tobringtheprivatedesigntoanSDOtocompleteformalstandardizationoncethebasictechnologyisdeveloped.Forexample,Ethernet,FireWire,andBluetoothcomputercommunicationsstandardsweredevelopedlargelyprivatelybutthenstandardizedviaanSDO(IEEE).Intheearlierstagesofdevelopment,theremaybeseveralcompetingtechnologieswiththeirownconsortia.Formalstandardscanhelpweedtheseout.TheyalsohelpsponsorscommitcrediblytoopenlicensingprogramstoattractadoptersbymakingFRANDcommitments.PlacingessentialpatentsinapatentpoolsmayalsopromotetransparentFRANDlicensingtotheentiremarket.

Inthesecondpath,theneedtoinvolveawiderangeoffirmsintheindustrythroughoutthetechnologydevelopmentandstandardizationprocessmeansthatstandardsmaybedevelopedwithinanSDOfrom

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thebeginning.Thistypicallyappliestoregionalorglobalmobilecommunicationsstandards,ortomajoradvancesinanarea,suchasWi-FiandWiMAXnetworkstandards,inwhichthescaleofadoptionandthedangersoffragmentationdiscourageindividualdevelopment.

SDOstandardsmayalsohelpfirmsdevelopthestandardandtechnologyconcurrently,byformingaconsensusamongdevelopers,implementers,andserviceproviders.Standardizationisoftenanticipatory,beforeproductsareintroducedandbeforemajorinvestmentsbytheparties,sothatstandardizationcanbecoordinatedwithinnovation.ThereisstilllikelytobesignificantR&Daheadoftimeasdeveloperscompeteforaheadstart,andduringthestandardizationprocessasthetechnologyconvergestoadominantdesign.Technologyisalsolikelytobedevelopedfurtherasgenerationalstandardsareenhanced.56

SDOsandmanyconsortiaalsocertifyindependentconformancetestingorganizations,whichverifythataproductcomplieswithagivenstandard.Crediblecertificationisvital.Aproductthatisevenpart-compliantmaynotbeuseableinallconditions,andbuyerswillavoidit.57

Credibilitywithintheindustryiscriticalforcommunicationstandardsbecauseoftheinvestmentsandtimescalesinvolved.Asaresult,SDOstandardsmaybemorecrediblethaneitherdefactoorconsortiastandards,sincethedebatebetweenalternativesneedstoberesolvedbyconsensusbeforethestandardisadoptedandbeforeproductsarebroughttomarket.ThisdoesnotmeanthatanSDOstandardwillautomaticallybeadoptedbytheindustry.Theremaybeothercompetingstandards,ortheproductmaynotbesuccessfulonthemarket.

AconcernabouttheincreasinguseofhybridstandardizationhasbeenthatSDOsmightbereducedtoconfirmingdefactoprivatestandardsratherthanbeingoriginaldevelopers.Theyhavealteredtheirprocedurestoreducethisriskandbemoreeffectiveintheir“large-scale”role.ManySDOshavespeduptheirproceduresandmaycooperateearlierwithotherstandardsorganizationstoavoidduplicationandtheriskofconflictingstandards.58Theymayalsoofferotherstandards-relatedservicessuchasadvertising,educationandtraining,andbusinessresearch.59

5.3 IEEEcommunicationsnetworkstandards

a) IEEEstandardizationhistory

TheInstituteofElectricalandElectronicsEngineers(IEEE)isaprofessionalassociationformedin1963fromtheamalgamationofUSassociationsgoingbacktothenineteenthcentury.60Itistheworld's

56Thecomplexityofcommunicationssystemsmeansthatadesignmaycombinemodularizedcomponentsandbeversatileenoughtoadaptasapplicationsshift.Thisimpliesthatinteroperabilityisalreadypartofthetechnologydesign.Anewdeviceisasysteminitself.57Somestandardsmayacquirelegalstandingiftheyarespecifiedinprocurementcontractsornationallicensing.Sometelecommunicationsstandardsmaybespecifiedininternationaltreaties,suchasthosetraditionallyoverseenbytheITU,orbeaconditionforobtainingamobilecommunicationslicense(asGSMstandardwasoriginallyinEurope).TheformalSDOsarepartofthehierarchyofinternationalstandardsorganizationsandaretheroutebywhichastandardmaybecomeadoptedasaglobalstandardbytheITUorISO/IEC.58ProceduresinSDOshavebeenmademoreflexibleandfaster,suchas“AlternativeApprovalProcess”fast-trackapprovalprocedureintroducedbyITUin2001.ThereisnowalsomorecollaborationwithforumsandotherSDOstoavoidduplicationofworkandtheriskofconflictingstandardsinthemarketplace.ITU2006;Hazucha2013;http://www.itu.int/en/ITU-T/about/Pages/approval.aspx59https://www.bsigroup.com/en-GB/standards/benefits-of-using-standards/;https://www.ansi.org/about_ansi/faqs/faqs60http://ethw.org/IEEE_History;TheearliestparentassociationwastheAmericanInstituteofElectricalEngineers(AIEE)formedin1884.http://ethw.org/AIEE_History_1884-1963

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largestassociationoftechnicalprofessionals,currentlywithmorethan420,000membersaroundtheworld.Oneofitsmanyfunctionsistodevelopglobalstandardsinabroadrangeofindustries.

IEEEisoneofthemostimportantglobalstandardsdevelopmentgroupsinelectronicsandelectricity.Itsinvolvementinelectricalstandardsdatesbackto1890,whenthefirstUSelectricalstandardsweredeveloped.61ItsstandardsdevelopmenthasbeenmanagedbytheIEEEStandardsBoardsince1963,reorganizedastheIEEEStandardsAssociation(IEEE-SA)in1985.62TechnicallyIEEEisneitherformalSDOnorconsortium,andreferstoitselfasa“consensusbuildingorganization,”althoughitfunctionseffectivelyasanSDO.63ItisaccreditedbyANSI,anditsstandardsoftenbecomeformalUSandinternationalstandards.64IEEEstandardsaredevelopedbyvoluntaryconsensusprocesses.65

IEEEstandardsapplyinawiderangeofapplications.TherearetwotypesofIEEE-SAmembers—individualsandcorporations—allofwhommaytakepartinstandardsdevelopment.66PerhapsbecauseofIEEE-SA’sbroadmembership,itsstandardstendtofocusonparticulartechnologiesratherthanindustries.Mobilecommunicationsstandards,bycomparison,aremorelikelytobedevelopedwithinspecializedtelecommunicationsstandardsorganizationswhosemembersareorganizationsactiveinthatindustry,includingtechnologydevelopers,deviceandequipmentmanufacturers,andtelecommunicationscarriers,aswellasrepresentativesfromapplicationservicesandregulators.67

b) OverviewofIEEEcommunicationsstandards

CertainnetworkcommunicationsstandardsaredevelopedwithintheIEEE802LocalAreaNetworks(LAN)/MetropolitanAreaNetworks(MAN)StandardsCommittee.StandardsincludetheIEEE802.3wiredEthernetstandard,IEEE802.15Bluetooth,IEEE802.11wirelesslocalareanetworkstandard(“Wi-Fi”),andIEEE802.16wirelessmetropolitanareanetworks(“WiMAX”).Computercommunicationsnetworksinvolvedrangefromsmall-scalepersonalareanetworks(PANs)usedatshortrangetojoinaphoneorheadsettoacomputeratlowpoweruptotheglobalinternet.InbetweenareLANsofcomputersandperipheralswithinanoffice,andMANsoperatingonacitywidescale.Onastilllargerscale,wideareanetworks(WANs)includenationalandglobaltelecommunicationsandmobilenetworks,andlargeprivatebusinessnetworks.

