The rise of consortia in the information and communication technology industries: emerging implications for policy

Telecommunications Policy 23 (1999) 159—173

The rise of consortia in the information and communicationtechnology industries: emerging implications for policy

Richard Hawkins*Information, Networks and Knowledge (INK), Science and Technology Policy Research (SPRU), Mantell Building,

University of Sussex, Falmer, Brighton, BN1 9RF, UK

Abstract

Over the past decade, consortia have become a structural feature of technology and market co-ordinationin the information and communication technology industries. This paper examines some of the policy issuesraised by the consortia phenomenon by examining its origins and structures critically and reviewingconsortia interactions with standardisation processes. The findings are that consortia fulfil a complex role intoday’s market structure that is aimed at creating technologically integrated business communities, that‘efficiency’ rationales may not be the prime rationale for participation in consortia technical committees, andthat consortia now operate as a global system. Policy implications are drawn in terms of access asymmetries,industrial policy, user participation, and the future role of the officially recognised standards organisa-tions. ( 1999 Elsevier Science Ltd. All rights reserved.

1. Introduction

Beginning in the late 1980s, a substantial number of firms in the telecommunication, computer,consumer electronics and media industries began to became involved in an intriguing form ofinter-firm collaboration commonly known as an industry consortium.1 Throughout the 1990sthese organisations proliferated widely. Virtually all of the world’s major information and com-munication technology (ICT) firms are now active across the consortia spectrum, and most of thesignificant smaller firms are active in selected consortia. Consortia have attracted members from

*Tel.: 01273 678165; fax: 01273-685865; e-mail: [email protected] is common also for a consortium to be referred to as a ‘forum’, and several leading consortia incorporate the word

‘forum’ into their official names (e.g. the ATM Forum or the Frame Relay Forum). For the sake of economy, the term‘consortium’ will be used generically throughout this paper.

0308-5961/99/$ — see front matter ( 1999 Elsevier Science Ltd. All rights reserved.PII: S 0 3 0 8 - 5 9 6 1 ( 9 8 ) 0 0 0 8 5 - 8

large and small firms that are intensive users and/or ‘in-house’ developers of ICT capabilities, aswell as from suppliers of ICT products as such. The major consortia have also acquired significantinternational visibility and influence in policy contexts.

Most commentary on consortia activity tends to regard it as an adjunct or alternative to formalstandardisation processes as carried out in national and international standards developmentorganisations (SDO). Certainly, some consortia work in tandem with the formal standardisationsystem, and many SDOs have initiated formal co-operation agreements with selected consortia,ostensibly with the objective of making formal standardisation processes more efficient andresponsive to industry requirements. But the consortia are beginning to create an intricate networkof tacit and explicit recognition and co-operation agreements among themselves.

Nevertheless, most consortia explicitly disassociate themselves with ‘standards-making’ as such.They draw a line between SDO outputs, which they acknowledge to be ‘standards’ in theconventional sense, and consortia specifications that they regard in quite a different light. Failureto understand the exact nature of this ‘different light’ could have profound implications forpolicymakers, whose essential interest in all initiatives to co-ordinate technology on an inter-firmbasis remains one of preserving the public interest by ensuring that distortions do not appear in therapidly evolving marketplace for ICT products and services. Standardisation has always been animportant aspect of technology co-ordination, but its complexion is now very different than it wasa decade ago.2

Already by the mid-1990s a number of important policy issues were in evidence. Updegrovenoted the potential for individually dominant technology suppliers to use consortia in order to gainstrategic advantages in the marketplace, as well as citing intellectual property (IPR) and competi-tion policy issues (Updegrove, 1994, 1995). Subsequently, however, the whole subject of consortiatended to recede to the policy periphery. Most of the discussion has revolved around how better tointegrate consortia into the various national and international ‘information highway’ agendas(indeed, this was Updegrove’s main purpose) rather than to ask fundamental questions aboutwhere consortia activities are or ought to be leading.

This paper will not attempt to resolve these issues, but it will try to re-kindle the debate byexamining the origins and structures of the consortium phenomenon critically and identifyingsome of the implications for policy that emerge from consortia interactions with standardisationprocesses. To this end, the paper concentrates on identifying collective characteristics and implica-tions — acknowledging the diversity of interests and agenda within the emerging consortia systemrather than discussing it in detail. The paper is based largely on a comparative, critical survey ofconsortia and SDO membership lists, contracts, rules of procedure, subject areas, work items,committee structures and so forth. Findings were validated and supplemented with informationand insight gathered through personal discussions with senior technology managers and standardsstrategists in several major European and North American ICT firms over a number of years.

