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Network economics : principles - strategies - competition policy
Knieps G., Springer International Publishing, New York, NY, 2015. 184 pp.  Type: Book (978-3-319116-94-5)
Date Reviewed: Jul 15 2020

Network engineers frequently need to interact with business-oriented departments in their company. To do so effectively, it is necessary to be equipped with at least basic knowledge of economic problems related to the technological field. For instance, being aware of issues such as pricing, externalities, and market power makes it possible for a technology specialist to cooperate and close the gap that sometimes emerges between the engineering and business worlds. For networkers in pursuit of extending their business awareness, this book will be useful.

The book is quite short and can be treated as a concise introduction to the problems mentioned in its title. Overall, the nine chapters, with a small appendix and index terms, encompass only 184 pages. In chapter 1, the author identifies the six basic groups of problems that will be covered: the role of markets (the guiding thread of the whole work), the related costs (chapters 2 and 3), pricing (chapters 4 and 5), network standards (chapter 6), network services in the face of competition (chapter 7), and competition and regulation (chapters 8 and 9).

Chapter 2 focuses on modeling the costs with the application to networks (mainly construction and usage costs). Chapter 3 deals with the very important issue of externalities and considers a specifically network-oriented problem of congestion. Obviously, the focus is negative externalities, where the influence of other players provides the adverse effects. Chapter 4 discusses differentiation in pricing with examples in various network contexts. Chapter 5 presents auction mechanisms and their application in network industries.

Chapter 6 is devoted to compatibility standards, though treated in a different way than a network engineer might be used to (likely focused on notions such as Internet Engineering Task Force (IETF) requests for comments (RFCs), National Institute of Standards and Technology (NIST) special publications (SPs), ITU Telecommunication Standardization Sector (ITU-T) recommendations, and so on). Here, economical concepts are used as the rationale for standardization efforts by dealing with the concepts of goods, utilities, coordination, conflict of interest, and government regulatory obligations. This is an especially inspirational part of the book because it shows a different perspective on the topic, so well known to the average networker. Chapter 7 elaborates on so-called universal services, that is, the ones where the regulation body imposes on the operator the duty to provide the service on a not fully business ground. Chapter 8 covers basic competition and market regulatory issues (along with price regulations and monopoly problems). These issues are extended in the final chapter, “The Positive Theory of Regulation.”

The book is not very easy to follow for people who are not acquainted with calculus. While network engineers typically have a good mathematical background, they may be more accustomed to discrete math; thus, it can be useful to review some problems (such as derivatives) before reading the book. Each chapter contains a few (three or four) simple open questions, and a great advantage of the book is that there are proposed solutions to these questions given at the end. Although there is a lot of modeling, there are no calculation exercises to practice theory understanding. Each chapter includes its own reference list. In this way, readers are encouraged to do their own studies.

The book deals with economic problems shown in the network context but not necessarily in the computer network context, even though this aspect is also present. It is not a drawback that the author’s interests are such that the technological area of information and communications technology (ICT) is not most important for him. However, if readers are interested in extending their understanding of how economical concepts work in a communication network context, they may be more interested in Maillé and Tuffin’s work [1]. On the other hand, this book elaborates on the basic economics in a deeper way. For the reader described at the beginning of this review, I would suggest starting with this book before moving on to Telecommunication network economics.

Reviewer:  Piotr Cholda Review #: CR147016 (2012-0287)
1) Maillé, P.; Tuffin, B. Telecommunication network economics: from theory to applications. Cambridge University Press, Cambridge, UK, 2014.
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