TPRC Programs and Papers Archive: Abstract
| Title: The Internet: Still Wide Open and Competitive?
Author(s): Eli M. Noam Comments: Conf Year: 2003 (ID: 200) Download: [ PDF ] Abstract: This paper aims to measure market concentration in the Internet sector, to trace it over time, and to compare it with trends in other information industries. Our definition of the sector includes the basic infrastructure components of the Internet. For each of these industries, we tracked revenue and calculated individual firms’ market shares in this particular industry for a period of 20 years. The findings show the newer the medium, the more concentrated it is, and often the more its concentration is rising in recent years. In contrast, the Internet sub-sector is more concentrated than it was ever before, after its embryonic early years. We find pronounced horizontal and vertical trends of concentration in the Internet sector. High economies of scale based on the high fixed costs and low marginal costs, and often complemented by network effects on the demand side encouraged rapid expansions and created a period of intense competition in which prices were driven to levels that could not sustain total costs. The implications are, for the future, higher user prices, a higher profitability of the major firms, a slowing of innovation and upgrade, and increased power of major Internet firms. |