2Schmidt and Werle conclude that standardisation is essentially ‘technology co-ordination’, rather than simpledevelopment and/or harmonisation of technical specifications and protocols — the whole activity being driven by the highdegree of linkage between the commercial and technical architectures of the public network. The author is in fullagreement with this interpretation, but would emphasise to a greater degree that the institutional diversification evidentin the evolution of the consortia phenomenon indicates a shift in the basic purpose of the exercise from co-ordination ofthe public network to co-ordination of public and private network elements. See Schmidt and Werle (1998).

160 R. Hawkins / Telecommunications Policy 23 (1999) 159—173

2. What is a consortium?

A consortium is an informal alliance of firms, organisations, and (sometimes) individuals that isfinanced by membership fees for the purpose of co-ordinating technological and market develop-ment activities. Informality is a key characteristic as most conventional industrial networks operatethrough formal sub-contracting arrangements, or through partnerships and joint ventures.3Typically, consortia set out very explicit objectives and agendas, but pursue them through very‘informal’ working procedures.

Consortia have most of the organisational characteristics of voluntary trade, professional andindustry associations, and, indeed, some organisations engage inter alia in consortia-like activitieswithin much broader agendas.4 Likewise, some consortia have adopted the same kinds of advisory,training and advocacy activities as commonly undertaken by trade and industry associations.Membership in some consortia is open to all interested parties, while membership in others can berestricted according to specific professional, industrial or commercial affiliations.

Irrespective of the objectives and structures of individual consortia, the case that they havebecome a distinct class of organisation rests on the observation that to greater or lesser degrees, allconsortia display all of the following attributes:

f All consortia had their origins in major ICT industry and market restructuring initiatives,mostly those that occurred over the past six to ten years.

f Although some consortia concentrate on market research, information sharing, or the co-ordination of R&D, all consortia are oriented to some significant extent on the publicationand/or implementation of technical specifications developed or otherwise supported by theirmembers. Most of these outputs appear as ‘publicly available specifications’ (PAS) — i.e. they areavailable on a non-discriminatory basis to members and non-members (most are distributedfree, or at relatively trivial cost).

f Consortia are aimed at breaching traditional sector boundaries between ‘public’ and ‘private’networking by concentrating on specific product and service environments — like object orientedprogramming, teleconferencing, operating systems, transmission technologies, video compres-sion, digital broadcasting or network management.

f Consortia employ working methods in their technical programmes that are generally verysimilar to SDO practices.

f Most consortia were established by ‘core’ groups of founder members, made up mostly ofmultinational ICT supply firms and/or large national public telecommunication network oper-ators. Virtually all of the significant consortia have an international membership although manyfocus on specific national or regional agendas.

f Consortia are accountable only to their own members. Although some make a public servicecommitment, none are formally accountable to the public interest other than to conform withthe laws and regulations that apply in their countries of legal registration.

3There is a substantial literature on forms of industry collaboration and their effects, some of which is resonant in theconsortia context. See in particular Johonson and Mattsson (1987); Nelson (1994) and Dosi and Malerba (1996).

4I can be a moot point, for example, whether an organisation like the IEEE is primarily a professional body, anindustry association, a standards body, or a consortium. At various times this and other organisations display all of thesecharacteristics.

R. Hawkins / Telecommunications Policy 23 (1999) 159—173 161

3. Consortia and standards

Most consortia describe their specification-related activities as being only one part of amore general aim of co-ordinating technology with emerging market demands. SDOs claimsimilar objectives as rationales for standardisation. The difference is that the promulgatedstandard is the final product of the SDO, whereas most consortia agenda extend well be-yond standards-setting as such. For consortia, the desired final product is a co-ordinatedsegment of the ICT marketplace. The consortia objective is to use technology to create businesscommunities. They do this by creating links between suppliers of the ‘primary’ technologiesthat underpin new service environments, and suppliers of the complementary products andservices that will be required to establish and sustain them in the marketplace — consumerelectronics, software, digital content, commercial services and so forth. Thus, most consortia backup their specifications by offering an array of member services ranging from information reposito-ries and training programmes, to advertising campaigns and advocacy initiatives in trade andpolicy arenas.

These differences are subtle, but critical in terms of determining why firms pursue co-ordination initiatives in consortia as well as in SDOs. Consortia disclaimers that they arenot standards bodies could be dismissed as mere posturing, but there may be wisdom intaking them at face value. Critical market mass for new products and services is less likelyto develop unless they can be directed along defined commercial as well as technologicalpaths. This is a niche that consortia appear more uniquely positioned to exploit than areSDOs. Indeed, users and suppliers of complementary products like digitised content (manyof them small and medium sized enterprises) are already as conspicuously more in evidence asmembers of the leading consortia as they are conspicuously not in evidence as participants in SDOcommittees.

