Inthispaper,weanalyzethetelecommunications servicesmarket. Thisisafast-expandingmarket,withMicrosoft's announced entry into it providing additional impetus, and raising policy issues. We look for the market structure that will arise from the decisions of the service providers (in terms of product characteristics and pricing) and the customers, all acting in their own interests. We derive sufficient conditions for restricting the number of possible outcomes to three out of several potential ones. These conditions are satisfied by the common assumptions. We also show that when positive externalities are dominant, we will have only market-cornering at equilibrium. This result holds even when the products are differentiated. (We are already seeing near-complete market-cornering in the similar market for operating systems). That does not deter any of the competitors from entering the fray inthefirstplace,sinceallhavepositiveexpectedprofits. Wederivetheprobabilitythateachwillbetheplayer to comer the market. We also show the non-intuitive result that when externalities are dominant, the providers do not have to worry about externalities at all in taking their decisions. We have also introduced a new solution concept called "odds of dominance" in analyzing our game.
Giridharan, P., "Dominance in the Telecommunications Services Industry" (1995). ICIS 1995 Proceedings. 24.