INCENTIVES TO INVEST IN NEXT GENERATION NETWORKS - Organizational Codes, Investment Bias and Technology Change

Abstract

2 2 1. INTRODUCTION Lately, investments in telecommunications networks have been hotly debated, and examples of over-investment (3G, dot.com) have been widely publicized. However, there are also cases of under-investment in telecommunications, and this paper will in particular address drivers to under-investment by elaborating upon the relations between investment trade-offs, organizational codes, and incentives, during the process of technological change. This paper will elaborate on some possible drivers to investment bias, in particular drivers toward investment inertia when technology is changing. There are several possible examples of under-investment. Past examples include inattention to investments in digital facilities during the transition period between analogue and digital telecommunications facilities in the late 1980s (Bohlin, 1995). Another possible, future example is the introduction of the next generation Internet protocol-IPv6. IPv6 is a " classic chicken-and-egg " problem. Operators and ISP providers have few incentives to introduce IPv6 networks since there is little demand at present. Users do not demand IPv6 since there are not yet any perceivable benefits to the new protocol. Manufacturers have consequently been slow to implement IPv6. However, IPv6 would clearly seem to be the better protocol in the long run, since it improves the addressing and routing capabilities of the Internet, which is increasingly becoming a problem with the current Internet standard (IPv4). For instance, there are reportedly " fewer domain addresses available for China than either for Stanford University or MIT ". 1 Clearly, this lack of addresses could create a problem for China as Internet penetration rates there rise, as well as in other growing regions. IPv6 also defines a multi-level, hierarchical global addressing architecture. This feature is important since the Internet backbone depends upon a hierarchical address system similar to that of a telephone network. Without an address hierarchy, backbone routers would have to store table information on the reachability of every network in the world. However, most players seem to be somewhat locked-in to IPv4 and its possible enhancements, such as alternative ways to solve the address problem. Even for actors in regions endowed with many IPv4 addresses, there may be reasons to adopt IPv6. For instance, widespread adoption of the third generation mobile networks will require the adoption of IPv6. On a theoretical level, what are then some possible drivers to technological inertia, and investment bias? Starting first with some definitions, investment bias is a systematic deviation or skewness with respect to some standard …

Cite this paper

@inproceedings{Lindmark2003INCENTIVESTI, title={INCENTIVES TO INVEST IN NEXT GENERATION NETWORKS - Organizational Codes, Investment Bias and Technology Change}, author={Sven Lindmark}, year={2003} }