4. The origins of ICT consortia

Although most of today’s consortia are based in the United States, the first real prototype of theconsortium ‘model’ as outlined above appeared in Europe. The European Computer Manufac-turers Association (ECMA) was founded in 1963 to deal with growing concern in Europe that themainframe computer market was too concentrated amongst a few, mostly US-based companies.Similar concerns were expressed in the US, but, for a variety of reasons, no US equivalent ofECMA was formed until much later (more below).

ECMA established many of the basic organisational characteristics of the consortium. Member-ship is voluntary, industry-wide, and international (within the European region), the focus is onspecific technical problems, the process relies on voluntary technical committees, and financialsupport is on the basis of member contributions.5 As with all subsequent consortia, the most

5At the time ECMA was formed, its members were primarily European mainframe computer vendors, most of whomwere subsidiaries of US firms. Current ECMA membership is much broader and includes major European-based firmsfrom the telecommunication sector.


prominent ECMA members were (and are) large multinationals. ECMA was among the first (if notthe first) ICT-industry organisation to issue PAS. Moreover, ECMA established close relationshipsvery early on with the International Organization for Standardization (ISO). In the late 1960s andearly 1970s, ECMA was one of the main advisors to ISO Technical Committee 97 in setting up thefirst major international computer standardisation programme. From the beginning, ISO recip-rocated by placing ECMA recommendations on a ‘fast-track’ whenever they were presented forconsideration as international standards.

Most SDOs (including ISO) have rules to ensure that standards requirements are defined by thestakeholders themselves, and not by SDOs. Consortia can be useful in co-ordinating this process,which, historically, has been both a strength and a weakness of the SDO system. On the one hand,a bottom up approach keeps down the numbers of idiosyncratic and redundant standards. On theother hand, the process can yield somewhat random results, and it tends to involve only the mostdominant stakeholders.

A much more ‘managed’ approach to standardisation emerged in ISO during the 1980s,including a more proactive role in identifying standards requirements. Likewise, in the Interna-tional Telecommunication Union (ITU), the steady broadening of the criteria for direct participa-tion in ITU standards committees that occurred between 1989 and 1995 broadened also the base oftechnical subjects and commercial perspectives from which ‘bottom up’ identification of standardspriorities could emerge.

Initially poor co-ordination of overlapping work between ISO and ITU (since improvedsomewhat) reinforced perceptions in industry that the whole formal standards development systemfor ICT was too complex and remote from the developers and users of standards. The strongemergence of regionally-oriented standardisation systems in Europe, North America and Japan(particularly in the telecommunication sector) was in part a response to this situation, but therewere economic and political agendas to accommodate in these regional bodies that blunted theeffectiveness of many of their attempts to streamline the global system.6

Undoubtedly, institutional factors like these provided major incentives for ICT producers toinitiate actions outside of the SDO structure. Furthermore, rapid changes were occurring in thebasic technical paradigms of public and private networking. In particular, the spectacular diffusionof the Internet that began in the early 1990s re-oriented much thinking about the commercialimplications of truly ‘open’ networks. It is significant that the Internet features very prominently inthe agendas of most consortia. Either they exist to develop its potential proactively, or to respondreactively to its implications in terms of transmission requirements, network management capabili-ties, and so forth. But the Internet standards regime operates mostly outside of the SDO system,and according to its own principles and rules.

For a growing number of stakeholders in this ‘brave new world’ pursuing new standardsframeworks within the established SDOs carried clear risks. The SDO system retained manytechnological and institutional legacies that might impede rapid exploitation of commercialpossibilities in new network environments like the Internet.

An additional stimulus worth noting was liberalisation of the US legal regime concerningcollaborative R&D arrangements among US firms. At the time ECMA was formed in the 1960s,

6For an analysis of the origins of these problems see Hawkins (1992).


US anti-trust law actively discouraged US firms from developing common technical specificationsexcept through officially acknowledged formal standardisation processes.7 Changes in US lawsfrom 1988 onwards encouraged closer R&D collaboration between US firms, and it is against thisbackground that most of the current generation of consortia emerged.8

It should be remembered that the US SDO system is unique in being highly distributed.Relatively few standards developed by the several hundred independent organisations developingstandards in the US (including those that convene committees accredited by the AmericanNational Standards Institute) are actually proposed as national standards! In other words, the USSDO model is already very similar to the consortium model — much more so than the Europeanstandards system, for example.

