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Social Networks, Dominance And Interoperability

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Social Networks, Dominance And Interoperability

  1. 1. Social Utilities, Dominance and Interoperability: a Modest Proposal Ian Brown and Chris Marsden, GikIII 24 September 2008 Oxford
  2. 2. Social utility competition concerns?
  3. 3. Whither market failure? <ul><li>dominance of social utilities </li></ul><ul><ul><li>(SNS, IM clients etc) </li></ul></ul><ul><li>in various national markets </li></ul><ul><li>strong network effects </li></ul><ul><li>high switching costs </li></ul>
  4. 4. SNS market penetration Source: Le Monde, 15/5/08
  5. 5. Mergers and acquisitions <ul><li>Dominant content providers in Internet or other content markets: </li></ul><ul><ul><li>MySpace/News Corp.; </li></ul></ul><ul><ul><li>Orkut-Google-DoubleClick; </li></ul></ul><ul><ul><li>Amazon and Microsoft investments </li></ul></ul>
  6. 6. Vertical integration and SNS <ul><li>The behemoth SNS: </li></ul><ul><li>Can influence negotiation with ISPs </li></ul><ul><li>Absent net neutrality regulation </li></ul><ul><li>Leading to a vertical value chain of dominance </li></ul><ul><li>BT and MySpace and News Corp </li></ul><ul><li>Orange and Google and Orkut </li></ul><ul><li>DTelekom and AOL and Facebook </li></ul>
  7. 7. Hypothesis <ul><li>OpenSocial and related efforts may reduce switching costs, </li></ul><ul><li>but network effects will still act as a barrier to entry </li></ul><ul><li>vertical integration will limit consumer choice </li></ul>
  8. 8. Proposal <ul><li>Competition authorities should: </li></ul><ul><li>impose ex ante interoperability requirements </li></ul><ul><li>upon dominant social utilities </li></ul><ul><li>between vertically integrated value chains </li></ul><ul><li>to minimise network barriers </li></ul>
  9. 9. Three models <ul><li>Model 1: Must-carry obligations </li></ul><ul><li>on broadcasters and Electronic Programme Guides </li></ul><ul><li>Model 2: API disclosure requirements </li></ul><ul><li>on Microsoft from DoJ and EC rulings </li></ul><ul><li>Model 3: Interconnect requirements </li></ul><ul><li>on telcos, especially with SMP </li></ul>
  10. 10. Recommendation <ul><li>API disclosure requirements are necessary but not sufficient - ability to program platform apps is of little use if they cannot run </li></ul><ul><li>Must-carry obligations enable one platform to “break in” to another (eg Flickr app on Facebook) </li></ul><ul><li>Interconnect reqts most likely to lead to seamless user experience that will create real competition </li></ul>

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