Speech: Alex Chisholm speaks about online platform regulation.

M2 PRESSWIRE-October 27, 2015-: Speech: Alex Chisholm speaks about online platform regulation



Introduction and summary

I am most grateful for the invitation from Germany's Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway (BNetZa) to renew contact with old friends at the Body of European Regulators of Electronic Communications (BEREC), and the opportunity to renew mental engagement with the tricky regulatory issues posed by the evolving digital communications market. I am especially pleased to have the chance to tackle this precise topic - 'Platform regulation - antitrust law versus sector-specific legislation' - speaking as it does to both my current role as head of a competition authority, and my previous one as a telecoms regulator. Indeed when I received the invitation I did wonder whether the Bundesnetzagentur was showing an unexpectedly masochistic streak: given my new responsibilities, might I not argue that ex post competition is where it's 'at' today, and ex ante sector regulation should be retired from the scene?

Rest assured, there is no need for Annegret Groebel to put on the hair shirt, nor for President Jochen Herman to bring out his funeral suit. Because in fact we do not face a binary choice between antitrust and sectoral regulation. Indeed telecoms regulation has at its heart the concept from antitrust of recognising dominance, or 'significant market power', and then tackling this with remedies that aim to replicate the effects of competition - and wherever possible provide the conditions for competition. Notwithstanding all the advances in electronic communications, there remain natural monopolies and externalities such as interoperability, that merit continuing ex ante regulation. So antitrust law and sectoral regulation must work in unison.

But both need to recognise the nature of the epoch we are in and change accordingly. It seems appropriate here in Bonn to remember the work of Joseph Schumpeter, Professor at the university here during the late 1920s. Schumpeter showed that great historical waves of technological innovation clump together - canals, steam, steel and electricity, mass production and now - though he died too early to see it himself - Information Technology. In each epoch, the rules of the economy tend to be best adapted to the wave that has passed, not the wave that is breaking. And it is the breaking wave that will bring with it utterly new benefits to humanity - all the way from Big Data methods of improving public health through epidemic detection to cat videos - while, of course, also presenting us with risks that have never been faced before.

Today, as regulators, we have the responsibility but also the great historical privilege of playing an influential role in the deployment throughout the economy of the latest of these defining technological eras. As regulators, we must try to minimise the inevitable mismatch between how we've done things before and the opportunities and risks of the new. My goal today will be to describe how both antitrust and telecoms regulation ought to change, and why I believe this period requires more ex post and less ex ante regulation.

Overall I will focus on 3 general points:

First, blanket solutions should be avoided. Instead an evidence-based assessment of potential adverse effects of specific industry features or practices should be carried out before either ex ante regulatory or ex post enforcement tools are deployed. In either case this should be closely targeted to the specific harm identified, and every care given to avoid disproportionate actions and unwelcome side-effects. In that respect, online platforms and the digital economy do not differ from any other sector: there is no need to reinvent the regulatory wheel.

Secondly, the significant risks associated with premature, broad-brush ex ante legislation or rule-making point towards a need to shift away from sector-specific regulation to ex post antitrust enforcement, which is better adapted to the period we're in, with its fast-changing technology and evolving market reactions.

Thirdly, as regulators, policymakers, businesses and consumers, we all need to adapt our practices to harvest the benefits of the new while containing its costs and risks. 1. Blanket solutions a poor fit for the still-evolving web The diversity of 'online platforms'

So let's begin this assessment by considering online platforms in broad perspective.

First, is the size of the so-called digital giants a problem in itself? From a competition perspective, the answer is no. Success in winning customers is not cause for suspicion or condemnation. And size is not equivalent to dominance. Where there is dominance, such companies must show especial care not to abuse that position, and must expect especially watchful scrutiny by the authorities. But dominance itself is not illegal.

The second broad question: is there sufficient commonality in the evolving ecosystem of the web for us to judge that certain business models ought to be subject to regulation or enforcement action? I challenge you to tell me what characteristics the following online models uniquely share: communications and social media platforms; operating systems and app stores; audiovisual and music platforms; e-commerce platforms; content platforms (itself a diverse group); search engines; payment systems; sharing platforms ... and the list could go on (1 - see footnotes at the end).

Different platform characteristics will give rise to different issues, and regulation must remain case-specific if we are to minimise the risk of applying the wrong rule to a novel situation.

To give an example: if a platform is processing consumer data, one would want to be confident that it is respecting its privacy obligations to consumers. One might also need to be watchful in case it acquired an unmatchable advantage over rivals through its exclusive control over such data. But not all platforms process consumer data; and most of those that do, do not have market power; and of these a smaller group still would have the ability and incentive to abuse that power. So the analysis is situation specific.

Given the significant differences between the business models of the main digital platforms, one must be sceptical a priori about the extent to which any type of broad-brush legislation or economic regulation could provide satisfactory outcomes across such a wide variety of different situations. When the wave of innovation has stopped breaking, perhaps. But we are far from that today.

This innate scepticism is reinforced for me by recent work our authority has undertaken in digital markets. No 'digital one-size-fits-all' - the need for an...

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