#RegulatingCode IEEE SIIT conference 24092013

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

9. 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).

10. 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

11. Regulating Code
Good Governance and Better Regulation in
the Information Age (MIT Press)
@IanBrownOII
@ChrisTMarsden
#RegulatingCode

12. 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

13. 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

14. 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?

15. 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

16. 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)

17. 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

18. 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

19. 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

20. 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.‖

21. 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

22. 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)

23. 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

24. 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

25. 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

26. 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