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STANDARDS AND COMPETITION

STANDARDS AND COMPETITION
Algirdas Krupovnickas, преподаватель, кандидат технических наук, доцент

Vilnius Gediminas Technical University

Участник конференции

 

The article examines some standards that are innovative and well implemented and gain visibility and recognition for their new functionality. They also help diffuse knowledge and encourage technology to be applied in new ways. The roles of new technology are measured by patents and technology diffusion measured by standards. Competition is definitely a key component in driving innovation, but it's important to question where that competition should be occurring, and where it's mutually beneficial to have a standard.
Keywords: standards, competition, de facto standards, de jure standards,intellectual property.

Standards give a level playing field, allowing solutions from different suppliers to work together (known as “interoperability”) and competition between new and existing products services and processes. They also help diffuse knowledge and encourage technology to be applied in new ways. Standards provide legal security for innovative companies, creating large-scale markets and building confidence among consumers.

Standards can be of two kinds: de facto standards created by market forces, and de jure standards created by standards-setting organizations. In both cases, the standards can include intellectual property rights.

In the de facto scenario, the value is in the standard, not in the technology itself. The value comes from the fact that everybody is going to use the same technology.

Intellectual property (IP) provides ownership over technologies in the standard. That reduces the competitive effect because if one vendor owns the right, other vendors cannot compete. In de facto standards, however, the conflict between IP and standards can have serious effect on competition as there are no constraints such as antitrust legislation.

Multinational corporations are in a better position to set standards and influence them as they hold essential patents and other IP rights on technologies necessary to comply with standards.

The use of standards in EU public procurement processes and those used by large multinational companies were also assessed with a view to enabling bidding companies to be more innovative in their product and service designs and offerings. Often de facto standards are developed either by a dominant corporation (e.g. IBM’s ASCII) or by a consortium of interested vendors (e.g. Zigbee Alliance).

In many cases successful de facto standards eventually become formalized into real standards. In other cases recommended practices can help narrow the choises. Standards that are innovative and well implemented will gain visibility and recognition for their new functionality. One such development is the biometric standard for face image data (ISO/IEC 19794-5). ISO/IEC 19794-5:2005 specifies scene, photographic, digitization and format requirements for images of faces to be used in the context of both human verification and computer automated recognition. The approach to specifying scene and photographic requirements in this format is to carefully describe constraints on how a photograph should appear rather than to dictate how the photograph should be taken. The format is designed to allow for the specification of visible information such as gender, pose and eye color. The digital image format can be either ISO standard JPEG or JPEG2000. Finally, the 'best practice' appendices provide guidance on photo capture for travel documents and face recognition performance versus digital compression.

The study presented in ISO/IEC 19794-5:2005 annex concentrates on geometrical parameters of the face in the photograph which are important for biometric matching applications. The findings of the study are based on the statistical evaluation of automated image analysis by quality assessment software. The analysis given above shows that with current technology the thresholds set forth in this part of ISO/IEC 19794 can be achieved in real world applications. Since the data used for this study were collected from four major e-passport issuing countries across the world, the results can be regarded as representative within the scope of this analysis.

The roles of new technology are measured by patents and technology diffusion measured by standards. Especially in the areas of services, experiences with standards and standardisation are limited while at the same time it is recognized that services are a growing part of the economy and a dominant source of innovation. In the area of public procurement, standards can play a facilitating role in the creation of new markets but also here there is a need to understand more of how standards can be used to foster innovation.

Standards in technology are not new. You can get access to information on ANSI Standards dating back to 1978 at the Charles Babbage Institute.  We use standards in nearly every aspect of computing, from the ASCII (1963) and Unicode (1991) character sets to the TCP/IP protocol (1973) to the USB bus (1996) on our systems. We use MPEG standards to store to share audio and video on our DVD drives.  Even the electricity coming from the wall outlets is delivered according to a standard.

There are four levels of cyber standards: 

  • Media?related standards specific to fiber optics, microwave, WiFi, CATV, wires, telephones and cell phones;
  • Transport?related standards such as Internet standards including Ethernet, IP, TCP, HTTP;
  • Application?related standards such as HTML, XML, IEC 61850, Common Information Model (CIM);
  • Security?related standards such as AES 256, PKI, secret keys, and Certificates.

How does standardization impact competition?

  1. With standardization, competition will drive the prices for the replacement parts down, while the manufacturer still makes a profit. The purchase of proprietary systems locks a buyer into one manufacturer's replacements and parts. This allows the manufacturers to create natural monopolies and raise prices of “spare” parts.
  2. Standardization avoids the problem of losing a technology (a bankrupt supplier cannot support its products) and thus enhances market growth and competition, since a seller need not be both financially secure and committed to the industry in order to sell a product.
  3. Standardization can replace the need for regulations (i.e., Long distance telecommunications). Linux provides a model for this. There is a tightly controlled core of functionality (the kernel) which is freely available and used by many competing distributions. Each distribution bundles the kernel with additional functionality for their customers. Some distributions (such as Red Hat and Fedora) concentrate on server management, others on the workstation environment (SUSE, Mandrake), multi-media capabilities (Ubuntu) or ease of use (Linspire). Different distributions have different commercial models, serving the needs of different markets. The core functionality is protected, and there is enough flexibility for variants to meet specific customer needs.

A similar model would allow competition to mould IT management standards to the specific needs of multiple customers, while preserving the critical core.

Competition is definitely a key component in driving innovation, but it's important to question where that competition should be occurring, and where it's mutually beneficial to have a standard.

References:

  1. INTERNATIONAL STANDARD ISO/IEC 19794-5:2005 TECHNICAL CORRIGENDUM 2 Published 2008-07-01.
  2. Which Is More Important For Innovation: A Standard Platform Or Competition? 
  3. Peter Drahos, Imelda Maher. Innovation, competition, standards and intellectual property: policy perspectives from economics and law. Information Economics and Policy 16 (2004) 1–11. 
  4. Farrell, Joseph and Garth Saloner. Product Standardization and Competitive Strategy, ed. H. Landis Gable (Amsterdam: Elsevier Science Publishers B.V., 1987).
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