The following are the outputs of the real-time captioning taken during the Eleventh Annual Meeting of the Internet Governance Forum (IGF) in Jalisco, Mexico, from 5 to 9 December 2016. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the event, but should not be treated as an authoritative record.
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>> Can you hear me? Does it work?
>> Hello. Hello. Hello. Hello.
>> All right. Good afternoon. Welcome to this workshop on competition in the digital age. Let me introduce myself. I'm Vincenzo Spiezia from the OACD and I'm one of the organizers with Deepak Mishra at World Bank when unfortunately could not be here today. Before I introduce the panelists, let me just say a few words about the background of this workshop. The background is basically, the large, fast increase of a number of new business by research technologies and that provides traditional services in new ways. In particular, you might be familiar with digital platforms like Uber, like Safaricom, like Alibaba. You have two competing, some of offline, traditional enterprises and more of the online enterprise that use the internet and technologies as a way to shape their business.
and the regulation is struggling to adapt to this new situation. To phrase this in a simple way, I can say that there is a majority view which is by no way a consensus that there is a potential here in this platform and new business in terms of innovation and growth. There is also strong disagreement about two issues. The first one is whether and to what extent you need to change or give up on existing regulations and the second issue is whether you need new regulations to face new risks in terms of concentration and lower competition that some of these platforms may eventually drive the market to.
And to make things more difficult, is not just a specific set of regulations that we are talking about but different sets of them. You can think of regulation related to competitions or those sort of regulations related to consumer protections, to employment so for instance, actors like Uber that clear these regulations. So, from our perspective at OACD, the debate seems to be a bit trapped into two opposite positions. One is that of those claiming that regulation is hampering innovation so we should drastically reduce it. On the other side, you have those that claim that the presence of platforms of new entrants may lead to situation of winner takes all. Again, we don't need to be stuck in dichotomy, on the one hand, there are people saying that statute may hamper innovation by preventing the entry of new businesses. And that's precisely one side of the coin.
Now, the issues, I think whether we are, to what extent the benefits from innovation. So growth, we lost sight of the loss in terms of consumer protection in employment that are not in place. I think the answer is not clear, and it's also likely to be different among economic activities. Also believe that the should not be different from the one we use in the past. And probably will have a different view. In the past, to strike a balance between different legitimate and potentially conflicting objectives of interest. Those of new interests and incumbents, those of consumers and producers and those of employers and employees being aware that some individuals are also different perspectives, for example, the same person as a consumer and worker.
On the other pole of this dichotomy, there's also the view that competition as it's shaped right now cannot prevent the emergence of digital technology. These digital actors try to be in a way that escapes the traditional regulations. They rely much more on network economies. On business work, for instance, the services might be for free and the values are generating data and other activities which are not at the heart ‑‑ they are not regulated by the competition law. There is also final thing that cut across these questions which is whether the better information we can get to the internet, transaction with better internet can then to address some of the incomplete information, some information asymmetries that the situation has been designed for. I think ratings of the users and suppliers, also more broadly of the big data on better observation on the transaction that take place of the internet, on the price of the service, provider quality and so on. The thing is, there is a lot of room for developing new tools and those for thinking in a different way that exist in the regulation.
These are all very difficult questions and I don't have an answer so I'm very pleased that we have around this table some expert that might help us to address these issues. Let me start with Megan Richards which is the director for communication and technology, with the European commissions. I will just introduce all of you and then I will ‑‑
>> MEGAN RICHARDS: Oh, okay.
>> We have Sonia Jorge is Executive Director of the Alliance for Affordable Internet. Eli Noam is the professor of finance and economics at Columbia Business School. Joseph Alhadeff is chief policy officer for Oracle. I know many of you have the precise title. We organize this around four questions, two for each speaker and then we have opportunity, two rounds of questions. In between each round, we'll have the opportunity for you to intervene and make comments and ask questions. I will invite the speaker, if possible, to speak to ‑‑ give their remarks no more than five minutes in response to each question and then at the end try to wrap up the outcomes of the conversation to the extent I'll manage.
So, first question, just to warm up is, I'm asking to Joseph, first, and then to Eli, what is your take about the current regulation, the status of the regulation. The regulation that defeats the purpose ‑‑ do you think the regulation defeats the purpose and what is your view on how things evolve? Joseph, maybe you want to start.
