Wednesday, January 31, 2018

Vivan Sharan's Oped on "Data economy: Well-heeled e-platforms", with Arvind Gupta, for Economic Times, 01 November 2017

From languishing at the bottom of world data consumption per capita rankings, India is now among the top five countries with over 450 million Internet users. This rapid digitalisation has led to the creation of new online services that are changing the way people search for information, interact with each other, pay for things and consume content.
Simultaneously, the convergence of offline business with online technologies, and the horizontal integration within online markets has led to the stacking of services on top of each other, and the creation of large online ‘platforms’. Such platforms are changing traditional assumptions about market dominance and abuse, both concepts at the heart of competition law.
For instance, previous discussions of dominance considered the question of abuse of ‘relevant markets’ as away of helping regulators assess when rules regarding fair competition were violated. However, platforms often integrate across a number of markets, making such comparisons difficult. India must address the actualisation of ‘winner takes all’ online markets, lest concentrated markets compromise generation of jobs, monetisation of intellectual properties and unfettered innovation — all prerequisites to becoming a successful data economy. In doing so, a delicate balance must be struck between ex-ante and ex-post regulations. Ex-ante regulations (such as license conditions) can harm all of these objectives by limiting the degrees of freedom that entrepreneurs have to innovate. So, governments have adopted a range of approaches to regulating new markets and services such as taxi aggregation and cryptocurrencies.
Conversely, over-dependence on ex-post regulation, such as competition law, can result in the establishment of ‘facts on the ground’ that favour firms that have established near monopoly positions. However, by the time policymakers and regulators understand the implications of a new platform, the platform owner is likely to have built powerful entry barriers in many online markets.
Warning signs of the consequences of discriminatory behaviour by online platforms are already palpable. If a new delivery startup is to be introduced, it would almost certainly have to negotiate service agreements with mapping services offered by one of the large platforms.
Moreover, increasing numbers of acquisitions and investments by large platforms are continually expanding the scope of their business interests. This bears resemblance to the vertical integration between telecom companies and Internet-based services that continues to roil the discourse on network neutrality. Network neutrality is the principle that similar classes of data must move impartially on the Internet, no matter the destination or the source.
The consequent limitation of gatekeeping abilities of network operators —telcos in India’s case — is the desired outcome of such a principles-based framework.
The exemplary role of the Indian telecom regulator in aiming to establish a robust network neutrality framework has been commended globally. India should take the lead in establishing complementary norms for ‘platform neutrality’ to ensure that online markets, like networks, remain fair.
One way of doing this could be through a light-touch framework analogous to the ‘Most Favoured Nations’ principle of the WTO. Signatories to the WTO can’t normally discriminate between different trading partners. Similarly, a framework for platform neutrality could ensure that online platforms do not discriminate in the levels of technical access or pricing offered to competing services — thereby maintaining their own role as intermediaries.
This would also ensure that both consumers and innovators benefit from a balanced paradigm, in which the scope for cartelisation is minimised, and possibilities of innovation-led disruptions maximised.
(Gupta is Head, Digital India Foundation. Sharan is a technology policy expert)

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