Bitpipe vs. service: Why do pure service providers outperform fully integrated operators?
AbstractWith the emergence of pure internet-based service providers, the business landscape of fully integrated telecommunications providers - industry incumbents that provide services on their own infrastructure - has changed massively. While various pure service providers exhibit successful business models and high performance, the services offered by the integrated telecommunication firms are not able to compete on neither price nor user experience. To shed light on this issue, we build upon work that has applied a complex systems perspective on performance - how firms manage to configure a large set of interdependent activities affects the performance of the overall activity system. We develop a simulation model to illustrate the effects of a) configuring only interdependent service-related activities, while building on an existing (external) infrastructure, and b) configuring both infrastructure-related and service-related activities at the same time. Our results point to a mechanism that helps explain the underperformance of the fully integrated operators. Pure service providers can improve the performance of their services speedily, as they can focus on optimizing only the service-related activities and adapting them to an existing infrastructure. Fully integrated operators, in contrast, will likely be concerned with both infrastructure and service components, taking into account also the interdependencies between these two domains. While this approach can help reap synergy effects and yield a performance advantage in the long run, it requires more time and results in a lower performance in the short run. Put differently, the objective of the integrated operators to integrate their bitpipe and service business puts these firms at a disadvantage when compared to their specialized competitors. We illustrate this mechanism with two case studies that show how fully integrated operators adapted their infrastructure in response to their service activities, which in return triggered further adaptations and coordination effort. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Telecommunications Society (ITS) in its series 8th Asia-Pacific Regional ITS Conference, Taipei 2011: Convergence in the Digital Age with number 52308.
Date of creation: 2011
Date of revision:
Contact details of provider:
Web page: http://www.its2011taiwan.com/
Telecommunication industry; complex systems; organizational search;
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sendil K. Ethiraj & Daniel Levinthal, 2004. "Modularity and Innovation in Complex Systems," Management Science, INFORMS, vol. 50(2), pages 159-173, February.
- Daniel A. Levinthal, 1997. "Adaptation on Rugged Landscapes," Management Science, INFORMS, vol. 43(7), pages 934-950, July.
- Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
- Pankaj Ghemawat, 1991. "Market Incumbency and Technological Inertia," Marketing Science, INFORMS, vol. 10(2), pages 161-171.
- Martin Fransman, 2001. "Analysing The Evolution Of Industry: The Relevance Of The Telecommunications Industry," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 10(2-3), pages 109-140.
- Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
- Lori Rosenkopf & Paul Almeida, 2003. "Overcoming Local Search Through Alliances and Mobility," Management Science, INFORMS, vol. 49(6), pages 751-766, June.
- Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June.
- Jan W. Rivkin, 2000. "Imitation of Complex Strategies," Management Science, INFORMS, vol. 46(6), pages 824-844, June.
- Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, January.
- Baer, Walter S, 1995. "Telecommunications infrastructure competition: The costs of delay," Telecommunications Policy, Elsevier, vol. 19(5), pages 351-363, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.