>> JOSEPH ALHADEFF: The short answer is, yes, and it depends. The question is really, it depends upon the regular laying. You pointed out there are a number of regulations. I would add data protection as well as one of the regulations that would be around that, and I think one of the things you have to think about with a regulation is, what is its implementation? What is its flexibility in its implementation because you don't want just to look at checklists when you look at regulation. You want regulations that can keep with the times and also be somewhat flexible. You also have to think what its context is and is it appropriate for implementation in the circumstances it's being used for. What we find is over time, someone may be using a regulation that is no longer fit for purpose and you have to think about how you implement it. The standard you're implementing may still be the correct standard but how implement it may be something you think about which changes with the new technology and then lastly the level at which the regulation is written. Regulations written with principle are often more applicable over time than regulations more detailed and descriptive so again the nature of what you're trying to accomplish needs to guide the regulation to make it appropriate for its use. I think you were getting at this in your opening comments but there's a knee jerk reaction that every time there's a new technology or business model, someone wants to create a new regulation. Whereas most regulations that exist actually can be applied to the new technology or business model, you just have to think about how to do it.
So I think we need to get away from thinking that everything needs something new but actually thinking how the things that already exist apply and how we can make them applicable. One of the things that's missing, however, when we look at the need for regulation is that I don't think we necessarily factor what the role or benefit and the positive impact of the information may deliver. If you don't do that then you have a tendency to eliminate all risk or potential risk and then you may limit the innovative potential of the technology being used so I think we have to figure out ways in which we can understand that we're protecting the fundamental nature of user rights in the implementation of these technology while still gaining the societal benefit their application. There I'm thinking of health research and things of that nature where the reticence risk prevents people from using technology that could make a societal difference. We have to look at the regulation that fits the situation and that's difficult because policy makers by definition are trying to find a regulation that's broad and across the board. The question of how to implement them at the contextual level becomes very difficult.
And I think we're going to have to grapple with those issues whether it's in a competitive marketplace, how you apply the standards of privacy, whether it's how you consider all the fundamental rights, not just one of them. Those are all issues we have to come to terms with doing a better job of what we're doing than we are today.
>> ELI NOAM: Thank you very much. First, I want to thank you for inviting me and the audience, I thank you for finding the place and enduring the heat. You obviously in some natural selectivity are some of the smartest and most resilient people around. This is my fourth IGF, and my role seems to be to cast some skepticism. So about 80 years ago, I was talking about why the internet was bad for democracy. See what happened.
And two years ago, I was skeptical about jobs. So let me then have my personally ‑‑ ten minutes, you said, with five observations. The first one is, libertarianism is out, and interventionism is in. And the Trump election would show that so here we are four weeks after an election in the United States. I believe the internet caused, indirectly, Donald Trump to be elected. I would be happy to elaborate that. We hear business as usual attitude which is a little bit of whining that the internet is too regulated and regulated by the wrong people, by people who don't get it. If they only knew what we knew, they would be much smarter and leave us alone, except our competitors and ISBs which should not be left alone and the Chinese, et cetera.
But the realities is that the forces unleashed by the digital transformation have led to a backlash in which the forces of Republicanism both on the republic and Democratic side essentially lost so neoliberalism got defended, but not from the left, from the right. So what does this mean? Will we then get to rely on the market? Probably not. Because the second observation is that market forces here have not ‑‑ kind of are working in a weird way but in a short‑term way, in an entryway, but entry level, entry barriers way with they're lowered but then there are also fundamental economics of economy of scale and network effects that are, have kind of assert themselves with a greater capital intensity of up-front investment, higher fixed cost, low marginal cost, low distance sensitivity, and they all lead predictively to oligarchicalistic type markets. In that sense, internet based activities can be called a natural oligarchy and sometimes worse than that, so therefore, competitive forces will work only so well, but not really in many instances because of the large scale operations that will exist.
Which brings us, then, to regulatory interventions. Sorry to observe that. But. So here people say, regulation, I have great sense with Uber and Air BNB and being harassed and sometimes pushed around by local regulators all over the world. But, there are probably three major factors for underlying regulation. The first one is that the self‑interest ‑‑ the protectionism of incumbents. And the second one is the self‑interest of regulators who like to regulate. And the third one is, though, the public interest. And people who kind of talk about against regulation often focus on the first two and disregard the third one but the third one really is the most important one because in a way, it enables the other two. So, therefore, people, for example, think of taking video that video regulation exists because there's a scarcity of spectrum. Therefore, we have to license. Therefore, the only few competitors there, therefore we have to regulate them. Now comes to the internet. Spectrum becomes irrelevant therefore we don't have to regulate these video activities, right?
