†Authors' affiliation: Department of Economics and Christ Church, University of Oxford, Oxford, England. e-mail:email@example.com
IS MULTIMEDIA CONVERGENCE TO BE WELCOMED?*
Article first published online: 27 JUN 2011
© 2011 The Authors. The Journal of Industrial Economics © 2011 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 59, Issue 2, pages 225–253, June 2011
How to Cite
THANASSOULIS, J. (2011), IS MULTIMEDIA CONVERGENCE TO BE WELCOMED?. The Journal of Industrial Economics, 59: 225–253. doi: 10.1111/j.1467-6451.2011.00451.x
*I would like to thank the Editor and two anonymous referees for comments and suggestions. In addition I would like to thank seminar participants at the U.K.'s Office of Communications Regulation (OFCOM), the University of Oxford, the City Conference on Competition and Regulation and the IIOC 2009 Conference in Boston. All errors remain my own.
- Issue published online: 27 JUN 2011
- Article first published online: 27 JUN 2011
This paper considers the consumer implications of the process of convergence across multimedia and telecoms markets. Convergence starts when one firm begins to sell products in hitherto separate horizontal markets competing against rivals active in just one or another of the markets. Convergence creates a strategic link between the markets which alters the price levels, creates the possibility of bundle prices, and creates winners and losers in the population. Partial convergence (e.g., a merged provider of telephony and internet services vs. independent sellers of telephony or internet broadband) lowers prices in the less competitive sector, raises them in the more competitive sector and raises the total prices paid by consumers active in both sectors as compared to the counter-factual of no convergence. Full convergence (e.g., multiple firms offering TV and internet bundles) leads to deep discounts for bundle purchases but no reductions in stand alone prices paid by consumers in only one of the converging sectors. The bundle on bundle competition is so fierce that profits for all converging firms are reduced compared to the counter-factual of partial convergence.