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#RegulatingCode IEEE SIIT conference 24092013

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#RegulatingCode IEEE SIIT conference 24092013

#RegulatingCode IEEE SIIT conference 24092013

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  • 1. Interoperability as a Standard-based ICT Competition Remedy Dr Ian Brown (Oxford) and Prof. Dr Chris Marsden (Sussex) IEEE SIIT 24 September 2013
  • 2. Standards-based interoperability framework  We assess regulatory intervention ◦ according to the code solutions used.  Standards-based solutions involve both ◦ competition analysis and ◦ interoperability requirements ◦ in strategic communications sectors.  We conclude that such standards frameworks are urgently needed ◦ to enable citizens to make most effective use of the opportunities offered by ICTs
  • 3. We analyse the regulatory shaping of ―code‖ standards  Technological environment of Internet  comprising hardware, software and their interactions,  notably in the protocols and standards used to achieve interoperability  to achieve more economically efficient and socially just regulation.  Acknowledging that ―openness‖ in standards is controversial ◦ Kretchmer (2008) Open Standards Requirements
  • 4. History of competition policy for open technology standards  Long predates the Internet (Kahin and Abbate 1995)  Governments see success of open standards as ◦ solutions for the well-known entrenchment of ◦ dominant Internet commercial actors using network effects ◦ (Pitofsky 1998; Lemley and McGowan 1998).  Evidence of extensive network effects and  innovation that can rapidly tip markets ◦ Bar/Borrus/Steinberg 1995; Cowie/Marsden 1999  focussed policymakers‘ attention on interoperability  solution to emerging competition & innovation problems ◦ (EC 1997, De Nardis ed. 2011, van Schewick 2011)
  • 5. Many de facto standards created outside formal SSOs  Producers and consumers coalesce around a dominant product or service, ◦ E.g. Windows OS, Intel microproc architecture  Problems of interoperability and refusal to licence by the de facto standards setters, ◦ heavily enmeshed and interdependent environment of computer software and hardware.  De facto standards setters leverage dominance into other areas (Coates 2011)
  • 6. Regulatory constraints created Internet innovation in 1980-90s  Cannon (2003): fundamental regulation  imposed on U.S. telecoms firms in 1980s ◦ open network architecture (ONA) ◦ 1985 Computer III inquiry  U.S. Federal Communications Commission (FCC).  (Computer II and III inquiries refer to investigations by the FCC into the regulation of data transfer and the conditions necessary to achieve an increasingly competitive market for that data.)  European equivalent amounted to ◦ interoperability plus ◦ physical interconnection between networks  (Coates 2011)
  • 7. Microsoft lessons?  Microsoft crushed Netscape ◦ moment of ―Schumpeterian emergency‖  (Bresnahan, Greenstein, and Hendersen 2011)  Mehra 2011: innovative upstarts outwit clumsier behemoths? ◦ Android/Apple v. Windows Mobile
  • 8. Interoperability was solution imposed – or refuted  Microsoft competition litigation, ◦ beginning with U.S. antitrust investigation in 1991 prior to the dawn of mass Internet adoption,  enforced interoperability and application programming interface (API) disclosure,  Intel settling similar investigation into interoperability and anticompetitive practices.  Interoperability adapted by the complainants in ◦ Google and Facebook investigations EC 2010 (IP/10/1624) ◦ Apple‘s iTunes price discrimination settlement EC in 2007–2008 (IP/08/22) ◦ preliminary antitrust investigation into Apple‘s App Store policies (IP/10/1175).
  • 9. Law and Code; Code and Law  Interoperability is not a panacea or magic bullet in all cases ◦ Understanding protocols/standards ◦ as well as legal regulation,  leads to a better understanding of how ◦ regulation can shape ―better‖ standards ◦ support interoperability and competition ◦ Where required? ◦ Lessig 1999/2006, Zittrain 2008
  • 10. Regulating Code Good Governance and Better Regulation in the Information Age (MIT Press) @IanBrownOII @ChrisTMarsden #RegulatingCode
  • 11. Empirical investigation  Five case studies and one ‗prior art‘ (encryption, anonymity, security) ◦ Multi-year empirical investigation ◦ Builds on various EC/other studies including  ‗Self-regulation.info‘ (2001-4), ‗Co-regulation‘ (2006-8), ‗Towards a Future Internet‘ (2008-10), ‗Privacy Value Networks‘ (2008-11), ‗Network neutrality‘ (2007-10) ‗Internet science‘ (2012-15)  Reassesses prior art in view of ‗hard cases‘ ◦ Topics with no organised regulation/self-regulation ◦ Due to lack of consensus over solutions ◦ Clash between market outcomes and human rights
  • 12. Prosumers not super-users  Web 2.0 and related tools make for active users, not passive consumers  US administrative & academic arguments ◦ self-regulation may work for geeks, ◦ but what about the other 99%?  European regulatory space ◦ more fertile ground to explore prosumerism ◦ as both a market-based and ◦ citizen-oriented regulatory tool