Communicationsnetworksmayusecombinationsofwireline,wireless,andopticalcable.Manywereoriginallydesignedaroundwiredconnections(Ethernetandtelecommunications)andhavebeenextendedtowireless(Wi-Fiandmobilephones)oropticalfiber(MANsandmobilecommunicationsbackbone)asthesetechnologieshavebecomemorecosteffectiveandpervasive.Also,thetechnologies

61http://ethw.org/IEEE_Standards_Association_History62http://ethw.org/IEEE_History;http://ethw.org/IEEE_Standards_Association_History;http://standards.ieee.org/about/ieeesa.html63https://standards.ieee.org/64“ManyofthestandardsarejoinedproducedwithANSI…andingeneralareasuggestedguidethatisnotmandatorybyitselfunlessrequiredbytheprojectspecificationoradoptedbyanauthoritywithjurisdictionoverthesubjectmatterapplication.”http://www.eng-tips.com/viewthread.cfm?qid=10291565https://standards.ieee.org/about/strategy.html;https://www.ieee.org/education_careers/education/standards/standards_glossary.html“voluntaryconsensusstandard”.66https://standards.ieee.org/membership/67InFebruary2015,IEEEadoptedchangestoitsIPpolicies,placingincreasedconditionsonlicensingofstandardsessentialpatents.ThechangeswereapprovedthroughtheIEEEgovernanceprocessand“supported”byaDOJbusinessreviewletter.https://www.justice.gov/atr/response-institute-electrical-and-electronics-engineers-incorporatedSomelargecompaniesdidnotsupportthechangesandthishasgeneratedsomecontroversy.Teece&Sherry2016.

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usedbydifferentcommunicationsnetworksaremerging,astelecommunicationsnetworksincreasinglyusecomputer-basedtechnologyandlargercomputernetworksusebackbonelong-distancetransportfromtelecommunications.

Differentstandardizationrouteshavebeeninusedependingontechnologyandthebreadthofitssupport.Insomecases,two-stephybridstandardizationmaybeafeasiblerouteforsmaller-scalesystemsanduntriedconcepts.DevelopersmayrequireIEEEstandardsforcredibilitywithimplementersandconsumersbutmaydevelopthetechnologyprivatelybeforesubmittingittotheSDO.FornascenttechnologiessuchasEthernet,FireWire,andBluetooth,thetechnologyandthestandardswerefirstdevelopedprivatelyinsinglefirms,workinggroups,andconsortia.Speedtomarketwasimportant,andthetechnologymayhavebeentoonewtopredictitsfuture.SpecificationswerebroughttotheSDOsforformalstandardizationwhenearlyproductswerealreadyonthemarket.

Inothercases,formorefar-reachingtechnologyitmaybeimportanttoinvolveawholeindustryearlierinstandardizationanduseSDOsfromthebeginning.ThiswasseenwiththeIEEEWLAN/WMANstandardslike802.11Wi-Fiand802.16WiMAX,whichweredevelopedwithintheSDOprocessandfocusedpreviouslyfragmentedproprietarydevelopmentefforts.Theyhavebeenregularlyenhancedsincethen.

c) Individualstandards

i) IEEE802.3–Ethernet

EthernetstandardswerefirstdevelopedprivatelyandonlyformallystandardizedoncethebroadpotentialofEthernetwasrealized.Formalstandardshelpeditsacceptance,anditisnowthemostwidelyinstalledwiredLANtechnology.

OriginallydevelopedbyXeroxin1973,thefirst“DIX”standarddevelopedbyDigital,Intel,andXeroxappearedin1980.68FormalstandardizationresultedinthepublicationofIEEE802.3in1983.EthernetinitiallycompetedwithtwoLANproprietarysystems,TokenRingandTokenBus,butbythelate1980sEthernethadbecomedominant.ApprovalofEthernetontheinternationallevelwasachievedwiththeISO8802-3standardpublishedin1989.

Initiallydesignedtorunovercoaxialcables,Ethernetnowtypicallyusestwistedpairoropticalcable.IthasbecomeafamilyofIEEE802.3enhancedstandardsdevelopedsincethen.Thesearesteadilyevolvingtoembracenewmedia,highertransmissionspeeds,andchangesinframecontent.69

ii) IEEE802.15WPAN–Bluetooth/ZigBee

Bluetoothisawirelesstechnologyusedtoreplacewiresovershortdistancesatlowpower,suchasforconnectingdevicestomobilephonesandbuildingwirelesspersonalareanetworks(WPANs).BluetoothwasdevelopedprivatelybyEricssonin1994asawirelessalternativetodatacables.Itwasonlysubmittedtobecomeaformalstandardsomeyearslater.Aidedbyformalstandardization,Bluetoothisnowgainingwidespreaduseinapplicationscallingforflexible,short-range,low-powerwirelessconnections.ItislikelybeanimportantcomponentoftheInternetofThings(IoT)forlow-power

68Ethernet,likeWi-Filater,owesitsoriginstoALOHAnetcomputernetworkingsystem,developedattheUniversityofHawaiiinthe1970s.Althoughdesignedforwirelessorsatellitetransmission,ALOHAnetcouldalsousecable.Yu2013;http://timeline.ethernethistory.com/69E.g.,802.3actoaccommodateVLANandprioritytaggingandfunctionalrequirements(e.g.,802.3af,definingPowerOverEthernet[POE]crucialtomostWi-FiandIPtelephonydeployments)http://searchnetworking.techtarget.com/definition/Ethernet

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applications.70

BluetoothwasstandardizedwithintheIEEE802.15WorkingGroupforWirelessSpecialtyNetworks(WSN)asIEEE802.15.1in2002and2005.71IEEEnolongermaintainsenhancementsofthestandard.MaintenanceofthestandardhasreturnedtotheBluetoothSpecialInterestGroup(SIG),aprivateallianceoffirmssetupin1998topromoteandadministerthestandard.72TheSIGisbelievedtobebettersuitedtomanagethecommercializationandfurtherdevelopmentofthestandard.

