Interconnection & Interoperability

Agreement: fundamental goalDisagreement:

What is an interface?Which interfaces are critical?What is “open”? How should standards be set?

Map out the debate

3 fundamental problemsClash of two concepts and of two debates:

Interconnection (telecom)Interoperability (computing)

Economics / Strategy: Technical meritStrategic interest of the parties

Three policy domains: IP protectionantitrustregulatory oversight

No clear separation, many conflicts

Interconnection v. Interoperability

Degree? Interop > InterconnectTwo distinct traditions:

Telecom InterconnectionComputing Interoperability

What are the relevant Interfaces?What is the primary policy goal?

interface telecom interconnection

computer interoperability

appliance to network

· physical: modular phone or CATV plugs· logical: standard signaling

ethernet (10baseT)

appliance-to-application

(not a major concern of traditional Telecom)

Windows and Intel-based machines v. MacOS and Motorola-based machines

application-to-application 

· interface between voice-mail systems

service provider to carrier interface (ONA's BSAs/BSEs as the network's APIs)

· file exchange between applications

· message passing among different e-mail services

· client/server compatibility

· APIs: OS to application interface

network-to-network MCI to PacBell, voice call [equal access]

· internet [TCP/IP]

Primary policy goal?

Interconnection / Telecom: network effects, pursued through regulation

Interoperability/ Computing: encourage innovation, pursued through IP protection

 Reflects inherent trade-off between

integration and diversity

Policy trade-off diversity

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Policy trade-off diversity

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Policy trade-off diversity

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Policy trade-off diversity

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Virtual differentiation

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Telecom

Computing

Policy trade-offdiversity

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Interfaces and Strategy

which interfaces are critical?what is “open”?

Fully openFully ClosedMost lie in between

what is “proprietary”?how should interface standards be set?

government mandateVoluntary consensusMarket competition

Compatibility & interconnection

Public Owned

Published

Available to all

Compete on implementation

TCP/IP, Ethernet

Licensed (non-discrimatory Terms)

Owner maximizes installed base, entrants compete on implementation

Dolby, VHS, phone

Restricted

Available, but govnt restrictions

Industrial policy, security

PAL, HDTV(?), clipper

Owner's choice to license

Maximize profits from locked-in installed base

Windows, CATV set-top boxes

Compatibility & interconnection

Public Owned

Published

Available to all

Compete on implementation

TCP/IP, Ethernet

Licensed (non-discrimatory Terms)

Owner maximizes installed base, entrants compete on implementation

Dolby, VHS, phone

Restricted

Available, but govnt restrictions

Industrial policy, security

PAL, HDTV(?), clipper

Owner's choice to license

Maximize profits from locked-in installed base

Windows, CATV set-top boxes

Users

Compatibility & interconnection

Public Owned

Published

Available to all

Compete on implementation

TCP/IP, Ethernet

Licensed (non-discrimatory Terms)

Owner maximizes installed base, entrants compete on implementation

Dolby, VHS, phone

Restricted

Available, but govnt restrictions

Industrial policy, security

PAL, HDTV(?), clipper

Owner's choice to license

Maximize profits from locked-in installed base

Windows, CATV set-top boxes

Users

Producers with locked-in, quasi-monopoly position (Microsoft, IBM, CATV)

Compatibility & interconnection

Public Owned

Published

Available to all

Compete on implementation

TCP/IP, Ethernet

Licensed (non-discrimatory Terms)

Owner maximizes installed base, entrants compete on implementation

Dolby, VHS, phone

Restricted

Available, but govnt restrictions

Industrial policy, security

PAL, HDTV(?), clipper

Owner's choice to license

Maximize profits from locked-in installed base

Windows, CATV set-top boxes

UsersCommon carriers

Suppliers without monopoly position

Producers with locked-in, quasi-monopoly position (Microsoft, IBM, CATV)

Interfaces and Policy

Primary concern:Telecom: encourage network effects.

Regulatory oversight. Ex-ante (introduce competition within monopolies)

Computing: encourage innovation IP protection. Ex-Post (grant IP protection -- monopoly -- remedies if abuses

Interfaces and Policy (cont'd)Intellectual Property: temporary monopoly

CopyrightPatentsTrends?

- Toward denying IP protection for interfaces- Increasing use of patent protection for software (as functional)

AntitrustCounterweight to IP"Essential Facilities"Blunt instrument

Regulatory oversight

Conclusion

Should we care? Will private incentives serve the public

interest?Is there scope for beneficial

government action?

Conclusion

Should we care? YESWill private incentives serve the public

interest? Is there scope for beneficial

government action?

Conclusion

Should we care? YESWill private incentives serve the public

interest? NOIs there scope for beneficial

government action?

Conclusion

Should we care? YESWill private incentives serve the public

interest? NOIs there scope for beneficial

government action? MAYBE…