BPPIE Intro Class

Components of the Information Economy Information Goods Information Infrastructure

Components of the Information Economy Information Goods –Anything that can be digitized Music, movies, box scores… –Costly to produce, low cost to reproduce –Can P=MC? –Why are we more interested in this than we were 20 years ago? Information Infrastructure

Components of the Information Economy Information Goods –Anything that can be digitized Music, movies, box scores… –Costly to produce, low cost to reproduce –Can P=MC? –Why are we more interested in this than we were 20 years ago? Information Infrastructure } Piracy/ Privacy

Components of the Information Economy Information Goods Information Infrastructure –Devices used to interact with information Computers, fax machines. –Human capital –Conduits of information Telephone lines, wireless spectrum, Cable TV providers, Internet backbone.

Devices used to interact with information Computers, fax, machines. Main economic/strategy issue –Network externalities: I value this more if you also have it/have something compatible. Main public policy issues –Methods of standard setting Market evolution Standard-setting body – nongovernmental Governmental standard setting body. –Antitrust issues

Human Capital Digital divide issues. –TCA ’96 appropriates significant funding for Internet connectivity in schools. –Corporations/Foundations have also created significant funding for computers in schools/libraries. –More importantly, what are the infrastructure priorities for developing countries? Internet kiosks, cell phones, etc.

Economics of information conduits –Conduits of information High Fixed costs of production, low marginal costs. Generally have capacity constraints. Some of the economics similar to railroads, power plants.

Regulation of information conduits U.S. –Federal Communications Commission Created in the Communications Act of Original mission: keep broadcasters out of each other’s spectrum, regulate AT&T. Authority expanded to include Cable TV, satellite TV, wireless communications, Internet. Important coordinator of international relationships. –State/local Regulators. Abroad –Some nationalized providers –Various regulatory structures.

Convergence/Technological change Previously differentiated infrastructures are converging in the services that they can provide. –Wireline/wireless telephone. –Cable TV company/ Local telephone company Legacy regulation –Very similar businesses can be regulated very differently. Regulation impacts strategy and strategy impacts regulation.

Course Goals Achieve rudimentary understanding of the technologies of each industry. Achieve understanding of basic economics of each industry Understand basic regulatory concerns/ themes Understand how firm value/opportunities are affected by technology/ economics/ regulation. Understand how strategy influences and is influenced by regulation.

Syllabus/Course set-up. Course requirements –Class participation Class a mix of lecture and cases. –Case write-ups In syllabus, bold questions are case write-up opportunities. Handed in at the beginning of class. –Mini-project: handed out 1/31 for 2/14 class –Final project – class presentation Groups of up to 4 Project proposal due Feb 16 or earlier pages for groups, 8-10 for individuals