IEEE802.15continuestodevelopstandardsforothertypesofwirelessnetworks.ZigBeeisanotherWPANwirelessconnectionstandarddesignedforsmall-scaleprojects,suchashomeautomationandmedicaldevicedatacollection.ItaimstobesimplerandlessexpensivethanotherWPANssuchasBluetoothorWi-Fi.ItwasconceivedbyIEEEworkinggroupsinthe1980sandstandardizedasIEEE802.15.4forlow-ratewirelesspersonalareanetworks(LR-WPANs)in2003,revisedin2006.ItispromotedbytheZigBeeAlliance.73

iii) IEEE802.11WLAN–Wi-Fi

FormalIEEEWi-Fistandardshelpedresolvethepotentialfragmentationofprivatestandardsforwirelessnetworktechnology.ThishelpedestablishWi-Fiasthemajorwirelesslocalareanetwork(WLAN)technology.

WLANtechnologywasinitiallydevelopedprivately,butthesewerelimitedsystemswithfragmentedprivatestandards.IttookanSDO,IEEE,torealizethatauniversalopenstandardwasneededfortheindustrytogrow.ThesuccessofthisstrategyisshowninthewidespreaduseofWi-Fitodayandtheexpandedusepredictedforthefuture.

ThisisstandardizedintheIEEE802.11setofstandardsforcomputercommunications,marketedasWi-Fi.TheoriginalversionofIEEE802.11wasreleasedin1997andhasbeenextendedandamendedinanumberofrevisionssincethen.Wi-Fistandards(IEEE802.11a,b,g,nandnowac)definetheequivalentofEthernetforWLANs.74In1999,theWi-FiAlliancewasformedbyindustrymemberstopromoteWLANundertheWi-Fitrademark.75

WiredEthernetandwirelessWi-FiarethemostcommontransmissiontechnologiesforLANs.76BothhaveoriginsinALOHAnet,abasicradiodatanetworkdevelopedin1971.77WLANsweremadecommerciallyfeasiblebythe1985USFederalCommunicationsCommission(FCC)rulingthatreleasedspectrumintheindustrial,scientific,andmedicalradio(ISM)bandforunlicenseduse.EarlyWLANshadlimitedperformanceandwereexpensiveprivatenetworkswithproprietaryprotocols.78Intheearly

70Curry2016;RSComponents2015.71http://www.ieee802.org/15/pub/TG1.html;http://standards.ieee.org/findstds/standard/802.15.1-2002.html;http://standards.ieee.org/findstds/standard/802.15.1-2005.html72https://www.bluetooth.com/about-usThisissimilartotheUSBImplementersForum(USB-IF)setuptopromotetheUSBstandard.SimilarallianceshavebeensetupforWi-Fi,WiMAX,andothers.PossiblereasonsforsuchachangemaybethatfurtherdevelopmentsarelinkedtocommercialissuesandanSDOmaynotbeaneffectivelocationtomanagethisoncetheinitialstandardsaredeveloped.Inthiscase,IEEE802.15workinggrouphasfocuseditseffortssubsequentlyonotherWPANstandards.73http://www.zigbee.org/74Kreuzer2017;http://ethw.org/Wireless_LAN_802.11_Wi-Fi75Wi-Fiis"WirelessFidelity."http://www.wi-fi.org/who-we-are/history76Kurose&Ross2000;http://www.ieee802.org/;http://searchnetworking.techtarget.com/definition/Ethernet77AbramsonSchwartz2009.78In1988NCRCorporation(acquiredbyAT&Tin1991)introducedaprecursorto802.11,calledWaveLAN.Null1999;Tourrilhes2003;Bray2014.

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1990s,theIEEErealizedthatanopenwirelessstandardwasnecessaryandestablishedthe802.11workinggrouptodevelopawirelessLANstandard.79In1997,itreleasedthefirst802.11a/bstandards.Subsequentenhancementsincreasedthespeedfromtheinitialmaximumdatatransferrateof2Mbits/sfor802.11a,bto600Mbits/sfor802.11nin2009,and1.3Gbits/sfor802.11acin2013.802.11standardshavealsobeenextendedintonewspectrumbands.80

Futuredevelopmentsof802.11willfurtherincreasespeedsandaddnewspectrumbands.Wi-Ficommunicationsarealsoconvergingwithmobilecommunicationstoextendbothservices,withWi-Fihotspotspotentiallyalargepartoffutureplansfor4Gand5GsystemsandWi-Ficonnectionsswitchingto4G/5Gautomaticallywhenonthemove.Futuredevelopmentsto802.11willbesteeredbyIEEE,butthereislikelytobeincreasedcoordinationwithothertechnologiessuchas5GLTEandsmallcells.81

BluetoothandWi-Fihavesomesimilarandrelatedapplications.82Bluetoothisusedforconnectingdevicesandtransferringdataatshortrange.Itwasoriginallyintendedforportableequipmentbutalsoworksforfixedapplicationssuchashomethermostats.Wi-Fiisamorecomprehensivereplacementforhigh-speedcablingforWLANs.Significantly,itcanbefixedormobile.BluetoothandWi-Fiaretosomeextentcomplementary.Bluetoothworkswellinsimpleapplicationstoconnecttwodeviceswithminimalconfiguration.Wi-FiappliesformorecomplexWLANconfigurationsandwhenhighspeedsarerequired.Bothhavescopeforfuturedevelopment.

iv) IEEE802.16WMAN–WiMAX

WiMAXwasinitiatedbyIEEEessentiallyasanextensionofWi-Fitolongerdistancesandlargernetworks.Althoughthestandardhasbeensuccessfulitsusehasbeenlimitedbyparalleldevelopmentsofothermobilecommunicationstechnologies.WiMAXwasacontenderfor4GmobilestandardsbutwasrejectedinfavorofLongTermEvolution(LTE),whichhadbroadersupport,especiallyfromcarriers.Thismayillustratehowstandardizationdoesnotguaranteecommercialsuccess.WiMAXstillhasanumberofapplicationsandmaybepartof5Gwirelesscommunicationssystems.

