Economic Impact of Technology Standards

September 2017

Jorge Padilla, John Davies and Aleksandra Boutin

"Our research has shown that industries based on open technology standards, agreed through voluntary participation in industry bodies, have an impressive record of innovation. We looked in particular at the mobile telephony industry, which has seen remarkable growth and technical progress. Over the last 20 years or more, the number of devices sold has increased by about 20% per year, while the cost of mobile subscriptions relative to maximum data speed has decreased by around 40%. This impressive performance has arisen from a highly competitive market structure, at all levels of the supply chain. We argue that the institutions that set technical standards for the mobile industry are partly responsible for these economic outcomes.

Throughout this report we examine industries in which technical standards are important – mobile telephony, TV broadcasting and PC operating systems – drawing out common features but also comparing economic outcomes when standards are set in different ways: between these industries and over time. In particular, we note the problems that can arise when governments or individual companies are responsible for standard-setting. Both can lead to inefficiency in various ways, but particularly through fostering uncompetitive industry structures.  

In contrast, voluntary standard-setting - in which experts from technology providers and equipment manufacturers work together to create openly published technical standards - allows firms of different sizes and specialisations to participate in the value chain. This leads to more competition in production, as well as more specialised research firms and greater diversity in research. These outcomes depend on the Standard Development Organisations, which govern open standard-setting, striking the right balance between the interests of technology developers and technology users."

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