Standards and Public Policy

Abstract

The creation of interface standards enables competition at the level of components, rather than in complete systems, and consumers often benefit from component competition. Nevertheless, the standard-setting process can be manipulated to achieve anticompetitive ends. The authors consider the conditions under which a standards consortium could impose anticompetitive burdens on the market and examine several strategies such a consortium might employ to achieve anticompetitive objectives. They present a new strategy – one-way interface standards – and discuss the conditions under which it can be anticompetitive.

Introduction

Complementary devices in a complex technological system must communicate through interfaces to interoperate successfully. In systems that involve communications and computing functions, interfaces are connections through which signals pass. The devices on both sides of an interface (e.g., the microprocessors and a disk drive, or the PBX [that is, the private branch exchange] and the central office switch) must be designed so that they make the correct physical connection, send the correct signals to each other, and correctly interpret the signals received. We refer to the formal physical and signaling details as the interface specification.

Communications and computing functions are featured in a much wider variety of systems than those we think of as primarily telecommunications or computers. For example, automobiles have sophisticated controller systems in which multiple components communicate with each other. Medical devices often perform sophisticated computation. At the least, our analysis applies to any system through which information flows through electrical, photonic, or other electromagnetic signaling.