Wirelessmetropolitanareanetworks(WMANs)aresimilartoWLANsbutoperateoverlongerdistancesandlargergeographicareas.83WhereWi-FiprovidedawirelessalternativetoEthernetLANs,WMAN,commercializedasWiMAX,hasbeenseenasaviablelast-milealternativetoexpensivetelecommunicationslinksbetweenofficesandtotheInternet.84Thefirststandards,IEEE802.16,werepublishedin2001forfixedpoint-to-multipointbroadbandwirelesssystems.Capabilitieshavebeenextendedregularly.Non-line-of-sightandarangeofupto30mileswereaddedwith802.16ain2003.Mobileconnectionswereaddedwith802.16ein2005.Thecurrentstandard802.16.1a-2013enablesanarrayofinterworkingwithothercommunicationssystemssuchasLTEandothers.WiMAXinitially79ThiseffortwasledbyVicHayes,whohelpedestablishandchairedtheIEEE802.11workinggroupfrom1990-2000,andisoftencalledthe“fatherofWi-Fi.”Charny2002;Kharif2003;Kreuzer2017;https://www.computer.org/web/awards/karlsson-victor-hayes80Kreuzer2017.Beginningin1991,aEuropeanalternativeknownasHiperLAN/1wasalsopursuedbytheEuropeanTelecommunicationsStandardsInstitute(ETSI),withafirstversionapprovedin1996.AsecondHiperLAN/2specificationappearedin2000.Neitherachievedthecommercialsuccessof802.11,althoughmuchoftheworkonHiperLAN/2survivedinthephysicalspecificationsforIEEE802.11a.Lemstra,Hayes&Groenewegen2010.81Miller201482USRobotics2006.83http://searchmobilecomputing.techtarget.com/definition/8021684WiMAXis“WorldwideInteroperabilityforMicrowaveAccess.”TheWiMAXForum,aprivateallianceestablishedin2001,promotesWiMAXandoverseescertificationofcompliantdevices.ItdescribesWiMAXas“astandards-basedtechnologyenablingthedeliveryoflastmilewirelessbroadbandaccessasanalternativetocableandDSL.”

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providedaround30Mbpsdataratesandcurrentlyprovidesupto1Gbit/sforfixedstations.

AlthoughIEEE802.16mWirelessMAN-Advancedwasacandidatefor4G,itwasovershadowedbyLTE-Advanced,discussedbelow.85ItremainsacomplementtoLTEandwillplayapartinfuturecommunicationsdevelopments,attheleastforbroadbandconnectionsinremoteareas.

WANsincludenationalandglobaltelecommunicationsandmobilecommunicationsnetworks,aswellaslargeprivatebusinessoreducationalnetworks.Thesedeliverdataintheformoftelephonecalls,broadband,andstreamingvideo.AuserwithalaptopmaysearchtheInternet,checkemail,orconnecttoavirtualprivatenetwork(VPN)usingaWAN.MostcomputersnowhaveintegratedWirelessWAN(WWAN)capabilities.WWANsuseacombinationofmobilecommunicationscellularnetworktechnologiessuchasLTE,WiMAX,UMTS,CDMA2000,GSM,cellulardigitalpacketdata(CDPD),andMobitexofferedbywirelessserviceproviders.TheymayalsouseWi-FitoprovideInternetaccessviahotspotsifavailable.

5.4 3GPPmobilestandards

a) Mobilecommunicationsandstandardization

Theleadingglobalorganizationdevelopingmobilecommunicationsstandardstodayisthe3rdGenerationPartnershipProject(3GPP).86ThispartnershipofseventelecommunicationsSDOswasformedin2000todevelopstandardsforthenext-generationwirelessnetwork.873GPPbecametheindustrystandardsforumthatdefinedthird-generation(3G)UMTSstandardsandmorerecentlyfourth-generation(4G)LTE.Itisnowfocusedondeveloping5Gstandards.

Themobilecommunicationsindustryandthetechnologiesandstandardssupportingithavedevelopedrapidlysincethefirst-generation(1G)analogphonesappearedinthe1970s.88Digitaltechnologieswereintroducedintheearly1990sandhaveevolvedthroughaconstantstreamofstandardssincethen,including2G,2.5G,2.75G,3G,4G,andthecurrentdevelopmentefforttodevelop5G.

The1Gmobilephonesofthe1970sand1980susedanalogsignalswithadedicatedfrequencyforeachcall.Theywereheavy,expensive,andnotcompatibleacrosscountries.Evenso,theywereverysuccessful,andthemarketgrewrapidly.

Newdigitaltechnologiesinthe1980sprovidedtheopportunitytoexpandmobilecapacitywithbetterspectrumuse,lowercosts,andcommonstandardswithinternationalroaming.Theindustry,andgovernments,movedtowardsacommonsetof2Gstandardstoreducedevelopmentriskandtoimproveconsumeraccess.InEurope,theEuropeanConferenceofPostalandTelecommunicationsAdministrations(CEPT)beganworktodefineasingledigital2Gstandardin1982.89Itestablishedthe

85ThereweremanyfactorsintheprevalenceofLTEoverWiMAXfor4G.OneissuewasthatLTEprovidesmoreoptionsforredeployingspectrumfrompreviousstandards,especiallyinlowerfrequencybands,whichmadeitmoreattractivetosomecarriers.Segan2012;Aldmour2013.86ManydifferentSDOshavebeeninvolvedinsettingtelecommunicationsstandards.GloballeadersincludetheInternationalTelecommunicationUnion(ITU),ETSI,IEEE,andmanyregionalandnationalSDOsandSSOs.87Theseven3GPPOrganizationalPartnersare:TheAssociationofRadioIndustriesandBusinesses,Japan(ARIB),TheAllianceforTelecommunicationsIndustrySolutions,USA(ATIS),ChinaCommunicationsStandardsAssociation(CCSA),ETSI,TelecommunicationsTechnologyAssociation,Korea(TTA),andTelecommunicationTechnologyCommittee,Japan(TTC),and(since2015)TelecommunicationsStandardsDevelopmentSociety,India(TSDSI).http://www.3gpp.org/about-3gpp/about-3gpp88ThefirstcompanytoproduceahandheldmobilephoneisusuallyreckonedtobeMotorolain1973.Shiels2003.89Hillebrand,Rosenbrock&Hause2012;https://update.revolvy.com/main/index.php?s=GSM%20network&item_type=topic

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GlobalSystemforMobileCommunication(GSM)standardin1987,usingtimedivisionmultipleaccess(TDMA)digitalprocessing.StandardizationwastransferredtothenewlyformedEuropeanTelecommunicationsStandardsInstitute(ETSI)in1988,andthefirst2GGSMphonesappearedin1991.