Between about 1986 and the present, the number of significant ICT consortia rose from a merehandful to perhaps as many as one hundred. The fortunes of individual consortia wax and wane,however, and already there have been mergers and dissolutions. At the time this paper was beingprepared, there were perhaps 20 consortia that could be considered major forces in influencing thetechnological and policy directions for ICT products and services internationally. Table 1 listsa selection of consortia that might be deemed particularly significant on the basis that themembership of each represents a substantial international cross-section of significant ICT producerand user firms, and that the activities and products of each were being referenced to somesignificant extent by other consortia and SDOs, both inside and outside of this group.

This latter point is potentially very significant. Not all consortia have official liaisons with otherconsortia, but most of the ones listed in the table do. At the time this paper was being prepared,various liaison arrangements existed between DAVIC, IMA, TINA-C, OMG, W3C and DVB, forexample, motivated by the fact that all have direct stakes in the co-ordination of new digitalaudio-visual technologies. Indeed, around virtually every key technology, it is now possible to mapconsortium alliances in some detail. Some are formal to the extent that one consortium becomesa member of another (OMG is a member of W3C, for example), whereas others are informal (aswhen one consortium references the PAS of another in its own products). Likewise, most of theimportant national and international SDOs have or are negotiating recognition agreements withmajor consortia.9

Moreover, although most consortia have an international membership, very few are based outsideof the US, and most are oriented primarily to US industry and market conditions. The overallpattern is for the entire consortia structure to be anchored in the US, and for foreign firms — evenhuge European, Japanese and Korean multinationals — to participate in US-based organisationsrather than to promote competing or complementary consortia based in other locations.10 Indeed,many major European and Asian firms are founder members of important US-based consortia.

7There are historical concerns in the US that standards-oriented trade and industry groups could become subject toanti-trust investigations in some circumstances. US standards committees had to take care to keep membership criteriaand processes very open lest their activities were interpreted as illegal attempts to use technology in order to concentrateand control markets. See Swankin (1990).

8The US environment began to liberalise in the wake of the 1988 Omnibus ¹rade and Competitiveness Act. The rulesgoverning collaborative technology arrangements between firms were finally clarified in the 1993 National Co-operativeResearch and Production Act.

9For a more extensive discussion of these emerging alliances, See Hawkins (1997a).10For a more detailed discussion of the Japanese experience in consortia participation and promotion, see Mizumoto (1997).


Table 1Select group of major consortia

Name Type

ADSL-FAsymmetric Digital Subscriber Line Forum US-based international consortiumATM-FAsynchronous Transfer Mode Forum US-based international consortiumDAVICDigital Audio Visual Council Swiss-based international consortiumDVBDigital Video Broadcasting Project European consortium (based in the European

Broadcasting Union)ECMAEuropean Computer Manufacturers Association European consortiumEMAElectronic Messaging Association US-based international consortiumEURESCOMEuropean Institute for Research and Strategic Studies in European consortium

TelecommunicationsFrame Relay Forum US-based international consortiumIMAInteractive Multimedia Association US-based international consortiumIMTCInternational Multimedia Teleconferencing Consortium US-based international consortiumMMCFMultimedia Communications Forum US-based international consortiumMSAFMultimedia Services Affiliate Forum International consortium led by AT&TNMFNetwork Management Forum US-based international consortiumOMGObject Management Group US-based international consortiumThe Open Group US-based international consortiumTINA-CTelecommunications Information Networking Forum US-based international consortiumUMTSForum Universal Mobile Telecommunications System Forum European-based International consortiumVESAVideo Electronics Standards Association US-based international consortiumW3CWorld Wide Web Consortium Consortium — co-located in the US and EuropeXIWTCross Industry Working Team US consortium

5. The internal dynamics of ICT consortia

Ostensibly, a firm joins a consortium because it has a stake in its work. However, member firmsdo not take on the responsibilities of contractors and sub-contractors in the development of


a consortium product as they probably would do in more formal types of industry networks. Inprinciple, the consortium is incentive-driven — members will support an initiative with technicalcontributions, absorbing all of the costs this entails over and above the membership fees, only ifthey perceive that substantial benefits are to be realized.

In this sense, consortia are remarkably similar in form to SDOs with their voluntary committees.This begs an important question in terms of the linkage that is frequently drawn between joiningconsortia and achieving efficiency gains in standardisation processes. ¼hy import the basicstructural features of an SDO system that is perceived to be inefficient and unresponsive intoa consortia system that is aimed at increasing responsiveness and efficiency?