Well, wrong because in many ways the digital activities are regulated for a variety of societal reasons. The spectrum licensing is only the nexus of regulation but the real reason for it are that different societies have different values, for better or for worse. So the Saudi Arabians have their values and the Swedes have others and the Americans have others and the Thais don't like their royal family to be denigrated and the Germans don't like Swastikas, et cetera, et cetera. So that's what's going to happen. Regulation will simply be modified and you can see Brussels approach of extending the broadcast in these timid steps, we just do this. Next year, we just do that. The ratcheting up in the directives and now we're kind of talking about national quotas for OTC services and local domestic production requirements and interventions and how these programs are going to be listed on the internet.
So, there is a clearly slippery slope that is emerging here but basically where it's going to, the slippery slope, is towards applying the rules and regulations of existing broadcasting to the internet environment the not totally but b kind of that's the direction. Okay. So running out of time here. So, my fourth observation is, that governments will delegate regulation to Cloud providers and to other intermediaries and the reason is that it is too difficult and too complicated for governments themselves to run after all these providers of services and goods and what have you. It is much easier, more efficient to go after the intermediaries who are few in numbers. You can find them. They don't disappear. You can go after them. So kind of the Googles, the YouTube, the Amazons, the Facebooks, et cetera. Who, by the way, happen to be conveniently American. That certainly doesn't hurt in establishing national or regional regulations. So I would expect that this regulation of new activities that videos, taxicabs, financials, whatever will shift from a regulation to the regulation of the intermediaries and also include a healthy dose of self‑regulation, like regulating self‑regulation of some sort and that will be the future model.
Observation number five is everybody talks about we need consistent and predictable regulations. Forget it. You won't get them. And why should you? Nothing in this environment is predictable and consistent and why should regulation be? Regulation is probably going to be the last thing that is consistent and predictable because it is so slow. Everything else moved around with Moore's law except regulations. Always going to be behind curve, inevitably. Anything at the internet is slowing it down because everybody can organize, and it becomes more difficult to get anything done so one has to think of this regulatory process as a discovery process, not as a bunch of rules that means that less centralized regulation is better than centralized regulation because it's easier. And inconsistency is actually not bad because it helps in finding the better solution, and the more dynamic solution.
So, this circles back to the question of over or under regulation. Should we call it Uber regulation or under-regulation. To my mind, the system is overloaded but my expectation is that there will be much more of it and that it will edge to economic and societal of a discovery process, which we should help implement.
>> VINCENZO SPIEZIA: Thank you, Eli. The parts provocative and skeptical, this IGF as well. Maybe I can move to the second question, which is related to the issues of predictability of regulation. It's not working? We can move to another question, which is related to the issues of predictability of the environment regulation. I mentioned before the thought that I've been offline and online competitors change whether the rules are applied, to what extent they're implemented, and some. So the question for Megan, first, and then for Sonia, is whether policy can reduce, to what extent and how can policy reduce regulatory uncertainties in sectors where you have the presence of this type of online and offline businesses.
>> It needs regulation.
>> There you go.
>> You see. Regulation, instant regulation. It works.
>> private sector intervention?
>> MEGAN RICHARDS: Luckily, that's one of the points I was going to raise. It's a very difficult question, of course, and there's no easy answer. That's absolutely clear. We want to have a dynamic in digital society and economy, at the same time protect consumers, make sure there's a level playing field, all the wonderful things that regulators always say and consumers say and public policy officials say as well. But trying to address that is extraordinarily difficult. What we have done in Europe, and you said that regulations are by definition always out of kilter with reality. One thing we always try to do in Brussels and many others do too is try to make sure that regulation is technologically neutral. This is not easy. It doesn't mean they're always up‑to‑date but I just take one example of the e‑commerce directive which has been in existence for at least 15 years and maybe a bit more. It has served its time relatively well. It may not be perfect, but it has managed to provide a standardized regulatory base, which has worked so far.
Now, there are many other kinds of regulations that needed updating. The copy right directory in Europe, for example, which was more than 20 years old. Hadn't been updated for an online environment because when it was established the online publishing tenant really exist so it's obvious that certain updates and certain priorities have to change. In Europe, and this is perhaps an unfortunate case, legislation is very complex because it is developed by the commission after public consultation, after discussions with expert groups, after review of all the economic and financial and social information available after a full impact assessment, and then, of course, it goes to the council administrators and to the European parliament so it's not something that's easy and things often change as legislation comes through.
So trying to make sure that these policies meet all the interest of keeping innovation high, protecting consumers, ensuring that things are technologically neutral. Right now, under the digital market initiative which was already started to a certain degree under the digital agenda for Europe initiative, a whole series of updates of existing legislation or revisions of existing legislation are being introduced to try to bring up‑to‑date some of the regulatory base that existed to make it better for the online world. That communicate there needs to be new legislation specific for online activities, necessarily. But the online and offline actions, implications are treated in similar ways and I think that's one of the most important aspects. Now just to use the example of Uber that you took.
