Saturday, December 5, 2009

Cell Phone Technology Cooperation

In Industrial Analysis we talked about technology cooperation, and the theoretical reasons that rival firms may choose to agree to adopt a specific type of technology. The main thrust of the argument is that if the net benefits to the firms of standardizing technology are greater than the net benefits of separate technology standards, then rival firms have an incentive to choose technology standardization. Earlier this year, cellphone rivals (3 Group, AT&T, KTF, LG, mobilkom austria, Motorola, Nokia, Orange, Qualcomm, Samsung, Sony Ericsson, Telecom Italia, Telefónica, Telenor, Telstra, T-Mobile and Vodafone) agreed to sell cell phones with a universal charger by 2012.

The main argument is that this will benefit the environment, which it should. But there is an alternative (i.e. economic) argument as well. The standard cell phone charging technology will reduce the number of cell phone chargers that cell phone manufacturers will need to produce, hence lowering input costs for cell phone chargers.

Hence it seems as the net benefits of standardized cell phone chargers is greater than the net benefits of propriatary cell phone chargers. Coupled with the increase in competition of firms like PowerMat, who can charge multiple types of devices, this is a natural direction - profit enhancing - for cell phone retailers to pursue.

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