Intelligent Transport Systems - Telenor

10
Road telematics also represents a risk for telecommunications
operators because much of the
current telecom infrastructure can be replaced
by new infrastructure built along roads for other
purposes than road telematics. Similar threats
from cable television systems and the electricity
companies have not yet materialised. These systems
are still too expensive.
Another issue is whether or not road telematics
will generate new markets with market externalities.
Before answering that question let me recapitulate
what network externalities is all about.
An idealised description of normal markets is
that the market growths is proportional to the
number of potential customers not having
bought the product already; i.e.
dC / dt = k(1 – C)
where C is the relative number of customers
having bought the product, 1 – C is the relative
number of potential new customers, and k is a
constant of proportionality. If there are market
externalities, then the potential number of new
customers, again assuming the same idealised
market model, is also proportional to the number
of customer already having bought the product;
i.e. the differential equation becomes (with m as
constant of proportionality):
dC / dt = mC(1 – C)
Therefore, in order to look for network externalities
we must convince ourselves that the change
in market size (dC / dt) can be proportional to
the market size in the idealised model.
Looking more closely at the road telematic markets
we have described above, there is little that
indicates that network externalities exist. The
market for the computerised cars depends only
on the skills of the manufacturers and ordinary
competition rules where every manufacturer
must in due course follow the development in
order not to lose market shares. Implementing
road payment systems has nothing to do with
markets. On the contrary, it is done in order to
collect money to compensate for land usage, for
reducing pollution and for improving road
safety.
When it comes to provision of entertainment and
information, there is nothing that indicates that
providing these services to drivers and passengers
of cars leads to new network externalities.
Road telematics is thus a difficult area in which
to make business. The business potential is huge
but so are the problems.
References
1 Mérö, L. Moral Calculations: Game Theory,
Logic, and Human Frailty. New York,
Springer, 1998.
2 Binmore, K. Fun and Games: A Text on
Game Theory. New York, D.C. Heath, 1992.
3 Lovett, H et al. Businessplan: ITS Your
Time. NTNU, Master of Telecommunications
Strategy thesis, 2002.
4 Audestad, J. Challenges in Telecommunications.
Telektronikk, 98 (2/3), 159–182, 2002.
5 Soloman, S. Censors Handbook. McGraw-
Hill, 1999.
6 Saffo, P. Closing speech of the Biannual
Conference of the International Telecommunications
Society (ITS), Stockholm, 1998.
7 Mr. Feynman Goes to Washington: Investigating
the Space Shuttle Challenger Disaster.
In: Feynman, R P. What Do You Care What
Other People Think: Further Adventures of a
Curious Character. New York, Harper-
Collins, 1992
8 O’Mahony, D, Peirce, M, Tewari, H. Electronic
Payment Systems. London, Artech
House, 1997.
Telektronikk 1.2003