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The Economics And Politics Of The New Media, Vol. 6 - 1999, No. 3
Digital Convergence and Its Consequences
The concept of convergence has been bandied about for at least 25 years. Initially, concepts of convergence conflated technological integration of print, telecommunications and broadcasting systems with firm-level integration of publishers, telephone companies, cable TV operators, and broadcasters. Ithiel de Sola Pool’s (1983) concept of a single integrated common carrier that met all media needs exemplified the prevailing vision. This paper conducts a broad historical survey of the market structure of media and telecommunications industries from the analogue era of the 1940s to the late-1990s. Its chief premise is that convergence is driven by the declining cost of information processing power, and by the development of open standards. The chief effect of this upon market structure is not to encourage consolidation and vertical integration but rather to break up the media market into more or less specialised horizontal components (content, conveyance, packaging of services, software, and terminal equipment). Cheap, mass produced information processing radically undermines the economic and technological advantages of vertical integration across these component markets, and rewards specialisation and market share within individual horizontal markets. The idea of convergence has been coming in and out of fashion for more than two decades. The process can be cast in religious terms. A band of early prophets sets out a vision. Afterwards, a succession of messiah -- technologies appears that promise to realise the great vision. But, as we shall see, several of the messiah-technologies were crucified and failed to rise from the dead. Even so, one cannot discount the possibility that TCP/IP does indeed represent the Coming. In this article, I shall develop a long-term view of the convergence process. In the first part, I identify two of the prerequisites for digital convergence: (1) a technological revolution in processing power; and (2) a process of converging on common standards In the second part, I explore the impact of convergence on market structure and business models.