Digital Economics: How Information and Communication Technology is Shaping Markets, Businesses, and Innovation

Foreword
Preface
About this Book
Contents
About the Authors
Abbreviations
1: The Digital Economy
	1.1	 Introduction
	1.2	 Definitions
	1.3	 Digitization of the Economy
	1.4	 Digital Economics
	1.5	 Conclusions
	References
		Further Reading
2: Information and Communication Technologies
	2.1	 Introduction
		Box 2.1 The Transistor
	2.2	 Timeline for the ICT Evolution
		Box 2.2 The ARPANET
		Box 2.3 Family Tree of Mobile Networks
	2.3	 Factors Constraining Evolution
		Box 2.4 Cryptocurrencies
	2.4	 Internet of Things
	2.5	 Conclusions
	References
		Further Reading
3: Convergence of Technologies and Services
	3.1	 Dedicated Networks
	3.2	 Early Attempts of Service Integration
	3.3	 Service Integration over the Internet
	3.4	 Toward Next-Generation Network
		IP in the Sky
	3.5	 Conclusions
	References
4: Digital Economy Ecosystem
	4.1	 Ecosystem Metaphor
		Box 4.1 Illustration of the Vulnerability of a Biological Ecosystem
	4.2	 Ecosystem Components
	4.3	 The Layered Internet as Ecosystem Component
		Box 4.2 Skype and Over-the-Top Services
	4.4	 Computer Infrastructure and Platforms as Ecosystem Components
	4.5	 Applications and Content as Ecosystem Component
	4.6	 Consumers as Ecosystem Component
	4.7	 Authorities as Ecosystem Components
	4.8	 Conclusions
	References
5: Digital Market Evolution
	5.1	 Telecommunications as Natural Monopoly
	5.2	 De-monopolization of User Equipment
	5.3	 De-monopolization of Mobile Network Operations
		Box 5.1 Competitive Dilemma
	5.4	 De-monopolization of All Telecommunications Operations
	5.5	 Resellers and Virtual Network Operators
	5.6	 Conclusions
	References
6: Digital Goods and Services
	6.1	 Definitions
		Box 6.1 Anything as a Service
		Box 6.2 E-Banking
	6.2	 Zero Marginal Cost
	6.3	 Classification of Digital Goods
	6.4	 Zero Average Revenue per User
		Box 6.3 Facebook and ARPU = 0
	6.5	 Digital Commodities
	6.6	 Transaction Costs
	6.7	 Bundling
	6.8	 Conclusions
	References
		Further Reading
7: Production Models
	7.1	 Physical and Digital Products
	7.2	 Basic Production Methods
		7.2.1	 In-House Production
		7.2.2	 Commons-Based Peer Production
		7.2.3	 Crowdsourcing
	7.3	 Production Tools
		7.3.1	 Crowdfunding
		7.3.2	 Peer-to-Peer Lending
		7.3.3	 Free and Open-Source Software and Cloud Computing
	7.4	 Conclusions
	References
		Further Reading
8: Value Creation Models and Competitive Strategy
	8.1	 Introduction
	8.2	 Value Chain
	8.3	 Value Shop
	8.4	 Value Network
	8.5	 Competitive Forces
		8.5.1	 Porter’s Five Forces
		8.5.2	 Porter’s Five Forces Applied to the Digital Economy
	8.6	 Competition, Cooperation, and Coopetition
	8.7	 Conclusions
	References
		Further Reading
9: Network Effects
	9.1	 Introduction
		Box 9.1 Six Degrees of Separation
		Box 9.2 Dunbar’s Number
	9.2	 Positive and Negative Network Effects
	9.3	 Characteristics of Network Effects
	9.4	 Direct and Indirect Network Effects
	9.5	 Same-Side and Cross-Side Network Effects
	9.6	 Estimating the Value of Networks
		9.6.1	 Size of Networks
		9.6.2	 Sarnoff’s Law
		9.6.3	 Metcalfe’s Law and Odlyzko-Tilly’s Law
			Box 9.4 Derivation of Odlyzko-Tilly’s Law
		9.6.4	 Reed’s Law
			Box 9.5 Derivation of the Modified Law
		9.6.5	 Summary and Comparison of Network Laws
	9.7	 Conclusions
	References
		Further Reading
10: Multisided Platforms
	10.1	 Introduction
	10.2	 Characteristics of Multisided Platforms
		10.2.1	 Network Effects
		10.2.2	 Pricing
		10.2.3	 Competition
		10.2.4	 Business Ecosystem
		10.2.5	 Market Regulations
	10.3	 Network Effects and MSPs
	10.4	 Business Ecosystem and MSPs
	10.5	 Trade Process of MSPs and Resellers
	10.6	 Conclusions
	References
11: Path Dependence
	11.1	 Definitions
	11.2	 Competition and Path Dependence
	Case Study 11.1 Videotape Format War
	11.3	 Impact of Churning
	Box 11.1 Mathematical Model for the Temporal Evolution of Markets with Churning
	11.4	 Path Dependence and Lock-In
	Case Study 11.2 Facebook vs Myspace
	11.5	 Conclusions
	References
		Further Reading
12: Lock-In and Switching Costs
	12.1	 Introduction