One possible answer is that it is not the consensus system that is at fault, only its institu-tional context in some instances. It is often argued that consortia can apply the committeemethod more efficiently because they deal with a smaller range of technological interests. Theassumption is that membership in the consortium implies agreement with its technical objectivesand that lack of agreement can be expressed without penalty by leaving the consortium. Thefail-safe is that no consortium specification has any official recognition, and its implementation isnot mandatory. In any event, once a consortium specification looks like it could assume the role ofan ‘industry standard’ in a more conventional sense, the practice of many consortia is then to shiftthe initiative over to the SDO system. Indeed, the SDO and consortia systems are now closelyintertwined.

Another possible answer is that consortia projects can respond much more quickly to changes intechnology. Because consortia specifications have no official status, there is no need for the manystages of the SDO regime — work items, draft standards, pre-standards, regional standards,international standards etc. — nor for the supporting bureaucratic feedback loops oriented tovarious internal scrutiny and public enquiry processes. The claimed result is a structure thatproduces specifications more quickly than SDOs, and that these are as close to a prevailingconsensus on market requirements as possible.

If we examine these explanations critically, however, it is clear either that major ICT firms havequite seriously misjudged the standardisation issue (not a likely scenario), or that there are othergood reasons for them to want to support the consortia model. It is important to look at theseother reasons in order to clarify the possible costs and benefits of consortia participation for firms,and to assess the policy implications of the increasing significance of PAS.

6. The consortia model and efficiency objectives

By surveying those consortium membership agreements that are available for public scrutiny, itemerges that the typical range of yearly membership fees for firms is between US$ 5000 (about theminimum) and US$ 60,000. In most cases, the fees are assessed on schedules linked to memberrevenues. Special dispensations are made in some instances for non-commercial members (likeacademic and professional organisations), and some consortia allow observer status.

For a large ICT multinational, fees in the range of US$ 20,000 to US$ 60,000 per consortium arenot all that significant, but it must be remembered that the scope of the typical consortium isnarrow and most large companies now belong to many consortia. Indeed, a comparison of themembership lists of the major consortia reveals that about 40 to 50 large multinational vendors of


computer and telecommunication equipment and services virtually blanket the entire consortiumspectrum.

If large firms like AT&T, Alcatel, Siemens, IBM, Intel, Microsoft or Ericsson were each toparticipate in 30 consortia (this is about average for firms like these) the average yearly expenditureon consortia fees would approach perhaps US$ 1.5 million per firm. This is over and above theexisting costs of participating in the mainline SDOs (T1, ETSI, ITU-T, ISO/IEC JTC1 etc.).Undoubtedly, some substitution of allegiances occurs where firms switch technical inputs fromSDO committees to consortia. However, there is little indication that the list of SDO work items isgetting shorter as the consortia lists get longer. Indeed, a look at the evolution of SDO workprogrammes over the past two or three years indicates a steady increase in activity. The matter isworth more detailed study, but it does not appear at this point that firms are diverting standardisa-tion resources to consortia — rather that net expenditure on SDO, consortia and related activities isincreasing across the board.11

Indeed, it is reasonable to anticipate that the number of nooks and crannies added to theinternational standardisation system by consortia will not lower costs, and may increase them. Theresources required to cope with each added element of complexity in a system generally do notstabilize and decline. Rather, they tend to accumulate, often at a proportional and sometimesdisproportional rate of increase. A single global SDO would be impractical for many reasons anda certain amount of diversity is necessary and desirable. The problem is how to determine at whatpoint the value added by diversity is outweighed by its costs. Basically, the consortia explosion mayat best be shifting the locus of standardisation costs from historical intra-organisational proceduralcosts to new inter-organisational co-ordination costs.

One of the cost-minimising advantages attributed to consortia is reduced ‘time-to-market’.Because consortia specifications get to the market more quickly, so the argument goes, the costs ofproducing them can be recovered more quickly. However, evidence for this is only anecdotal— there are no comprehensive independent ‘time-to-market’ studies of PAS vs SDO standards.Some consortium specifications are developed in a short period of time, but so are some SDOstandards — the first set of ISO Motion Picture Experts Group (MPEG) specifications being a goodexample. Furthermore, getting standards to market quickly is not always an advantage, especiallyif there are many of them at various stages of maturity. In the mid-1990s, for example, the ATMForum had to virtually suspend production of specifications for a time as the rates at which theywere being released and revised was overwhelming potential users and confusing the market.

Much of this time-to-market rationale springs from the premise that all consortia members arepositively engaged in the work of the consortia to which they belong, and that consortia representa more targeted community of experts. This may be true in some instances, but by no means in all.

