Free-ridership in the standards-setting process: the case of 10BaseT

Abstract

In many cases, standards have public goods attributes. As a result it is important to consider how the development costs are provided. It is well known that public goods, due to their nonexclusionary nature, are subject to free riders. We consider free-ridership in standardization in general, and examine the case of one standard, IEEE 802.3i (10BaseT) in particular. We show that free-ridership existed in the development of the 10BaseT standard, and in the subsequent product market, by specifying the criteria for the existence of free-ridership and by providing the necessary data to show that such an issue actually exists. We discuss the consequences of free-ridership and consider the implications for the standards development process in general.