This post is based on my paper for the Workshop on the “Economic Impact of OTT on National Telecommunication/ICTMarkets” held in Geneva, Switzerland on Tuesday, October 1, 2019, at ITUHeadquarters
Introduction-Traditional
vs. digital are they to be treated at par?
Most of us cannot imagine life without
our favourite Over the Top Services (OTTs). We depend upon them to search for
information (Google), shop (Amazon, eBay), plan holidays (Airbnb), commute
(Uber, Lyft), keep in touch with our friends (WhatsApp, Facebook), stream music
and video (iTunes, Netflix), improve our career prospects (Linkedin).
While there is no disputing the
tremendous consumer value created by OTTs, the issue of whether, how and how
much to regulate these services remains a difficult one. Regulators must be
cautious about the impact of their actions on innovation and competition. While
issues like security, consumer protection, and taxation would need to be
addressed, regulation of OTTs driven solely by the motivation of leveling the
playing field between traditional and digital modes of service delivery would
be detrimental to consumer welfare. Instead, a fresh look at regulation of the
service concerned regardless of the medium may be the answer. The result of
this exercise could well be an easing of the compliance burden on traditional
brick and mortar firms while introducing more regulation for some digital
firms such as large online platforms.
Self-Regulation
& Cooperation may deter Over-Regulation
Security:
Technology companies should voluntarily self-regulate and collaborate with
governments to prevent online harms. This would reduce the tendency to
over-regulate online services in response to real or perceived harm. A good
example of the need for such cooperation is OTTs in the sphere of social media where
security considerations have caused governments across the world to seek to
regulate at least some of these OTTs at par with traditional means of
communications. It is evident that given their popularity and international
reach, they are susceptible to misuse and thus, governments will continue to
demand interception for security purposes. However, it is also important to
implement checks and balances that safeguard privacy and limit surveillance, at
least at par with those that have existed for interception requests on
traditional modes of communication. Given that OTTs cut across borders, this is
also an important area for international collaboration.
Misinformation: The problem of fake news and misinformation is a grave one and it is
related to the speed and scale of influence of social media platforms.
Traditionally digital platforms have been treated as intermediaries with
limited liability, but off late governments across the world have begun to
consider regulation ranging from adoption of
self-regulation by intermediaries/platforms to regulatory enforcement of a code
of ethics (UK), to imposing liability to screen out harmful content (UK, India[1])
are being examined[2]. It is
being considered if new regulators need to be set up for this purpose. These
bodies would also receive and settle consumer disputes and enforce
accountability measures.
Technology itself can solve unique
problems faced in relation to OTTs. India is WhatsApp’s biggest market. The
Indian government has worked along with the firm to handle the menace of fake
news or misinformation by limiting the number of forwards and displaying
prominently the fact that the message is not original but forwarded. Further,
consumers can check the veracity of information with the help of a tip line
number.[3]
Hence if digital technology firms providing OTTs cooperate with regulators and
governments to find innovative solutions to address consumer protection issues,
governments are less likely to overregulate.
Consent
is overrated
Privacy and data protection are important
concerns. Incidents of mining and misuse of sensitive consumer information have
demonstrated equally the need for a sound accountability framework that digital
firms must be held responsible to, as also, the acute need to create consumer
awareness. International consensus on standards of data protection such as
simplicity and clarity of consent is critical. Nations across the world are
putting in place data protection frameworks, many of which lay emphasis on
consent. However, consent, as it exists today, is complicated and asking a
consumer to read/understand long agreements can be a meaningless exercise. There
is a need to simplify and standardize disclosures to create greater
transparency in use of personal data. Further, reducing the compliance burden for
cross border OTTs also demands that international data protection regimes have
some degree of harmonization. This is another important area for international
consensus and collaboration.