11On the basis of miscellaneous estimates given to the author over the past two years by standards strategists in severalmultinational ICT equipment manufacturers, costs directly attributable to standards-making would appear to be in theaverage range of US$ 5—7 million per firm, per year and rising. It is not being claimed here that such estimates are reliableor accurate. In the first place, all of these strategists acknowledged that separating out the costs of standardisation fromtotal R&D spends is practically impossible. Indeed, for the most part, the estimates they provided cover only the directlyattributable administrative, travel and subsistence costs in connection with sending participants to meetings. The fullcosts are probably much higher!


In the first place, large multinationals belong to virtually all of the major consortia, although few ifany of them would claim to have comparable leading-edge competencies, or commercial interestsin all of the specialised areas covered by these consortia. Clearly, a part of the consortiamembership rationale is ‘flag showing’ and ‘place holding’, or simply to gather intelligence ongeneral developments in these various fields.

Secondly, difficulties in coming to consensus agreements tend to increase as the range of vestedinterests increases. Consortia like the International Multimedia Association (IMA), and the ObjectManagement Group (OMG), for example, each have in excess of 1000 members. The membershipprofiles of consortia like these are actually much more diverse than those attached to a body likeJTC1! Comments made to the author by ECMA participants over the years have indicated thateven though ECMA membership is a fraction that of IMA or OMG, as the diversity of memberinterests has increased, so have the difficulties in achieving consensus agreements and co-ordina-ting work with SDOs. The closer one looks, there are fewer prima facie reasons to assume thatconsortia will necessarily come to consensus any more quickly than SDOs. Moreover, whereagreements appear to emerge quickly in a consortium, this may reflect only a limited consensusamongst key participants. Generally speaking, consortia do not implement ‘balance of interest’rules in their committees.

As there is no guarantee that all consortia members will be able or willing to contributetechnically on an equitable basis, ‘free-rider’ problems are merely transposed from the SDO arenato the consortium. Indeed, many additional risks are presented by the diversity of membership ina consortia structure that is becoming increasingly interlocked due to the cross-membership ofdominant firms, but with little by way of harmonised procedures for policing member behaviour— particularly regarding IPR.

One possible function of consortia is the pooling of knowledge and competencies as codified andprotected by copyright and patents. However, the extent to which consortia might be operating asIPR pools is somewhat obscure. A limited search of the US Patent Office database undertaken forthis study revealed no evidence at all that consortia are becoming patent assignees.12 For manyfirms, moreover, consortia could be extremely risky places to put IPR on the table, unless, ofcourse, legal arrangements had been made between the relevant IPR owners beforehand.

7. Why consortia?

So far, it would appear that the advantages of consortia are rather dubious. However, if weassume (as surely we must) that major multinationals are behaving rationally in supporting theemerging consortia system, we must look for the sources of advantage that must be obvious tothese firms — and particularly to that group of major multinationals that appear prominently asfounder members of consortia. Indeed, the ambiguities start to disappear if we widen our horizons

12The US Patent Office data base was searched early in 1998 with reference to a sample group of 10 leading consortia.No patents were found that were assigned to consortia, and only a small handful of passing references were found toconsortia specifications in other patents.


from purely standardisation issues to the wider problem of how firms position themselvesstrategically to exploit new networking environments.

A study produced by Japan’s Telecommunication Technology Committee in the midst of theconsortium explosion of the mid-1990s classified the activities of consortia in terms of theirtechnological orientation when compared to the subject areas in the ITU and JTC1 workprogrammes (TTC, 1995). The study found that a large contingent of consortia (about one third ofthe group examined in the study) occupied a technological position somewhere between the polesof ‘computing’ and ‘telecommunication’, and that there appeared to be a correlation betweenconsortia formation and the emerging problem of how to select the most optimal institutionalenvironments for setting standards amidst rapid technological convergence.

In a recent study for the European Commission, Mansell, Steinmueller et al. outline anintriguing approach to monitoring emerging ICT industry dynamics that is useful in interpretingthese findings (Mansell et al., 1996). This approach classifies various groupings of ICT interests asincumbents — existing suppliers of telecommunication and computer products and services with anextensive installed base of technology linked to an established customer base; insurgents — newerfirms seeking build market shares for goods and services based on new technology; and virtualcommunities centred around emerging configurations of dominant users of networked services,especially in an Internet environment.

