Interoperability among social networks and OTT providers
Several regulators and their expert panels [1] [2] [3] [4] have recently made a case for interoperability among social networks and over-the-top applications. Calls for regulation in this regard are rooted in the notion that interoperability would increase competition among social networks, similar to interconnection regulation and its use to control natural monopolies and facilitate the entry of new operators.
Proposed versions of interoperability in the digital era differ from one regulator to another, manifesting in policy or recommendations as one or more of the following
- Data Portability – The ability to export personal data in a common machine-readable format.
- Protocol Interoperability – The existence of common standards under which data can be shared between platforms
- Data Interoperability – The existence of so-called privileged APIs (Application Programming Interfaces) for competitors. Privileged APIs allow a selected group of other networks access to (some of) a network’s data that cannot be accessed via public APIs.
- Full Protocol Interoperability – The integration of all services of a network with others
If mandated by policy, a best-case scenario may manifest as simple data portability requirements that many social networks (e.g. Facebook Archive, Google Takeout etc) already offer to users, or an extreme mandate to ensure full protocol interoperability between two OTT providers. The extreme scenario imposes costs neither party may eventually find desirable and certainly does not guarantee increased competition among OTT providers. The socio-economic impact of the imposition of interoperability mandates is hard to pin down, given that these would vary significantly depending on the version/(s) of interoperability eventually adopted by regulators.
Techno-economic considerations
The notion that network effects dominate the market for OTT services is often used to justify ex-ante regulatory intervention in the form of interoperability mandates. This is how the argument usually goes – “X is too big, and since many users are on its network, there would be little if any incentive for users to join competing platforms. Interconnection between these platforms would address these network effects, and force one platform to exchange information with another to the ultimate benefit of customers.”
What proponents of the above fail to account for, is that these alleged network effects were far more prevalent when Facebook successfully supplanted wealthy & dominant opponents such as Orkut, Myspace, hi5, and others. At the same time, current alternatives to WhatsApp (e.g. Telegram, Viber) perform better in certain nations. We also find instances of incumbents copying the features of smaller platforms [5]. Why would an organization with a perceived “monopoly” control over the market scramble to improve its offering, if not for a desire to respond to competition?
A free & open internet allows for the emergence of better products & services that, if deemed to be of value, are favored by users. Any measures that limit internet freedoms (especially with regard to forced interoperability) must be evaluated within the backdrop of a free & open internet that displays no signs of market failure, as well as the impact such mandates would have on start-ups and innovators.
Interoperability mandates also accompany financial burdens that may fit the appetite of incumbents but may well be onerous for start-ups and entrepreneurs. It is however important to note that much of the proposed regulation in this regard carves out an exception and calls for mandates to be applied exclusively on large networks that have a perceived monopoly.
Technical bottlenecks and business models may present further challenges, especially with respect to full protocol interoperability. Such mandates may require start-ups to significantly scale operations and associated costs ahead of schedule, for e.g. In the case of maximum upload sizes of media files permitted on two distinct messaging platforms. It is reasonable to expect lower limits for file transfers and sharing on platforms managed by start-ups in comparison to incumbents.
Given that the public internet signals no signs of market failure, interoperability mandates on social networks and OTT may well be deemed as solutions in search of a problem. The alleged concern that interoperability would allow innovators & startups to challenge & compete effectively with incumbents is entirely theoretical, with little guarantee that said interoperability would address any competitive concerns.
A strengthening of competition laws to account for the intricacies of digital business models and the nature of the internet would serve end consumers and industry as a better more efficient alternative to the kind of prescriptive mandates that are currently known to accompany the rhetoric over interoperability mandates.
References
[1] Telecommunications Regulatory Authority of India (2018). Consultation Paper on Regulatory Framework for Over-The-Top (OTT) communication Services, available at https://main.trai.gov.in/sites/default/files/CPOTT12112018.pdf
[2] Crémer, J., De Montjoye, Y.-A., & Schweitzer, H. (2019). Competition policy for the digital era, available at https://op.europa.eu/en/publication-detail/-/publication/21dc175c-7b76-11e9-9f05-01aa75ed71a1/language-en
[3] Furman, J., Coyle, D., Fletcher, A., & McAules, D. (2019). Unlocking Digital Competition: Report of the Digital Competition Expert Panel, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf
[4] Morton, F., Nierenberg, T., Bouvier, P., & Al., E. (2019). Report: Committee for the Study of Digital Platforms-Market Structure and Antitrust Subcommittee. Stigler Center for the Study of the Economy and the State, available at https://www.publicknowledge.org/wp-content/uploads/2019/09/Stigler-Committee-on-Digital-Platforms-Final-Report.pdf
[5] Constine, J., 2017. Instagram on copying Snapchat: “This is the way the tech industry works”. [Online] Available at: https://techcrunch.com/2017/05/16/to-clone-or-not-to-clone/