TheUSdevelopedaseparateTDMAD-AMPSdigital2Gstandardin1990.ThemaincompetitortoGSMwasfromQualcomm,whichdevelopedaproprietarysystembasedoncodedivisionmultipleaccess(CDMA).ThisismorespectrumefficientthanTDMA,butthetwoaretechnicallyincompatible.ItwasstandardizedintheUSin1995bytheTelecommunicationsIndustryAssociation(TIA)asIS-95andintroducedthatyearascdmaOne.Inthestandardscontest,cdmaOnesharedthemarketinUS,Japan,andKorea,butGSMwasdominantinEuropeandincreasinglypresentworldwide,includingintheUS.GSM’searlystartandinstalledbasegaveitstrongadvantagesandrestrictedcdmaOnegrowthdespiteCDMA’stechnicalperformance.TherehavebeenmanyenhancementstoGSM,startingwithSMStextingin1991.90Themostwidelyadopted2.5GstandardwastheGeneralPacketRadioService(GPRS)standard,originallydevelopedbyETSIandnowmaintainedby3GPP.Themostwidelyadopted2.75GstandardwasEnhancedDataRatesforGSMEvolution(EDGE).GSMandits3G/4GsuccessorsUMTS/LTEhavebeenextremelysuccessfulasthemostwidelyusedcellulartechnologyintheworldtoday,with90percentmarketshare,operatinginover200countries.91

Theindustrystarteddeveloping3Gsystemsinthelate1990stoprovideincreaseddatacapacitytomeetthegrowingdemandforvoiceandnascentmobilebroadbandservices.BuildingonthesuccessofGSM,sixinternationalSDOs(nowseven)formedthe3GPPinabout1998todevelopmoreadvancedmobilecommunicationsstandardsbasedonGSMnetworksbutincorporatingCDMAtechnology,calledUMTS/WCDMA.Anothergroupformedthe3rdGenerationPartnershipProject2(3GPP2)todevelopglobalstandardsforCDMA2000,anevolutionofCDMAIS-95.Thisledtoahighlycontentious3GstandardscontestbetweenwhatwascharacterizedasanevolutionofGSMthoughusingdifferentcoretechnology,andanevolutionaryCDMA-basedstandard.92TheIPpartofthisdispute,primarilybetweenEricssonandQualcomm,wasresolvedin1998bycross-licensingandamajorbusinessdealinwhichEricssonboughtQualcomm'sterrestrialCDMAwirelessinfrastructurebusiness.93Thedevelopmentoftwostandardsin3GPPand3GPP2continuedinparallel.Themostwidelyused3GstandardtodayisUMTS/WCDMA,althoughtheunderlyingCDMAtechnologyiscommontoUMTSandCDMA2000.94Therehavebeenaseriesofenhancementsto3GPPstandards,discussedbelow.

By2008,theneedforultra-fastbroadbandaccess,drivenbythegrowthofsmartphones,mobileinternet,andapplicationssuchasstreamingmedia,threatenedtooutstripthecapabilitiesof3G.95ITUIMT-Advancedrequirementssettargetsfor4Gstandards,withpeakspeedsofbetween100Mbits/sand1Gbit/s,accordingtomobility,comparedtothepeakdata-ratesof1to5Mbits/sfor3G.4Gsystemswerealsotobebasedonall-IP(InternetProtocol)packet-switchednetworks,idealfordata,andaparadigmshiftawayfromcircuit-switchedvoicetopacketdatainfuture.96Theindustrystartedto

90http://www.gsmhistory.com/sms/91Hillebrand,Rosenbrock&Hause2012;http://www.gsma.com/aboutus/gsm-technology/gsm92Qualcomm1999;Grindley,Salant&Waverman1999;Hjelm2000;Saugstrup&Henten2006;http://www.ericssonhistory.com/changing-the-world/Big-bang/A-new-fight-/93https://www.qualcomm.com/news/releases/1999/03/25/ericsson-and-qualcomm-reach-global-cdma-resolution94Inanecessarycompromise,theITUIMT-2000globalstandardfor3Gin1999permittedsixpossibleradiointerfaces:EDGE(evolutionofGSM/GPRS);CDMA2000(3GPP2);threeversionsofUMTS:W-CDMA(ETSI),TD-CDMA(ETSI),TD-SCDMA(Chiba);DECT(portablephones);andWiMAX.http://opensource.telkomspeedy.com/wiki/index.php/IMT-200095Saeed2010.96Tellabs2012.

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developtwocompeting4Gsystems,bothbasedonorthogonalfrequency-divisionmultiplexing(OFDM)technology.97ThesewereWiMAX,standardizedbyIEEE,andLTE,standardizedby3GPP.ThisparalleldevelopmentledtoanotherstandardscompetitionbetweenLTEandWiMAX.98Bothhadtechnicalstrengths,andWiMAXwasavailableearlierthatLTE.However,LTEhadthecriticaladvantagesofbeinganevolutionofexisting3Gstandardsandbeingsupportedbymostofthenetworkoperators.NetworkoperatorsarecurrentlyrollingoutLTEandLTE-Advanced4Gsystems.

Withenhancementsto4Gstandardsstillongoing,theindustryhasstartedpreparingfor5Gcommunicationsystemsplannedfor2020.

Theevolutioninmobilecommunicationshasbeenoneofthemostfundamentaleconomicandtechnologicalbreakthroughsofrecentdecades.Ithastransformedthebulkycarphonesofthe1970sintothepowerfuland,relativelyspeaking,inexpensivesmartphonesandtabletstoday.Anewmobilegenerationhasappearedapproximatelyeverydecadesincethefirstdigitalsystemswereintroducedinthe1990s,enabledbytechnologicalbreakthroughscoordinatedviastandards.Ithasexpandedbeyondvoiceintobroadbandandinternettobecomethecorecommunicationshubforanarrayofservicesaffectingallindustries.

b) 3GPPstandardsgenerations

Theevolutionofwirelesscapabilitieshastakenplaceoverseveralstandardsgenerations.Aregularseriesoftechnicaldevelopmentsmarkedbysuccessivestandardsrevisions,everyyearortwo,havebuiltontheoriginal20003G/UMTS/WCDMAstandards.Thesehaveaddednewcapabilitiesandvastlyincreasedperformance,leadingtothefirst4G/LTEstandardsin2008andcurrentlypreparingfor5G.Successivereleasesbuildonpreviousgenerations,andeachsteprepresentsasignificantadvanceoverthepreviousgeneration.Someoftheheadline3GPPradiotechnologiesandsystemsovertherecentreleasesareshowninFigure4.99

Figure4:Generationsof3GPPstandardsreleases

97OFDMtechnologyiswellsuitedfortransmittinglargeamountsofdigitaldataviawireless.Itworksbysplittingtheradiosignalintomultiplesmaller“sub-signals”thatarethentransmittedsimultaneouslyatdifferentfrequenciestothereceiver.OFDMreducestheamountofcrosstalkinsignaltransmissions.VersionsofOFDMarealsousedinopticalcableandothersystems.Molisch2010,p.417.98Hamblen2008;Tudan2012;Aldmour2013.99http://www.3gpp.org/about-3gpp

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Themainnewfeaturesforeachofthesereleasesofthe3GPPstandardfor3Gand4GarelistedinTable4.Mostofthereleasesaddenhancementsandrevisionstothepreviousstandard.Some,suchasRelease99andRelease8,marktheintroductionofamajornewtechnologyshift,here3Gand4G.Theincrementalimprovementsincludethegrowthinthedataratesandothervitalimprovements.100Thegrowthinthepeakdataratesisakeydriverofgrowthofthemobileecosystem.Ithasdependedoncombinationsofmultipleinnovationsanddevelopments.Standardsandinnovationsalsoapplytonewcomponents(DSP,sensors),newdevices(smartphones,tablets),andnewinfrastructure(highdata-ratemultiple-input,multiple-output(MIMO)antennae,servers,smallcells,hybridnetworks).

