4- Firm Concentration Ratio( CRm= Σmi=1 si ).15+.10+.8+.8= .41 or 41%Using the 4 firm concentration ratio, it is hypothesized that this industry is definitely not perfectly competitive but perhaps approaching oligopoly. The low concentration ratio shows that the companies in this industry compete actively with one another. Herfindahl Hirschman Index ( )
Lower Bound:.152 + .102 + .082 +.082 + .072+.072 + .042 = 0.0567Upper Bound:.152 + .102 + .082 + .082 + .072 +. 072 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .042 + .012 = .0728
————————————————-The Lower & Upper Bound of this industry also reaffirms what was analyzed by the 4-firm concentration ratio. With an upper bound of .0728 suggest that the industry of Voice over IP as a unified communication service is lowlyconcentrated. Firms do not have power to push Price over Marginal Cost. ————————————————-
Our test market for this analysis is specifically the UCaaS, the unified communication as a service for businesses, through voice over IP. Voice over Internet Protocol is a telecommunication method in which voice packets are sent in a computer-serviced network such as the Internet. There are 3 types of VoIP service that can be used such as analog telephone adaptor which allows you to connect a phone to your internet connection converting traditional phone lines into digital data transmission;
IP Phones are specialized phones that gets connected directly in your router through an Ethernet port; or Computer-computer communications which replaces the traditional phone with a microphone, speaker and sound card; All three nullify the restrictions surfaced in distance to distance communications. For simplicity of the analysis and to be in harmonization with the secondary data collected, I held these three different types of Voice IP to be constant throughout the whole industry.
A) Geographic Scope:I defined my market globally because this type of service is more relevant to global business to business transactions (B2B) that now use these more efficient methods of communicating as oppose to the traditional method later discussed. The Voice over Internet Protocol, or VoIP, is relatively new in its intangible product life. North America accounts for nearly 80% of this industry although expansions in Europe & Asia are promising. If the geographic scope was nationalized instead of globalized, then you would see increase in the concentration ratio as well as the HHI index due to the amount of accounts in the US, where it was originally adopted.
B) Horizontal Integration:An alternative to VoIP is the traditional landline, which is an analog based device that process signals with variances in amplitude and frequency which has been generally used. Another substitute that one has to consider is the mobile device connection, which is cellular technology based on satellite and radio towers.
C) Vertical IntegrationA complement to this industry would be companies that produce monitors, microphones, web cameras, and routers that enhance your interaction when using Voice IP. All these can be seen as supplements to the interactions in business as well. (E.g. having a videoconference with someone who is across the country.) Other complements are smartphones or other Internet access devices that can support such software.
D) Upstream & Downstream Firms
Upstream firms in this industry are manufactures of products needed for installation and/or maintenance for example Modem suppliers. Differences in competition between modem and cable suppliers that support the connection can explain some of the dissimilarities in profits. In this case there are no downstream firms because what the manufacturer produces goes directly to the firm.
List of References-
Types of VoIP:http://voip.about.com/od/servicesandsolutions/tp/TypesOfVoIPServices.htm