10 07 2013 Lecture 1 Outline of Last Lecture I No Previous Outline this was the first lecture Outline of Current Lecture II Distribution of Signals or Media in Telecommunications III Basic Telecommunications IV Miscellaneous Telecommunications V Internet Telecommunications Current Lecture Distribution of Signals or Media in Telecommunications o Satellites o Radio o Internet Basic Telecommunications o Video Games o Telephone o Books o Video TV Movies o Telegraph o o o o o o o Comics Music Miscellaneous Telecommunications Pornography Social Media Internet Telecommunications Google is the biggest company in this media form Internet is like Pandora s Box Ever increasing Useable by everyone no matter what their age Lecture 2 Outline of Last Lecture I Distribution of Signal or Media in Telecommunications II Basic Telecommunications III Miscellaneous Telecommunications IV Internet Telecommunications Outline of Current Lecture V Basic Business Brief Tips VI Telegraph History Business Model Current Lecture Basic Business Brief Tips o The Company s Business Model Profits Revenues Costs Does it change over the course of time Does it require complimentary goods Example Xbox console and games o The Competitors Direct vs indirect Degree of substitutability Each competitor will have different strategies o Customers the real battleground Demographics Psychographics Culture attitude style values beliefs etc Previous purchases o The Legal Issues Intellectual property Patents copyrights trademarks trade secrets etc Competition regulation Some markets have to be regulated o o o o Torts Privacy publicity product consequences etc The Cultural Issues Attitudes towards products and competitor s products Cultural integration Cultural consequences Example For Facebook the 55 demographic is growing The Technological Issues Evolution of product Cost dynamics Functionality and quality Adoption patterns Complimentary products Their evolution Telegraph History Business Model Could only send stuff by Pony Express postal service and trains Could only send via normal transportation mode News was costly With the telegraph messages could be sent at the speed of light Needed other things to be successful before the telegraph could take off Batteries had to be invented first There was a growing knowledge of electricity and things through wires o Samuel Morse took 5 years to really get the telegraph polished Started to try and make it known by attempting to convince the US government to fund it After 3 years they funded 40 miles of these wires o To Function Needs interconnected wires Value is dependent on the cost of sending it in a traditional way vs using this new way o Important Definitions Externality a cost or benefit that results from an activity or transaction and that affects an otherwise uninvolved party who did not choose to incur that cost or benefit Example a company doesn t pay for the negative outputs o Putting regulations on it causes them to internalize what they are doing Can have both positive and negative externalities Network effect the effect that one user of a good or service has on the value of that product to other people When present the value of a product or service is dependent on the number of others using it Economies of scale the cost advantages that enterprises obtain due to size with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output Often operational efficiency is also greater with increasing scale leading to lower variable cost as well o Telegraph Business Model Competitors US postal service was its main competitor o Wasn t bound by any sort of issues like the telegraph was o Cheaper to send messages via the postal service even though it took longer o Everyone was already using the postal service and transportation was increasing Customers Military Newspapers Banks o Transmitted loan and stock numbers Businesses o They were all growing o Lowered coordination costs o Regional companies started popping up Legal Cultural and Technological Issues Patent o Used it to control the rollout of technology o When it was up companies started popping up There was no interconnectibility o People weren t sure if messages were being delivered properly Larger telegraph companies started to buy up the smaller ones o Economies of scale took place o Western Union Rose up in the North Did great business during the Civil War Anywhere troops went they set up wire lines Southern Telegraph companies started to fail The telegraph technology was increasing o It was getting more efficient o Natural Monopoly in telegraph Western Union entered into exclusivity agreements Made a partner in the associated press Early abuse of market powers o Exclusivity of news was part of the telegraph And later the associated press o Patent was granted in 1840 Western Union achieved national monopoly in 1866 o No antitrust regulation at this time The telegraph necessitates the rise of competition regulation The Telephone o At first Western Union didn t see the telephone as a threatening technology Without technological advancement nothing else could really be done with the telegraph o Kronos Effect Dominant industry player wants to keep dominance o o o o Tries to buy up other technologies to incorporate into their company The Patent Exclusive rights for a specified period of time to an inventor Creates incentive for innovation Gives a reason for other inventors to come about Prevents others from attempting to freeride on the innovation Must be non obvious innovation or invention Must have utility Can t be a trickster device The Telephone Mini Business Model Legal Issues The patent for the telephone was awarded in 1876 Bell Company acquired this There were simultaneous discoveries Elisha Gray and other Europeans were also playing around in this o o The patent fight Bell offered to sell patent to Western Union for 100k Western Union had deployed 56k telephones by 1878 Bell fell into depression and Theodore Vail came along Comes up with game plan for fighting Western Union Western Union still had improvement patents and a area massive reserve of money power and influence Lecture 3 Outline of Last Lecture I Basic Business Brief Tips II Telegraph History Business Model Outline of Current Lecture III The Telephone Current Lecture o Bell sues Western Union for Patent infringement J Gould comes and pulls the rug from underneath Western Union allowing for Bell to win