Table4:3GPPstandardsreleases

3GPPReleaseReleasedate

Content

Release99 2000 First3GUMTSstandard:basedonW-CDMARelease4 2001 1.28McpsTDD,All-IPcorenetworkRelease5 2002 AddedHSDPA,IMSRelease6 2005 AddedHSUPA,MBMS,integratedwithWLAN,GAN,PoCRelease7 2007 AddedHSPA+(MIMO,HOM,etc.),EDGEEvolutionRelease8 2008 First4GLTEstandard:all-IPNetwork(SAE),OFDMA,FDE,MIMOradiointerfaceRelease9 2010 LTEenhancements:WiMAXinteroperability,Dual-CellHSDPA,HSUPARelease10 2011 LTE-Advanced:IMT-Advanced4Grequirements,multi-cellHSDPARelease11 2013 FurtherLTEenhancements,detailed4GLTE-AdvancedRelease12 2014 LTE-B:Wi-Fiintegration,LTE-Hihotspotandsmallcells,3DbeamformingRelease13 2016 Furtherenhancement:30xLTEcapacity

100Otheradvancesincludehightransmissionratesbypackingmultipleantennaeindevices,power-saving,newservicessuchasIPMultimediaSubsystem(IMS)andQualityofservice(QoS),andseamlessinteroperabilitywithWi-Finetworks.

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Thefirststandardrecognizedas4G/LTEwasRelease8,in2008,whichincludedall-IPNetwork(SAE),orthogonalfrequency-divisionmultipleaccess(OFDMA)coding,frequency-domainequalization(FDE),andMIMOradiointerface.ThiswasnotyettrueLTE-Advanced(LTE-A)meetingITUIMT-Advancedspecifications,butincludedfundamentalchangesandperformanceimprovementscomparedto3G.3GPPRelease8alsointroducedfiveLTEUserEquipment(UE)categoriesdependingonmaximumpeakdatarateandMIMOcapabilitiessupport.101UEcategoriesdefinecombinationsofuplinkanddownlinkcapabilitiesandbroadenthestandardtoincludevariouscombinationsofspeed,poweruse,andothercharacteristicsdependingontheuserequipmentandtheapplication.102Thistakesthetechnologyintobroaderrealmsofapplicationswherepeakdataratesarenottheonlyconsideration.

Thefirst“true”4GstandardmeetingallITUIMT-Advancedrequirementswas3GPPRelease10,referredtoasLTE-AdvancedorLTE-A.ThishasbeensubsequentlyenhancedinReleases11,12,and13.LTE-AistheevolutionoftheoriginalLTEtechnologytowardevenhigherbandwidths.ItpromisesnearlythreetimesgreaterspeedthanthebasicLTEnetworkandcomprisesfivebuildingblocks:CarrierAggregation,IncreasedMIMOantennae,CoordinatedMultipoint(CoMP),RelayStation,andHeterogeneousNetwork(HetNet).NewUEcategorieshavebeenintroducedwitheachnewRelease,withamostrecentcountof20currently.103

LTE-Acreatesabridgebetween4Gand5Gworlds.104Further3GPPstandardsReleasesareunderwaythatwilladvance4Ganddefine5G.Amainconceptinincreasingthecapacityofmobilecommunicationstobringto5Gistoexpandsmall-cellnetworksandcreateasuper-densenetworkoftinycells.Otherpillarsof5Garelikelytobehigh-capacityMIMOantennaeandtheintegrationwithWi-Ficells.Thegoalsof5Gtechnologycanbesummarizedas:a1,000-timesincreaseincapacity,supportformorethan100billionconnectionsandupto10Gbits/sspeeds,andbelow1mslatency.Thefirst5Gstandardisprojectedtobe3GPPRelease16in2020.105Thestructure,capabilities,andcontentof5Ganditstimingarestillevolving.Inpractice,itismorelikelytobeanevolutionofprevious4Gtechnologiesthanaclearbreakthrough.OtherdevelopmentsbasedonmobilecommunicationsincludeIoTandintegrationofmobilecommunicationswithWi-Fi.106

c) Implicationsformobilecommunicationsstandardsdevelopment

Mobilecommunicationsstandardsillustratetheparallelimportanceoftechnologydevelopmentandinteroperability.Eachgenerationofstandardshasbeendrivenbyanimportantstepintechnologyinnovation.ThesehavebeencoordinatedviathedevelopmentofSDOstandards,primarilyin3GPP.107Thestandardsdevelopmentprocessbeginswhenthestandardsplenarygroupsteeringcommitteesetsgeneralrequirementsforthenext-generationstandardandestablishesworkinggroupstocoordinateworkinthesedirections.Developerfirmsworkwithinthesegroupstodeveloptechnologyandtoproposenewdesignstomeettheseaims.Therefollowsato-and-frowithintheworkinggroupswherebydifferentproposalsaresponsored,presented,evaluated,andfurtherdevelopedoveraperiodofabout

101http://www.radio-electronics.com/info/cellulartelecomms/lte-long-term-evolution/ue-category-categories-classes.php102http://www.3gpp.org/keywords-acronyms/1612-ue-category103Ghadialy2017.104AcrucialpartofLTE-AisHetNet,agradualevolutionofthecellulararchitecture,inacomplexnetworkassmallcellsthataddhundredsoreventhousandsofentrypointsintothecellularsystem.HetNetisamultilayeredsystemofoverlappingbigandsmallcellstopumpoutcheapbandwidth.Ahmad2015.105Romano2016;Mallinson2016.106Flore2016.;http://www.3gpp.org/news-events/3gpp-news/1805-iot_r14107ForprocesssummariesseeGupta2013;Kang&Bekkers2013;Teeceetal.2017;http://portal.etsi.org/Chaircor/process.asp

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1.5years.Foratypicalcycleofworkinggroupandplenarymeetingsfor3GPP,seeFigure5.108

Figure5:3GPPworkinggroupandplenarymeetingcycles

Thegroupsvoteonproposalsthateventuallyarereducedtoasingleproposal;ifitpassesthefinalvote(typicallydecidedbyconsensus,orifnecessarybyavoterequiringapprovalby71percentofmemberorganizations),itissenttothegoverningcouncilforadoptionaspartofthenextstandard.109Theprocessisoneofvoluntaryconsensus.Asproposalsarereviewedandamended,somemaybedroppedaltogether,othersimprovedtomeetconcerns,andsomeamalgamatedintojointproposalsthatotherscansupport.Theworkinggroupsinvolverepresentativesfrommemberfirms,includingtechnologydevelopers,deviceandequipmentmanufacturers,carriers,andapplicationsandserviceproviders.