Taxi drivers in some states are among the most regulated sectors. They have extraordinary regulations they have to follow. Licensing fees. Requirements when they have to drive. Safety requirements, et cetera. So a huge series of regulations that they have to meet. So the question, then, is if another group comes in which doesn't face those regulations, doesn't face the labor laws, doesn't have to meet those licensing regulations, et cetera. Is this a level playing field? I'm not making a comment about whether it is or whether it's not. I'm just saying that these kind of issues are so terribly complex. It takes, not just this room, but a will the of work to try to find a really just and good base to make sure that we can move forward.
>> SONYA: Can you hear me?
>> ELI NOAM: I would agree that it's difficult, but why does this have to be resolved on a Brussels level? I mean, it's taxicabs, for God's sake.
>> MEGAN RICHARDS: Wait, wait, wait. Brussels doesn't regulate taxicabs, first. And this is not something that's ‑‑ well, let's wait and see. And under the European union treaty there are certain things that are regulated by European competition is a competence of the European Union, external action, all sorts of things. A whole series, others that are divided between member states and the European Union so when regulation is developed, you don't want to hear all the horrible stories about how European regulation works but another issue I wanted to raise later is the issue of jurisdiction which in old days, pre-internet days, let's say, was relatively simple for regulators to deal with. You looked after national territories. You applied your law within national territories. In Europe, you were more baud in a sense that we could apply over European territory but it's still limited. The internet has changed that completely so the internet means that jurisdictional limitations have changed as well.
>> VINCENZO SPIEZIA: I think you have to find your way through, otherwise ‑‑
>> SONIA JORGE: I will. So, what I would say is, I'm not going to argue some of the things that Megan and Eli were saying, but there are two things I think are important. First of all, I think it's important to be forward looking with the regulatory frameworks and despite the fact that regulation tends to be a bit behind technology and two things are important.
One is it is important to understand the concept of dynamic regulation that you were just mentioning, Eli. I think that is really critical. Something that is very difficult but something that we at A4AI have tried to do, to do what you were talking about, to do what you do, Megan, in the European context change that and move to Africa, to Asia where we work and to a certain extent in Latin American. It's more complex the not more complex because you don't have legislation that will support the system but because there actually isn't any legislation or any framework that actually supports that kind of move of regulation. So we still kind of to a certain extent creating an environment where first of all, there is an understanding of regulation as I always like to say, not of a control system but a system that promotes growth and incentivizes growth and that creates safe guards. And why is that important?
Because of another point that you made, Eli, which is that regulation needs to be in the public interest and if we frame regulatory and policy decisions around the public interest outcome it really helps to define how we can go about regulatory decisions. I think that's always important to keep in mind and to kind of go down how it works in practice, I'm going to move beyond some of these high level discussions that are really interesting and give you an example of something that is happening right now. In Nigeria, we are actually ‑‑ I was trying to finish a document in Nigeria, the regulatory agency, the Nigerian communications commission is looking at the possibility of perhaps introducing a new price floor for all data services in the country.
The reason why price floors did not exist, as we know, is because we want healthy competition. We want competition to exist in the market. We want prices to be reduced. That's why we work on affordable internet, affordable and equal access. Well, if competition doesn't work very well in some cases, and regulators deem that there is anticompetitive behavior, again, you have a competition commission in Europe. There's no such thing in Nigeria. There is predatory pricing taking place, how do you address that? And is the threat of potential predatory pricing an issue that actually could create problems from a user perspective in the public interest? Are users now going to have to pay for and increased prices because of possible actions from a regulatory perspective, or should the market be completely left alone and decide on its own what the prices should be.
It is a complex question. You want from a regulatory perspective to instill a certain level of certainty. You want to make sure that the market and the players in the market can, indeed, understand how they can work. Are there rules that they need to follow? But, there need to be safe guards that when those rules are not working, then you need to intervene. But if intervention is the case, which is where we are right now in this particular case in Nigeria where the commission is conducting an in depth cost study to try to understand what is really the cost of providing data services in the country. What are the kinds of things that we need to consider to have real good outcomes from such studies? And there enters another level of complexity because it's not just having these concepts introduced from a wide level, are we looking from a forward looking perspective. Are we looking at long term incremental cost? Are we looking at appropriate returns on investment inappropriate pay back periods?
