The valley of death for European OTT services? The role of policy and regulation -Martijn POEL - Delft University of Technology - Cord-Cutting Executive Seminar - DigiWorld Summit 2013


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Martijn Poel, Senior Researcher, Delft University of Technology, Technopolis

Martijn Poel is senior researcher and consultant at Technopolis. Fields of expertise include service innovation, innovation-friendly regulation, interactions in the policy mix, evaluation of information society policy and impact assessment of research programmes. He worked in projects for the European Commission (DG Connect, DG ENTR, DG RTD and JRC-IPTS) and the Dutch Ministry of Economic Affairs. From 2009 to 2011, he was chair of the European Communications Policy Research conference (EuroCPR).

November 2013, he will defend his PhD thesis at Delft University of Technology, Faculty of Technology, Policy and Management. Title: The impact of the policy mix on service innovation: the formative and growth phases of the sectoral innovation system for Internet video services in the Netherlands.

Prior to joining Technopolis, Martijn worked at TNO. He received his master’s degree from the University of Amsterdam, Faculty of Social Sciences. Legal courses were taken at the Institute for Information Law (IvIR).

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The valley of death for European OTT services? The role of policy and regulation -Martijn POEL - Delft University of Technology - Cord-Cutting Executive Seminar - DigiWorld Summit 2013

  1. 1. The valley of death for European OTT services? The role of policy and regulation Martijn Poel 20 November 2013, Montpellier Challenge the future 1
  2. 2. Pre-roll Challenge the future 2
  3. 3. Outline • Valley of death • Functions and phases of innovation systems • Deficiencies in innovation systems • The policy mix • Case study on Internet video in the Netherlands (1997-2011) • Conclusion Challenge the future 3
  4. 4. The valley(s) of death • Although innovation is a non-linear process, one can distinguish between: • Fundamental research > applied research > implementation and commercialisation > large-scale production and export • A persistent concern for European policy makers and firms • Often studied in the context of components and goods, e.g. Key Enabling Technologies • Seldom studied in the context of media and other services Challenge the future 4
  5. 5. Functions of innovation systems Knowledge development and diffusion Resource mobilisation Influence on the direction of search Legitimation Entrepreneurial experimentation Market formation Challenge the future 5
  6. 6. Phases of sectoral innovation systems • Across the formative and growth phases, the relevance and the details of the six functions change (Bergek et al., 2008) • From knowledge development and diffusion to legitimation and market formation • From knowledge about technologies to knowledge about largescale production and commercialisation • From experiments to living labs and large-scale demonstrators • From long-term funding of research to short-term funding of implementation and international expansion • Etc. Challenge the future 6
  7. 7. Deficiencies in innovation systems: market failures and system failures Market power Failures in infrastructural provision and investment Information asymmetry Lock-in/path dependency failures Externalities/spillovers Institutional failures Public goods Interaction failures Capabilities failures Challenge the future 7
  8. 8. Deficiencies (problems) can be either increased or decreased by policy and regulation Challenge the future 8
  9. 9. Challenge the future 9
  10. 10. OTT: European actors pushed away from the centre of the value network for media services? • Note that the study focused on Internet video services, with international competition and low switching costs • Whereas the settop-box model provides European actors more opportunities to maintain their clients Challenge the future 10
  11. 11. Challenge the future 11
  12. 12. Formative phase (1997-2006) and growth phase (2007-). The innovation system is getting more international, Internet video services are bundled with other services, and converge with online video services Growth phase, top 10 alters, i.e. actors not interviewed but mentioned 1, Apple, US 6, Hulu, US 2, NPO/NOS, NL 7, KPN, NL 3, Philips, NL 8, Google, US 4, YouTube, US 9, UPC/Chello, NL/US 5, Microsoft, US 10, Facebook, US Challenge the future 12
  13. 13. Two types of market failures hindered functioning of the innovation system Challenge the future 13
  14. 14. All five types of system failures hindered functioning of the innovation system Challenge the future 14
  15. 15. Innovation policies decreased the market failure of information asymmetry (and access to funding) • “The Snelnet pilot was crucial. A lot of things were developed, with a lot of publicity.” (formative phase) • “We are not good at sucking up subsidies. Only when it’s really easy, we participate, for instance the WBSO tax credit scheme.” • ICES-KIS R&D programme: ‘the Dutch FP7’ (relevance for SMEs?) Mixed signals about non-innovation policies, e.g. media policy • “Most probably, other actors in the sector benefited from the initiatives of public broadcasters; the dynamics that public broadcasters created; consumers that got used to video services.” Challenge the future 15
  16. 16. Both innovation policy and regulation impacted on system failures such as interaction failures and institutional failures • “We meet at PICNIC, TEDx and some smaller events that are frequented by the same type of persons. This is also where foreign actors show up; where we are inspired. Technology is coming from abroad.” • “Copyright is killing.” Challenge the future 16
  17. 17. Examples of interaction in the policy mix • While contributing to the function of knowledge development and diffusion, service providers benefited from development programmes (e.g. Pieken in de Delta), support for pilots (e.g. Snelnet and First Mile TV), WBSO and support for networks (e.g. iMMovator) • While contributing to different functions of the innovation system, service providers were hindered by media policy, copyright policy, electronic communications policy, competition policy (‘it all adds up’) Challenge the future 17
  18. 18. Conclusion • Policy matters: the impact of the policy mix on service innovation was substantial in terms of timing, scale, direction • Timing: impact of innovation policies was stronger during the formative phase. Support was reduced ‘halfway the valley’ • Emphasis was on R&D rather than pilots, incubators and export • Persistent regulatory uncertainty/ burdens during both phases, instead of easing the way through the valley (for EU firms) • Interaction in the policy mix. It all adds up Challenge the future 18
  19. 19. Recommendations • Service innovation requires time, money, several iterations and, hence, persistent and coherent innovation policies • Speed up clarification or adaptation of product/market regulation, by policy makers with domain expertise • Stimulate public actors to collaborate with private actors, also for online services that are linked to education, health and transport • The need for policy coordination, not just window dressing, can be underpinned by empirical studies about the policy mix Challenge the future 19
  20. 20. • This is not the Dutch Netflix. I repeat: … • Announced November 2013 • After 2 years of discussions with policy makers, legal experts, competition authority, copyright holders • Public broadcaster (NPO), SBS and RTL • Other broadcasters can join • Paid service Challenge the future 20