Forces to vertically integrate?

May 1, 1998

6

Lehr, Internet Bandwidth, CITI Conference

• Scale and Scope economies -- YES

  • Costs fixed, sunk, shared…peak capacity, branding
  • Demand externalities (universal termination)
  • “One Stop” shopping

• Transaction Costs (metering or contracting) -- YES

• Coordination & Control -- YES

• Price discrimination -- YES

• Product differentiation -- YES

• Innovation and Strategic Positioning -- YES (??)

• Market Power (raise rivals’ costs)? YES (??)

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