The Rise of Regional Standards Setting Bodies in Digital Radio Technology

Hernan Galperin, Annenberg School of Communications, University of Southern California, and Titus Levi, Annenberg School of Communications, University of Southern California

1/01/2005
(Original Publish Date: 9/28/2002)

This paper examines the economic and political incentives behind the development of domestic standards for DAB in the U.S. and the European Union (EU). We argue that given the local character of radio broadcasting, there are strong incentives for policymakers and domestic technology firms to develop competing standards rather than to seek harmonization, despite the foregone economies of scale in equipment manufacturing and systems development. Numerous studies have demonstrated that political benefits lead to the strategic use of technical standards favoring local firms, particularly in broadcasting. Regional standards setting bodies such as ETSI and the NRSC provide the institutional setting for such strategic maneuvering, partly due to the well-established process failures of international standards setting bodies such as the ITU. In the case of DAB, the Eureka consortium - in which Community authorities play a coordinating role - allowed European systems developers like Thomson to make investments with some assurance that a commercial system would see widespread deployment and adoption through Community legislation. In order to counter this early lead, American policymakers decided to support the development of a domestic system, arguing that the additional spectrum needed to implement the Eureka 147 system in the US would be hard to come by since the suggested frequency bands had military assignments in the US. This prompted the race to develop an American system, which - as in the case of digital TV - eventually resulted in the merger of competing systems into a single system under a new corporate aegis. We find that while the development of the IBOC system provides for a system of rewards that could be seized by American firms and technology developers, the strategic use of standards in digital audio broadcast raises issues of industrial policymaking and possible welfare losses that regulators need to address.