A look at the groups of consortia founder members makes it clear that incumbent and insurgentperspectives led most of the consortia formation that occurred throughout the 1990s. In setting upconsortia, incumbents were looking for new ways to maintain and increase revenues by maximisingand enhancing existing investments in network facilities in order to exploit the commercialpossibilities of these new markets for electronic services. Consortia like ADSL-F, ATM-F, NMFand TINA-C emerged predominantly among incumbents with these objectives. Insurgents soughtto use consortia to develop market share quickly by breaking up some of the vertical integrationthat still existed among incumbents. This yielded consortia like OMG, IMA and the Open Groupwho focussed more on the articulations between software, digitized content and networked servicesthan on platforms and network facilities as such. In some cases these agendas overlapped, yieldinghigh degrees of joint participation (as with DAVIC, OMG and W3C). Other consortia tended togravitate towards specific incumbent interests or competencies, particularly those consortiaoriented mostly to telecommunication like TINA-C, ASDL-F or EURESCOM.

As the consortium phenomenon began to emerge, the problem for virtual communities was thaton the whole they were too diverse and immature to be able to articulate coherent institutionalagendas concerning technical subjects. The pattern up to this point has been for potential leaders ofvirtual communities to become associated with various incumbent and insurgent-led consortia, orfor them to support already established user sector-based initiatives in SDOs. Although orientedentirely to developing new user environments on the Internet, for example, the membership ofW3C is weighted as much to incumbent and insurgent interests as to virtual community interests.

In explaining the role of consortia in terms of the strategies of incumbent and insurgent firms, itis worth recounting that the dynamics of technology and market co-ordination change as networkenvironments become more open and the supporting technology base becomes much moremodular. In closed networks defined by technology that was either proprietary or otherwisecontrolled by a select group of network operators and equipment suppliers, revenues came directlyin the form of rents protected by hierarchical ownership of the basic enabling technologies and


systems. In an open network, additional forms of revenue generation open up to incumbents,insurgents and virtual communities alike in the form of various kinds of value-added servicepossibilities. In turn, new services environments stimulate development of new network technolo-gies, both inside the existing public and private network architectures, and as add-ons and overlaysto this architecture.

However, the possibilities of being able to generate revenues in a open network environment arenot necessarily as ‘open’ as the network architecture itself might be. It is now becoming generallyaccepted that under certain conditions, first-movers can acquire very significant advantages bycapturing control over key interfaces.13 The strategy is to establish a standard in the market asquickly as possible — even to the extent of giving it away — such that it can attract a network of userslarge enough to reduce incentives for these users to seek alternatives. Once a user network isestablished around a standard established in the market by a firm or group of firms, considerablerevenues from the sale of various operational and support services can be leveraged. Where thisstrategy prevails, the incentive to establish de facto standards is great, and herein lies probably thereal link between consortia and standards-making.

Few ICT firms would see any reason to allow more entities with the market power of a Microsoftto emerge. Consortia can offer something of a counterbalance to the possibility that some key newtechnology will fall under the control of any one firm or group of firms. The consortium structurecan also allow groups of firms to exploit the very close complementarities that often exist betweentheir respective proprietary technologies in a milieu that encourages other market participants toacquire a stake in the outcome of such co-operation. This objective is reflected in the very activeknowledge dissemination and training focus adopted by many leading consortia, much of itdirected more at potential users of the specifications than at potential developers.

Viewed this way, the consortium model exhibits no real disbenefits for incumbents or insurgents.They must accept the possibly increased costs of participation, but it is quite reasonableto speculate at this point that the business case for consortium participation is actually dif-ferent from the business case for SDO participation. In any case, existing SDO activities can becomplemented at upstream and downstream levels by consortia inputs wherever the added‘legitimacy’ of an SDO standard is required to increase public confidence in new ICT product andservices environments.

8. Emerging policy implications of the consortia phenomenon

In policy terms, the main conclusion is that the dynamics of the consortia phenomenon havebecome systemic. In practice, consortia are not stand-alone organisations. Instead, an internationalsystem has evolved in which communication and co-ordination is achieved primarily throughinter-organisational alliances, and through cross-membership by firms large enough to have theresources, technological scope, and logistical acumen to span the entire system. This has severalimmediate implications for policymakers.

13For a comprehensive view of theoretical perspectives on network externality issues, see Arthur (1994).


8.1. Asymmetries of access and influence

The logistical and resource limit for most small and medium sized enterprises, and even for largeuser firms, would be to monitor and perhaps contribute to the work of at most a handful ofconsortia. Such selective participation could yield some positive results for small and peripheralstakeholders, but, for all stakeholders, the consortia system increases the complexities of monitor-ing individual technology co-ordination initiatives in their larger contexts. On the one hand, thesystemic nature of the consortia phenomenon could create avenues for smaller and more peripheralstakeholders to get connected with the whole technology co-ordination context through selectiveparticipation in only a few key consortia. But no consortium has mechanisms in place to facilitatethis outcome, and selective participation certainly is not the strategy of ICT suppliers. Pol-icymakers must be vigilant such that business communities stimulated by consortia do not becometechnological ghettos.

