Competition and Vertical Structure of Industry: Evidence from Info-Communications

The purpose of this paper is threefold. Firstly, the paper provides a synthesis of the potentialities and limits of the dominant economic literature on vertical contractual relations which essentially focuses on the impact of vertical specialization and vertical integration on competition and customers’ welfare. Second, the paper characterizes the historical evolution of the different degrees of vertical specialization and vertical integration for key actors in the info-communications industry: equipment suppliers, telcos, ISPs/IAPs, navigation and software/middleware companies, information and content companies. Thirdly, the paper realizes a confrontation between, on the one hand, optimal vertical structures exhibited in dominant economic models and, on the other hand, observed vertical structures in the infocommunications industry. From this confrontation emerges an important gap between theoretical results and observable trends. The outcome of this paper is thus that the dynamics between vertical relationships and competition requires a new research agenda, especially for economists and business historians concerned with the evolution of the info-communications industry. JEL classification codes: L 22; L 86; L 96; O 31