Thebulkofthetechnicalproposalsaremadebyarelativelysmallgroupofdeveloperfirms,withtheothermemberscontributingcommentsandkeepinginformedofthestandards’progress.110

Themainfocusforstandardsgenerationisthedraftingphase.Draftingtakesplaceinstagesofmanagement,specification,validation,andtesting,showninFigure6.111Feedbackfromthevalidationandtestingstepsislikelytorequirefurtherdevelopmentofthetechnologyandstandardsbythememberfirmsand3GPP.

Figure6:DraftingphasesoftheStandardsMakingProcess(SMP)withfeedback

Laterstagesofstandardizationincludesettinguptheconformancetestingrequirementsandcertifyingtestingbodies,andpromotingthestandard.TestingandcertificationthemselvestakeplaceoutsidetheSDO,andmayinvolvefurtherfeedbackinteractionsbetweentheSDOandmemberfirms.

Ingeneral,thewholeprocessofanew3GPPstandardtakesabouttwoyears—withtheinitializationof108http://www.3gpp.org/about-3gpp1093GPP2016.110Gupta2013;Baron,Gupta&Roberts2015.111VanderVeer&Wiles(2008);Teeceetal.2017;http://portal.etsi.org/Chaircor/process.asp

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succeedingreleasesoverlappingeachotherbyseveralmonthsormore.

ThishelpsillustratethedegreeofcoordinationbetweentechnologydevelopmentandstandardizationtakingplaceviatheSDOworkinggroups.

6. Futuredevelopmentsinstandards–whereareweheaded?

Withtheproliferationandrapidadvanceofdigitalcommunications,andthefocusofmanyindustriesaroundthese,theimportanceofstandardsinthefutureislikelytocontinuetogrow.Thiswillaffectspecificareasofcommunicationsstandards.Itisalsolikelytoincludethegrowingintegrationofinformationfrommanyotherindustriesusingcommunicationstechnologyandfurthercross-collaborationanddevelopment.Giventherapidityoftechnologicaladvancesandthecomplexityoffutureapplications,itisalsolikelythatthetrendtowardgreateruseofprivatestandardsdevelopment,consortia,andfasterhybridstandardsprocessesbetweenconsortiaandSDOswillcontinue.SDOswillcontinuetostreamlinestandardsdevelopmentprocessesanddiversifytheirservices.

6.1 CommunicationsstandardsandIoT

Wirelesscommunicationsusehasexplodedovertime,withbillionsofusersusingbillionsofdevicestosenduncountablenumbersofvoiceanddatamessagesannually.Thisprogressseemslikelytocontinueandaccelerate.Newdevelopmentssuchas5GmobilecommunicationsandtheInternetofThings(IoT)promisetoextendinterconnectionbetweenthedifferenttypesofdevicesandservicessothattheyinteroperateseamlessly.

5Gdevelopmentsandtheirimpactonstandardsarediscussedabove.Theadvancesinwirelesscommunicationsstandardshavebeencharacterizedbyhigherdatatransmissionperformance(e.g.,higherthroughput,speeds,useofdifferentfrequencybands),increasingrangeofapplications(e.g.,cellularversusWLANs),andtheabilitytoservegreaternumbersofsimultaneoususersinagivenarea.ThetotalnumberofSEPscoveredbythesevariousstandardsisinthetensofthousands.ThetotalR&Dspendingtodevelopthesetechnologiesisinthebillionsofdollars.Cellularcarriersalsospendbillionsofdollarsinspectrumauctionstoacquirethespectrumneededtoimplementthesestandards.

TheIoTdescribestheconnectionofanincreasingrangeofdevicestotheInternet,suchascars,kitchenappliances,electricmeters,smarthomes,andmanyothers.112MoredeviceswilljointhelistastheIoTgrows.AdefinitionofIoTis“anetworkofinternet-connectedobjectsabletocollectandexchangedatausingembeddedsensors.”113Anobjectiveistheuseoftheinterconnectedsensorstonotjustmonitorbutalsocontrolandmake“smart”decisionsbasedonthedata.IoTstandardsarelikelytobecomplexanddifficulttodevelopasmoredevicesareusedbymoreusersoveranincreasinglydiverserangeofapplications.114

IoTislikelytovastlyincreasethescopeofcommunicationsandintegrateservicesinmanyindustries.AchallengeforIoTstandardsisthatinformationexchangemaybebetweenwidelydifferentapplicationswithdifferentoperationalandcommunicationsneeds.Thismaybringtogetherfixedandmobile,lowandhighpower,andapplicationsrangingfromoccasionalmonitoringofsensorstoreal-timecontroloftransportdevices.Anelectricmetersensormightsendinformationonlyperiodically,onceadayoronceamonth,andneedlowpowertoconservebatteries.Aself-drivecarneedsinstantaneous,high-volume,

112ForintroductionstoIoT,seeWasik2013;Meola2016.113Meola2016.114ForacomprehensiveoverviewofthecomponentsandapplicationslikelytobeinvolvedinIoT,seeVermesan&Friess2013.

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two-waydatacommunicationsrunninginrealtime.Also,onceseparate,communicationssegmentsmaybecomelessdistinctandoverlapintootherservicesrunningoverothernetworks.

TherearealreadymanyconsortiaandalliancesworkingonaspectsofIoTstandardization.115ThisincludesSDOssuchasIEEE,3GPP,andITU,aswellasnumerousprivateconsortiaandalliances.116ItistoosoontobeconcernedwiththeintegrationofdifferentIoTstandards,butthisislikelytobecomeanissuesoon.Theareaisevolvingquickly,andfuturedirectionsarestillbeingdefined.

6.2 Otherstandardsforconvergenceandintegration

Generaltrendsindigitalelectronicsarelikelytobecontinuedrapidanddiverseinnovationsupportedbyequivalentstandardsdevelopment.Giventherateofchangeandsimplythevolumeofstandards,thismayincludeincreasinguseofprivateconsortiatocoordinateinnovationandinteroperability.Consortiahaveadvantagesinthattheymaybelessrestrictedbyformalrequirementsandcanfocusontechnicalandmarketproblemsinflexibleandresponsiveways.117However,formalSDOsalsohaveattractivefeaturessuchasinclusivity,accessibility,andcredibility.Anincreasingtrendmaybefindingnewwaystointegratethetworoutes.118ManySDOshavealreadystreamlinedtheirprocedurestoincorporateprivatestandardsintoformalindustrystandardsmorequicklywithoutsacrificingquality.Conversely,standardstradeorganizationsmaytakeovermoreresponsibilitiesformaintainingstandardsoncetheyhavebeenestablished.

Equallysignificantmaybetheincreasinguseofcommunicationstointegratedifferentindustriesaroundindividualandcommondatasystems.Convergenceiswellunderwayfocusingdiverseindustriesaroundcommunicationsservices.Somecommentatorsputmobilecommunicationsatthehubofthis“grandconvergence”asmoreindustriesbecomemorefocusedondigitalinformationandrelyincreasinglyoncommunicationstointeroperatewithconsumersandotherindustries.119IoTisonemanifestationofthis,asise-Business.Suchchanges,shouldtheyoccur,willsignificantlyinvolvethedevelopmentofcommunicationstechnologyandstandards.