8.2. Industrial policy

A major reason for the participation of foreign firms in a consortia system that is concen-trated in the US is that many foreign firms are seeking to develop market positions in the US itself.The US has established leads in several key new areas of networked services, and the critical massfor many of these services appears more likely to emerge first in the US marketplace than anywhereelse.

As the technological paths established in the US could have profound implications for the pathsthat are followed elsewhere in the world, many policymakers outside of the US have a potentiallylarge stake in these developments. Most national and regional industrial policies ( Japan beingperhaps the exception) are aimed at promoting selective comparative advantages in world ICTmarkets. Thus, for example, Europe has a major stake in mobile access technologies, an area whereEuropean technology is especially advanced. These advantages can be lost if evolutionary trajecto-ries are established in the US market that limit scope for non-US firms to compete to alter thesetrajectories at some point.

8.3. User participation in the consortia system

Although user communities are very much more in evidence in (at least a few) major consortiathan in SDOs, the consortia phenomenon is still very much supplier led. In effect, although indifferent ways, both the consortia and SDO systems include and exclude the same constituencies.A major question on the agendas of policymakers and industrial users of ICT is the extent to whichthe continued dominance of suppliers in ICT markets is a factor that affects negatively the efficientand productive development and deployment of ICT (Gibbs, 1997). There may be opportunities forinternationally significant consortia to emerge that are led by user interests like aerospace, thefinancial sector, the media industries or the defence industries. Asymmetries in ICT developmentcapabilities between US and non-US firms are not as pronounced in many of the more prominentICT application areas. Policymakers in several parts of the world might consider proactivelyencouraging such new initiatives.


8.4. The public interest implications of consortia-SDO links

The most obvious public interest issue with respect to all inter-firm technology co-ordinationinitiatives is to prevent distortions in the marketplace. With consortia, the main problem forpolicymakers is how to encourage positive outcomes from the consortia system while at the sametime preserving the ‘public interest’ orientation that has traditionally underpinned the legitimacy ofthe SDO system. This is particularly important in areas where legal and regulatory processes mustintersect with voluntary standardisation processes.

Increasingly, ICT suppliers may want fewer standards that are backed by the ‘legitimacy’ ofSDOs, except in a few selected areas where technical regulation of some description is perceived tobe necessary.14 Rather, they may want more short-term, consortium-based technology co-ordina-tion initiatives that are linked to specific business and product models. On the other hand, firmsthat are primarily implementers of ICT may want more ‘officially’ recognized standards, especiallyin dynamic new areas where they have fears about early lock-in to proprietary standards.

In this respect, probably the most realistic remedy for policymakers would be to take action toreduce the information asymmetries inherent in this much more complex system of technologyco-ordination. Policymakers might consider the potential of value-added information services onboth SDO and consortia activity as a policy tool. Wider availability of information about theseactivities world-wide could become a critical factor in reducing co-ordination costs for ICTproducers and users alike, and in preventing lock-in.

The possibility of accentuating the public interest role of SDOs in this context is worthy also ofexamination. In today’s ICT marketplace, knowledge of the whole scope and direction of technicalco-ordination activities is probably of as much or greater value to many firms and organisationsthan direct access to technical committees and specifications as such. SDOs may be in a uniqueposition to exploit their traditional positions as ‘honest brokers’ of industry-wide technicalagreements in new ways. A re-orientation of the SDO business model towards public informationservices might be worthy of consideration. Such action would acknowledge that for all stake-holders the costs of technical co-ordination are shifting from intra-organisational procedural coststo inter-organisational co-ordination costs, and it would differentiate decisively the roles ofconsortia and SDOs in the marketplace.

In seeking policy solutions of any kind, it is very important to keep in mind that the standards‘problem’ has changed remarkably since the first initiatives were undertaken in the late 1960s. Atthat time, the problem was how to encourage a few large multinational suppliers to set anynon-proprietary standards at all. Now the problem is that new standards appear in rapidproliferation. The main concerns for policymakers are evolving from stimulation of standardsdevelopment, to monitoring and oversight of a much broader technology co-ordination enterprise.

Acknowledgements

Much of the research contributing to this paper was funded by the European Union AdvancedCommunication Technologies and Services (ACTS) Programme.

14For a discussion of evolving technical regulation requirements in the public network see Hawkins (1997b).


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The rise of consortia in the information and communication technology industries: emerging implications for policy