	12.2	 Switching Costs
	12.3	 Lock-In Mechanisms
		12.3.1	 Spare Parts, System Updates, and Maintenance
		12.3.2	 Training
		12.3.3	 Incompatibility and Compatibility
		12.3.4	 Potential Loss of Information
		12.3.5	 Investments and Economic Lifetime
		12.3.6	 Difficult-to-Terminate Contracts
		12.3.7	 Loyalty Programs
		12.3.8	 Bundling
		12.3.9	 Search Algorithms
		12.3.10	 Product Tying
	12.4	 Lock-In Cycle
	12.5	 Network Effects and Lock-In Cycle
	12.6	 Lock-In and Market Regulations
	12.7	 Conclusions
	References
		Further Reading
13: Digital Monopolies and Oligopolies
	13.1	 Definition of Market Types
	13.2	 Formation of Monopolies
	Case Study 13.1 Creation of a Monopoly: Facebook
	13.3	 Formation of Oligopolies
	Case Study 13.2 The Mobile App Duopoly
	13.4	 Conclusions
	References
14: Mergers and Acquisitions
	14.1	 Definitions
	14.2	 Motivations for M&A
	14.3	 Types of Integration
	14.4	 Conclusions
	References
15: Standards
	15.1	 Why Standards?
	15.2	 Standards Organizations
		15.2.1	 ITU
		15.2.2	 ETSI
		15.2.3	 3GPP
		Box 15.1 From GSM to 5G
		15.2.4	 Internet Society
		15.2.5	 World Wide Web Consortium
		15.2.6	 Institute of Electrical and Electronics Engineers (IEEE)
	15.3	 Market Implications of Standards
	15.4	 Standards and Interconnectivity, Interoperability, and Backward Compatibility
	15.5	 Standards for Trust and Security
	15.6	 Conclusions
	Reference
16: The Long Tail
	16.1	 Origin of the Concept: Amazon and the Long Tail
	16.2	 Internet and the Long Tail
	16.3	 Numerical Analysis of the Long Tail
	Box 16.1 Zipf’s Law
	Box 16.2 Generalization of Zipf’s Law
	Box 16.3 The Long Tail and the Vulnerability of Internet
	16.4	 Conclusions
	References
		Further Reading
17: Digital Markets
	17.1	 Market Types
	17.2	 Stakeholders and Relationships in Digital Markets
	17.3	 E-Commerce Markets
	17.4	 Network Access Markets
	17.5	 Information Service Markets
	17.6	 Conclusions
	References
		Further Reading
18: Digital Market Modeling
	18.1	 Introduction
	18.2	 Bass Diffusion Model
	Box 18.1 Solution of the Bass Equation
	Box 18.2 Finding the Inflexion Point
	18.3	 Model for Markets with Competition and Churning
	Box 18.3 Market Stability and Churning
	18.4	 Models for Massive Multiplayer Online Games
	Box 18.4 The SIR Model
	18.5	 Analysis of Real Markets
	Box 18.5 System Dynamic Models
	18.6	 Conclusions
	References
19: Digital Business Models
	19.1 Modeling Concepts
	19.2 The Business Model Canvas
	19.3 The Stakeholder Relationship Model
	19.4 Digital Business Models
	Case Study 19.1 World of Warcraft
	Case Study 19.2 Spotify
	Case Study 19.3 Facebook
	Case Study 19.4 Wikipedia
	Case Study 19.5 Airbnb
	19.5 Conclusions
	References
		Further Reading
20: Big Data Economics
	20.1 Zettabyte Era
		20.1.1	 Generation
		20.1.2	 Processing
		20.1.3	 Distribution
		20.1.4	 Storage
	Box 20.1 Artificial Intelligence, Machine Learning, Expert Systems, and Data ­Mining
	20.2 Characteristics of Big Data
	Box 20.2 The Lefdal Mine Datacenter
	20.3 Use of Big Data
		20.3.1	 Marketing
		20.3.2	 Health Care
		20.3.3	 Algorithmic Financial Trading
		20.3.4	 Government and Public Services
		20.3.5	 Insurance
		20.3.6	 Retailers
		20.3.7	 Data Brokers
		20.3.8	 Electronic Media
		20.3.9	 Science
		20.3.10	 Data Illiteracy
	Box 20.3 Netflix and Big Data
	20.4 Abuse of Big Data
		20.4.1	 Clandestine Operations
		Box 20.4 Metadata, Content, and Privacy
		20.4.2	 Social Control
		20.4.3	 Tracking People
		20.4.4	 Violation of Personal Integrity
	20.5 Conclusions
	References
		Further Reading
21: Net Neutrality
	21.1 Basic Net Neutrality
	21.2 5G and Net Neutrality
	21.3 Device and Search Neutrality
	21.4 Business Implications of Net Neutrality
	21.5 Zero-Rating
	21.6 Conclusions
	References
22: Digital Regulation
	22.1 Introduction
	22.2 Mobile Network Regulations
		22.2.1	 Fair Competition
		22.2.2	 Denial of Interconnection
		22.2.3	 Excessive Pricing
		22.2.4	 Cross-Subsidizing
		22.2.5	 Price Discrimination
		22.2.6	 Lock-In of Customers
		22.2.7	 Non-Price Discrimination
	22.3 Internet Regulations
	22.4 Lessig’s Four Modalities
	22.5 Conclusions
	References
Index