6.3 Factorsaffectingsuccessofstandardstoday

Anumberoffactorswillcontinuetoaffectthecommercialsuccessorfailureofagivenstandard.Manyformallyadoptedstandardshaveneverachievedsignificantcommercialsuccess.Standardsthatarewidelyadoptedbyindustryparticipantsaremuchmorelikelytobesuccessfulthanstandardsthatfailtoattractsupport.Takingmobilecommunicationsasanexample,thisisespeciallyimportantwhenmultiplesuppliersofcomplementaryproductsorservices(e.g.,makersofmobilehandsets,makersofmobilebasestations,mobilecommunicationsserviceproviders,andgovernmentalagenciesthatallocateradiospectrumtothenewstandard)needtobeenlistedinsupportofthestandard.Openstandards(forwhichnumerousindustryparticipantsareabletoparticipateinsettingthestandard)arelikelytobemoresuccessfulthanless-openorproprietarystandardsinattractingsupport,asopennessmakesitmorelikelythatallinterestedparties’concernshavebeenconsideredinframingthestandard.Theabilitytoadaptstandardsconsistentlyovertimeastechnicalandcommercialconditionschangeis

115Themanyshiftingcoalitionsfortheinternetofthings(IoT)includeAllSeenAlliance/AllJoyn,OpenInterconnectConsortium/IoTivity,IndustrialInternetConsortium,ITU-TSG20,IEEEP2413,AppleHomeKit.https://techbeacon.com/state-iot-standards-stand-big-shakeout116IoTstandardizationprojectsat3GPPareoutlinedinReininger2016.Alsoseehttp://www.itu.int/en/ITU-T/studygroups/2013-2016/20/Pages/default.aspx117Hawkins1999.118ITU2006;Blind&Gauch2008;Hazucha2013.119Ahonen2014.

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anotherconsideration.

Priceandperformanceofthestandardizedproductsandserviceswillclearlycontinuetobeanimportantfactorincommercialsuccess.One(butonlyone)ofthefactorsaffectingcostisthetotalroyaltiessoughtbyholdersofpatentsusedinstandards-compliantproducts.Potentialimplementersofthestandardwantsomeassurancethattheywillbeabletoobtainreasonablypricedlicensestopatentedtechnologynecessarytomakestandards-compliantproducts,whichiswhymostSDOshaveapolicyrequiringholdersofsuchessentialpatentedtechnologytomakelicensesavailableon“reasonableandnon-discriminatory”(RAND)or“fair,reasonable,andnon-discriminatory”(FRAND)licensingtermsandconditions.Atthesametime,developersneedtheopportunitytoshareinthesuccessofstandardsasanappropriateincentiveforinvestmentinfurtherR&D.Thereshouldbeabalancebetweentheneedsofdevelopersandimplementers.Forproprietarystandards,itisimportanttoattracttheparticipationandsupportofsuppliersofcomplementarygoods/services.Ineithercase,standardssupporterswillneedaclearunderstandingofwhatthefuturelicensingbehaviorofSEPownersislikelytobe.

Thisimplies,amongotherthings,thatcontinuityandpredictabilityofIPlicensingpoliciesisimportant.ChangesinIPpolicies,forbothSDOandproprietarystandards,andtheirlegalinterpretations,willneedtobeconsideredcarefullyinthecontextofthecompletetechnologydevelopment,productinnovation,standardization,andimplementationecosystems,suchasthoseillustratedinthecasestudies.

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TableofContents

1. Introduction..................................................................................................................................................2 2. TheRoleofStandards...................................................................................................................................3

2.1 Howstandardsaddvalue–interoperabilityandinnovation...................................................................3 2.2 Factorsinstandardization........................................................................................................................4 2.3 Standardsorganizations...........................................................................................................................6

a) SDOs,consortia,andSSOs 6 b) Standardsdevelopmentandstandardssetting 7

2.4 Whatmakesonestandardmoresuccessfulthananother?....................................................................7 a) Dynamicsofstandardization 7 b) Establishingsuccessfulstandards 9 c) Firmpositioningandprofitability–openorproprietary? 12

3. CaseStudy1:Electricalconnectorstandards.............................................................................................15 3.1 Introduction...........................................................................................................................................15 3.2 FireWire.................................................................................................................................................17 3.3 UniversalSerialBus(USB)......................................................................................................................17 3.4 ComparingFireWireandUSBstandards................................................................................................18

a) TechnicaldifferencesbetweenFireWireandUSB 18 b) Comparativestandardsdevelopmentprocesses 18 c) Differencesinadoption,rollout,royalties 19

4. CaseStudy2:VideoRecoding–VHSvs.Betamax......................................................................................19 4.1 Introduction...........................................................................................................................................19 4.2 HistoryofVCR........................................................................................................................................20

a) DevelopmentofVHSandBetamax 20 b) Technicalcomparisons 22

4.3 Thevideorecordingformatcontest......................................................................................................23 a) Productandstandardizationstrategies 23 b) Pre-recordedmovies 24 c) Effectoflawandregulations 24 d) TechnologicaldesigncriticaltoVHSstandard 24 e) Standardsandprofitability 25

4.4 Lessonsfromthecontest.......................................................................................................................26 a) Marketstrategiesforstandards 26 b) Standardsandtechnologydevelopment 27 c) Generalindications 27

5. CaseStudy3:WirelessCommunicationsStandards...................................................................................28 5.1 Introduction...........................................................................................................................................28 5.2 Standardsprocesses–combiningmarketsandorganizations..............................................................29 5.3 IEEEcommunicationsnetworkstandards..............................................................................................30

a) IEEEstandardizationhistory 30 b) OverviewofIEEEcommunicationsstandards 31 c) Individualstandards 32 i) IEEE802.3–Ethernet...................................................................................................................32 ii) IEEE802.15WPAN–Bluetooth/ZigBee........................................................................................32 iii) IEEE802.11WLAN–Wi-Fi............................................................................................................33 iv) IEEE802.16WMAN–WiMAX......................................................................................................34

5.4 3GPPmobilestandards..........................................................................................................................35 a) Mobilecommunicationsandstandardization 35 b) 3GPPstandardsgenerations 37 c) Implicationsformobilecommunicationsstandardsdevelopment 39

6. Futuredevelopmentsinstandards–whereareweheaded?....................................................................41 6.1 CommunicationsstandardsandIoT.......................................................................................................41

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6.2 Otherstandardsforconvergenceandintegration................................................................................42 6.3 Factorsaffectingsuccessofstandardstoday........................................................................................42

References............................................................................................................................................................43