Tying Behavior Research With Network Effects And Switching Cost

Triple-play can bring more markets for communication companies and broadcasting companies, can bring more high quality and cheap information service for consumers, can also avoid repeated construction, reduce the cost of the management, and improve the level of resource utilization. At the same time, triple-play can also bring difficult problems for the regulation of VOIP, IPTV and so on value added service.First of all, in the paper, we review regulation system of China telecommunication industry, internet industry and broadcast and television industry, and analyse existing problems of communication industry and radio&television industry. For example, the lack of related legislation, department protection seriously, multiple role conflict, operating system differences, multiple management, decentralized responsibility and so on.Secondly, according to the industrial characteristics and system features of telecommunication industry, internet industry and broadcast and television industry, the paper simplifies model,abstracts network effect, switching cost variable, and makes the variable put into Hotelling model. From the perspective of market access and some certain assumptions, the paper distinguishes the model into broadcasting firm into communication industry, communication firm into broadcasting industry and broadcasting and communication firm mutual access. According to tying behavior, the three models can evolve into eight models.Thirdly, the paper obtains some important conclutions.First and foremost, the paper thinks broadcasting firm into communication industry, communication firm into broadcasting industry can not be suitable for strategy of China’s triple-play. Therefore, China can not adopt the strategy to promote triple-play. China should adopt the pattern of broadcasting and communication firm mutual access. What’s more, according to the conclution of model, the paper shows when broadcasting and communication firm enter mutually and the two firms adopt tying behavior, the equilibrium price of communication firm is greater than the equilibrium price of broadcasting firm and the market share of communication firm is greater than the market share of broadcasting firm.Therefore, tying behavior conforms to the Chicago school and may produce the exclusion and resitrict competition. Since producer surplus of tying behavior can be less than producer surplus of no tying behavior, broadcasting and communication firm will not adopt tying behavior. That is to say,triple-play times doesn’t exist the debate whether tying behavior of firm may produce the exclusion and resitrict competition between Chicago school and post Chicago school.Lastly,when broadcasting and communication firm enter mutually, and network effects and switching costs are greater enough, social welfare of no tying behavior can be greater than social welfare of tying behavior.Finally, according to the above conclutions, the paper puts forward to some suggestions about antitrust and regulation policies. For example, loosening regulation of entering into broadcasting industry and communication industry, loosening the regulation of tying behavior of firms, and speeding up the construction triple-play’s law.