  • 13. Government and market failure  Industry capture of regulators & legislators  Incumbents introduce new barriers to entry  Continued exclusion of wider civil society ◦ tenuous chain of accountability of participants ◦ to voters, shareholders and NGO stakeholders. ◦ effectiveness, accountability and legitimacy of these groups in representing the public interest?
  • 14. EC Responses to Problems  Better open standards procurement?  Decision No 922/2009/EC on interoperability solutions for European public administrations (ISA)  Better multistakeholder standard setting?  Multi Stakeholder Platform ◦ Commission Decision OJ C 349, 30.11.2011, p. 4  Recognised in EC Regulation (2013) on European standardisation, ◦ amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/2 2/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC and repealing Decision 87/95/EEC and Decision No 1673/2006/EC  Reinforces ICT standardisation efforts from Framework Directive 2002/21/EC
  • 15. Towards interoperability as prosumer law  Solution for prosumers & competition ◦ enhance competitive production of public goods ◦ innovation, public safety, and fundamental rights  Key aspects: ◦ Communications not competition policy ◦ Ex ante intervention (ex post supplements) ◦ Interoperability (incl. FRAND) ◦ Fair and reasonable defined by govt procurement  Not detailed rate of return regulation  Note that IT software leaders make supra-normal returns ◦ Detailed software interoperability,  not the general description offered by Gasser/Palfrey 2012  Specifics in Gasser (2007)
  • 16. What regulation teaches about code  Ex ante + ex post intervention  Interoperability ◦ Procurement policy + regulation/competition  A biased policy towards open code – ◦ Data open to mash-ups (government) ◦ Systems interoperable (procurement) ◦ Use of alternatives to market leader (e.g. Linux)  Via competition remedies and sponsorship
  • 17. Information regulation precedent  Must-carry/must-offer obligations, ◦ imposed on many market actors, ◦ including obliged to offer FRAND terms  (common carriers, broadband access providers, cable broadcasters, electronic program guides);  Interconnection requirements on telcos, ◦ especially those with dominance— ◦ And AOL/Time Warner merger requirement for instant messaging interoperability  Application programming interfaces (API) disclosure requirements, ◦ placed on Microsoft by EC upheld by ECJ
  • 18. EC Mandated Browser Choice  2011: MSFT failed to allow browser choice by default in Windows 7 ◦ fined €561m March 2013, ◦ previously fined €497m 2007 €860m 2012.  Browser ―error‖ expensive line of code
  • 19. Kroes‘ promise post-Microsoft  Will ―seriously explore all options to ensure that significant market players cannot just choose to deny interoperability.  ―The Commission should not need to run an epic antitrust case every time software lacks interoperability.‖
  • 20. Euro-Interoperability Framework  Response to multi-€bn competition cases: ◦ Microsoft saga (to 2009), Intel (2009), Apple (2010), Rambus (2009) ◦ Google (2013?) perhaps Facebook.... ◦ Coates (2011: Chapters 5-6)  Announced by DG Comp (CONNECT) Commissioner Kroes 2009-2010  Bias in favour of interoperability in policy  Concerns are broader than competition ◦ Include privacy, IPR, security, fundamental rights
  • 21. Economics and Human Rights  Open data, open code, and human rights  Blizzard of Internet governance principles 2011 ◦ Law/economics, or human rights, do not translate ◦ OECD/EC vs. UNHCR/OSCE/Council of Europe  This apparent dialogue of the deaf ◦ competition policy & corporate governance problem  Urgent task: dialogue between discrete expert fields ◦ ICT growth driver and transformative technology ◦ transformative role in communication and dialogue  ‗arms trade‘ in censorship technology; Twitter ‗revolution‘ (sic)
  • 22. EC Regulation (2013) Recital 41  ―It is essential for the development of European standardisation to  continue fostering and encouraging the active participation of European organisations ◦ representing SMEs, consumers and environmental and social interests. ◦ Such organisations pursue an aim of general European interest
  • 23. Article 5.1  European standardisation organisations  shall encourage and facilitate  appropriate representation & effective participation  of all relevant stakeholders,  including SMEs, consumer organisations and environmental and social stakeholders ◦ in their standardisation activities.  They shall in particular encourage and facilitate such representation and participation through the European stakeholder organisations receiving Union financing
  • 24. Developing study of code regulation  Similarities and cross-over with ◦ complexity science ◦ network science ◦ web science/graph theory  Match Internet regulation to complexity theory  Longstaff (2003), Cherry (2008), Schneider/Bauer (2007)  Network science fusion of scientific/fundamental elements from various components  Internet Science? EC Network of Excellence
  • 25. Many Research Questions?  Book published 22 March 2013  ‗Regulating Code‘ in proceedings of ICIS, April 2013  ‗Prosumer law‘ paper for EuroCPR (March version now on SSRN)  ‗Interoperability as a Code-Based Competition Remedy‘ in Proceedings of IEEE SIIT  Comments welcome