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Standards may be counterproductive.

Anticipatory government standards aimed at improving a country's position in high-technology races may have the opposite effect, suggests Marie Thursby, professor of economics in Purdue University's Krannert School of Management. Setting such standards for newly emerging technologies "can be tricky," she cautions. If done without foresight, they may hurt the country's research and development industries as well as consumers.

She cites the patent race involving high-definition television (HDTV) as an example showing the problems inherent in setting standards before product development is complete. "The Federal Communications Commission issued a regulation that HDTV transmission in the U.S. has to be compatible with existing broadcast channels. This was considered to be a strategic move to improve the position of U.S. firms trying to develop HDTV, because it meant the Japanese MUSE system could not be used in the United States without adaptation. When the standard was announced in 1988, the Japanese MUSE system was in working prototype. In the United States, Zenith was developing its Spectrum Compatible System, but it was only in the theoretical stage of development. The FCC move was designed to buy U.S. firms time in the race to develop HDTV."

This policy was controversial, Thursby explains, because many experts thought its only effect would be to slow down the date at which consumers could benefit from HDTV. They predicted the Japanese would adapt their system and still out-compete American businesses. Recent events may vindicate the FCC in its position. Several U.S. joint ventures, including a Zenith-AT&T project, successfully have developed digitally based systems that are considered superior to the Japanese analog system. In this case, the Japanese may have made a mistake in setting their standard early. The FCC has retained its requirement of retroactive compatibility, but has delayed picking a particular system until adequate testing can be performed.

Thursby says the key to success of the FCC's policy is the flexibility inherent in its action. Research and development is a highly uncertain activity, so that any standards set before successful completion of projects must include the flexibility to switch positions if necessary. By sticking with their early standard, the Japanese may lose any chance for their system to be the U.S. standard.

The determination of standards to promote competitiveness predates HDTV, and the U.S. is not alone in this type of policy. The Japanese set standards in the successful development of their machine-tool industry. Europe never adopted a single color-television standard because individual governments promoted their own to protect the interests of their companies. In the current HDTV race, the European Economic Community is taking a similar position, requiring use of systems developed by a joint venture of European firms.

The apparent importance of standards for high-technology products in the U.S. relates to concern that American firms have lost their competitive edge in developing new products. The U.S. Technology Policy Task Force has recommended their use to "support U.S. industry in technology development." Since 1980, the nation's trade surplus in high-technology products has fallen, and the share of foreign companies in American patent registrations has risen steadily. For example, the U.S. market share in consumer electronics has fallen from 100% in 1970 to less than five percent today.
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Title Annotation:standards for emerging technologies
Publication:USA Today (Magazine)
Date:Aug 1, 1993
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