Competition-Imbalance
of Market Power
Competition authorities are already seized of the complexity of trying to apply traditional competition law tools to digital
markets. Clearly, when services are offered free, the examination of
anti-competitive behavior arising out of market power must shift focus from
pricing to other measures of market power including how much personal data is
collected as a part of the transaction/contract with consumers. It is important to appreciate the imbalance of
power between the supplier of digital services and its individual consumer. Economies
of scale, network effects and lack of interoperability of platforms also call
to question the countervailing power of substitutes. Thus, if a consumer does
not like the fact that her personal data is collected for advertising can she
switch from a prominent social media platform when almost everybody in her social
circle uses that platform? Consumer awareness is necessary but not sufficient,
as individual consumers do not wield sufficient bargaining power in such
situations. Competition authorities and e-commerce regulators must also address
B2B (business to business) malpractices. These include preferential treatment to
in-house brands/services vis-à-vis third-party entities, and a variety of
anti-competitive conduct ranging from tying and bundling, to exorbitant
commissions for access to popular platforms.
New disruptive models of service delivery
should not be regulated merely because they threaten an existing model, because
such innovation and competition serve consumer interest. The OTT economy
thrives on a business model that has no brick and mortar marketplaces, no
physical records, less human labour, greater outsourcing and contracting. However, when market power leads to consumer harm
such as discriminatory pricing, anti-competitive conduct, counterfeiting,
breaches of privacy, etc., regulators must step in. India, through its draft e-commerce policy, is
contemplating rules to ensure competition on online retail platforms as well as
the protection of consumers using these platforms including anti-counterfeiting
measures and steps to ensure the authenticity of ratings and reviews and better consumer
redress.[4]
Should
Regulation Lighten up to Attract Compliance
Interestingly, it can also be argued that if
Governments were to design newer models of regulation that are light touch, flexible
and recognize the scale and quantity of market impact of an OTT player, they
may encourage more OTT players to conform to regulation. This would apply to
various compliances such as licensing and taxation. In its National Digital
Communications Policy[5],
India has recognized the need for greater investment in digital communications
and its positive multiplier impact on GDP growth as well as the need to
rationalize levies on telecom service providers as one of the means to
incentivize investment. The Department of Telecom has also recently approved
more flexibility in the regulation of mobile virtual network operators[6].
It could be argued that OTT players may be more willing to submit, rather than
resist if regulation regimes were less onerous. It could also be considered whether the
threshold for imposition of regulation on a service provider depended on market
impact measured by market share regardless of the medium through which it
operates. This would protect innovation by exempting startups/smaller firms
while ensuring a level playing field between online and offline models. Why
should a small taxi service or a small hotel chain have to bear different
regulatory burdens compared with a large digital platform offering similar
services? Singapore’s third-party taxi booking services Act[7]
is one such example of light-touch regulation with a graded approach related to the size of business. Such an approach acknowledges the cost of regulation and that
over-regulation of small firms can have a detrimental effect on innovation,
both offline and online.
The Europeans Union’s new Electronic
Communication Code seeks to regulate certain categories of interpersonal
services as Electronic Communication Services. This would encompass popular OTT
services. The Indian telecom regulator too has issued a consultation paper on
regulation of OTTs which inter alia asks if certain need to be regulated at par
with licensed telecom service providers. The consultation process shall duly
consider views expressed by various stakeholders.[8]
Conclusion
Ultimately, the answer lies in striking the
right balance and international cooperation and capacity building can assist
regulators across the world to find the golden mean.
[2] Disinformation and
‘Fake News’: Final Report House of Commons Digital, Culture, Media and Sport
Committee, Eighth Report of Session 2017–19, February 14, 2019
[3] https://economictimes.indiatimes.com/news/elections/lok-sabha/india/whatsapp-finally-has-way-to-handle-fake-news-during-elections/articleshow/68684237.cms?from=mdr
[5] http://dot.gov.in/sites/default/files/EnglishPolicy-NDCP.pdf
[8] https://main.trai.gov.in/consultation-paper-regulatory-framework-over-top-ott-communication-services
