Comparison of Wireless Standards-Setting --United States Versus Europe

Abstract

When decisions about developing standards are left to individual firms, there are many advantages including a flexible response to market evolution, accommodation to rapid technology change, and avoidance of costly coordination. However, the market process does not necessarily lead to compatible standards, especially when there is no clear market dominator. Standards Institutions generally facilitate better communication among market participants, which may discourage early and/or primitive incompatible standards to emerge in the market. However, expenditures on institutional standards-setting can lead to diminishing returns, or even be counter-productive because institutional standards usually take longer to produce and are slower to respond to technology development. Government agencies can specify compulsory standards to avoid incompatibility. In addition, governments can tie their policy on standardization closely with their industrial, trade, and/or regulatory policies. However, many exogenous factors handicap a government's effective involvement. Government often fails to respond to the dynamics of technology development and consumer demand, and to pick up the "right technology". This study first discusses why two different models have emerged in the two regions. It then examines outcomes and implications of the two models, including impacts on domestic service deployment, global trade competition, technology innovations, and strategies of multinational corporations. The goal is to conduct an empirical comparison between the two contrasting models.