The ICT power game and the privacy trigger

As the saying goes: “Rome wasn’t built in a day”. We could now add: Twitter was. The world-famous microblogging application – which has even been seen by some as a trigger of major geopolitical changes such as the “Arab Spring” – came to life in 2007. It happened at a “South by Southwest” conference, following its conception at a “hackathon” the year before. Today, developers and programmers pull together commercially viable products in one or two days. These fast-paced, disruptive dynamics are increasingly dominating markets and this starts being reflected in the EU political discourse. Is this likely to be translated into a shift of regulatory pressure from “old” to “new” players? Which role are privacy concerns playing?

New kids on the block

To offer a possible response, we first need to look at the various definitions of the Information and Communications Technology (ICT) sector: they cover a wide variety of activities ranging from electronic communications to devices or equipment and applications and services. First, things went from analogue to digital: forget the old electronic signals world, now it is all about bytes. Second, the now digitized world became interconnected thanks to the internet, and to an ever increasing ubiquitous access to networks.

In the “old” world, the main gatekeeper was the network operator. Owning and running the cables, as well as the copper or fiber network put operators in a unique position that also allowed them to be at the edge of service provision.

Today, a series of new actors – mostly content and application providers – is delivering ground-breaking services on top of these networks. Think of how Google has powerfully reorganized access to online information. Think of how Facebook is re-shaping private communications via the online social network concept. Think of how a myriad of “App” providers is effectively competing with providers of electronic communications as well as software providers. Just to mention two: WhatsApp competes with SMS, while the voice-navigation system Siri has effectively substituted the traditional text-to-speech software.

From this sketch of today’s ICT world, it becomes clear that there are new kids on the block. What is more, while some of the gate-keeping characteristics of the traditional players will not go away, there are new bottlenecks arising in the value-chain. This cannot go unnoticed and it is already spurring an EU-wide debate on whether – and how – the new players should be regulated.

The regulatory conundrum

While the question of how to regulate or not to regulate an industry is always a challenging one, in the case of ICT things appear to be even more complex, mainly for two reasons.

First, the pace of change in these markets is truly impressive and disruption is always around the corner. Observers are convinced that Twitter-like situations – think of Airbnb or Uber – will become “the norm as exponentially thinking start-ups replace linear businesses with unprecedented products and services” (see Hamanidis in Deloitte’s Tech Trends 2014).

Second, understanding ICT in such a fast-moving environment generates profound information asymmetries. One can argue that good policymaking does not necessarily need to rely on deep technical knowledge. However, that becomes crucial when it comes to developing policies on purely technical aspects of ICT. Think of net neutrality. As regulators in Europe and in the US are developing the first net neutrality rules in history, both telecom operators (or some internet players) – on one side of the debate – and neutrality activists – on the other side – are questioning the quality of policies based on radically different technical understandings of the matter. The former say that strict net neutrality rules will degrade the functioning of today’s internet, while the latter say that implementing strict rules is totally feasible. The European Commission as well as the US Federal Communications Commission are caught in a technical conundrum, in which they are trying to regulate – for the first time in history – a fast-moving and highly complex and intricate policy target such as the internet.

Personal data and privacy: a driver of political controversy

What might make the work of EU regulators relatively easier are privacy concerns – and the specific cultural attitude of Europeans with respect to data protection.

In the whole question of whether the new kids on the block should be regulated or not, privacy concerns have opened up a window of opportunity for EU regulators.

Indeed, personal data is regarded as one of the main building blocks of the digital economy. Services such as Google search or Facebook’s social networking are offered “free” to consumers and, at the same time, their business model is also built on the lawful monetization of users’ personal data. While Europeans also enjoy these services, there is both a concern on how one’s personal data is used and an increasing awareness that data becomes a substitute for other forms of payments in the online environment.

EU decision-makers not only are responding to these specific concerns, but are also turning them into a politically valuable asset to push both privacy-related reforms and a wider re-thinking of their digital policies.

Some of the EU top decision makers now find themselves under a pile of digital-related files. As we write, the European Commission, the European Parliament and Member states are busy trying to strike a deal on the much awaited Data Protection Regulation. This bill, strongly opposed by many online companies, will put forward a new set of rules to regulate the use of citizens’ data in the digital age.

At the same time, the new European Commissioner for Competition, Margrethe Vestager, is busy trying to get her arms around the economic value of personal data and how it could impact old and new antitrust cases. Fostered by a 2014 paper of the European Data Protection Supervisor, the debate around the data-driven dominance of some internet players is now higher on the political agenda and will not go away.

In the best tradition of spill-over effects, such concerns are also driving a wider political debate on whether other forms of regulation should be extended to internet companies. Traditional players like telecom operators are today highly regulated in a range of areas – from market structure to retail price regulation. In this context, the larger countries like Germany and France have put forward specific requests and policy papers addressing the need to look at how online platform regulation should evolve.

In a nutshell, the digital regulation front in Europe appears to be quite heated and will become even more so. Market changes, impact on citizens, as well as growing commercial interests, are pushing these topics to the forefront of the political debate. A range of actors, on both sides of the Atlantic, are looking with high interest at the developments. The pace of change, the difficult technical understanding, the economic stakes and vested interests involved will make it difficult for policymakers to take appropriate and meaningful decisions.

Alessandro Gropelli writes here in his personal capacity.