All these other concepts that come into the decision‑making process and that will then help define what the final outcome will be. Should a final outcome from any case be one that consumers are not very happy? How can regulators address that and how can regulators share the message that their job is ‑‑ it's about public interest. It's about prices, but it's also about creating a level playing field and a level of certainty that healthy competition can continue to be promoted in the market. So again, it's not easy and I think these are the kind of question that's for me would be great to hear from some of you because we work as the Alliance for Affordable Internet in developing countries where some of these questions are day‑to‑day concerns and we need to address them. But ultimately, I would say, certainty remains a key important issue in every single market, regardless. The public interest has to be the key common denominator of how we make these decisions but yes, also looking at what is the outcome we want to have from a particular decision. Is the outcome going to be against users? Is it going to be browsers? Is it going to be against, perceived more against the private sector where companies are not?
We need to consider all of that. So just to finalize that thought, one of the things that we do as part of our work is that as we look at all of these questions, we have very open public consultations and discussions with all the players because ultimately we want everyone to understand that there's always a level of compromise. No regulatory decision, no policy decision is ever going to make everybody equally happy. So, advertise you were saying, Eli, regulation is here to stay. Yes, but we can make it better. We can make it more predictable and we can make it more open and a result of more participation of all of the stakeholders so that's where we aim at and I'm hoping that during this process, and we've been successful in doing that in many jurisdictions in Africa, for example.
I hope that we can learn about thinking of regulation as a tool that can support continuing market growth but at the same time, again, coming up with decisions that are a good balance for all of the stakeholders and not just one versus another, but every single stakeholder. And when I say every single of them, not talking just about the overall perception of private sector or newer companies in the market but all service providers, all users, men and women in the market, men and women in communities and how they want to use those services for their own benefit so it's very important, again, to go back to the public interest and how that interest determines the way regulations get defined. Do I have ‑‑
(Audio cut out)
Some of the colleagues at world bank. In fact, Deepak was the one who was meant to be sitting on this panel. I'm glad we have a better gender balance on the panel since he got sick. A good friend. We were having some discussions on Deepak who was the co‑author of the most recent World Bank report on residual dividends, many of you might know. He was suggesting some solutions especially with companies like Uber that you mentioned and others like AirBNB and so forth that have entered the state and companies that are very complicated to realize, what exactly are they?
In the Uber case, are they transportation companies? Online companies? Digital service companies? What exactly are they? And one of the things that our colleagues at world bank have tried to start thinking about and really push for is the idea, first of all, let's think about solutions that classify companies based on the services they provide. And the reason why that is the case is because from a regulatory perspective you create these hugely complex systems because should Uber or AirBNB or even Google or Facebook, any kind of company that uses the internet to provide services be regulated by communications regulators? Doesn't make any sense to a certain level. Maybe at some L. maybe not at others. So should we separate the different levels at which these kind of corporates operate? That's one possibility.
I think we need to do a lot more thinking and understand what are the implications of having Uber be regulated as a transport company and not be at all affected by any kind of regulation in the communications field, which is in my perspective, in our perspective, in our organization actually quite important because it's not just about the service they provide in the digital space. And I'll finish with that thought for further discussion. What the internet introduced into the service provision equation is things like privacy, data protection, and the kinds of questions that neither of the regulatory environments are actually quite prepared to address.
You work on data protection, so maybe you have your view on that, but if there are issues around privacy and data protection from a service provision example where users need to be protected, in fact, by communications regulators, then we need to consider that. That means that regulation not only is going to be here to stay, is going to increase, is going to get more complex but is also going to get more compartmentalized. And that compartmentalization, I have to say, and I would love to hear the panelists perspectives, I actually think will be quite scary. Is going to make our jobs in the space much more complex but very difficult and I hope we can start coming up with some of the answers because right now, I don't think we have a lot of answers on how some of these things can be addressed.
>> VINCENZO SPIEZIA: Thank you, Sonia. Maybe the panelists want to react to the different events. Before that, I would like to hear whether there is any comments or questions from the audience. Please.
>> Thank you. I'm not speaking on behalf of my employer now so I can be provocative. Thee of you have spoken of the importance of regulation providing a level playing field, and my challenge to you is going to be, what is the virtue in a level playing field? Surely the whole idea of free market competition is to provide a better services, to tilt the services to market share. You've been talking about Uber, as an example. I'll tell you how that looks in my home city of London, which is actually one that's quite open to disruptive things, normally. Nonetheless, the regulator there before they were restrained by the courts had a few ideas for how Uber could be regulated to provide a level playing field. Firstly, they wanted to make sure that Uber couldn't pick you up sooner than five minutes so if it's a minute away, I've got to stand there for another four minutes before I can get into the Uber cab. That was their idea. Great idea.
Another idea is that it shouldn't be able to display on the map where the car is coming because clearly it would be unfair that I was allowed to see, oh, it is coming. It will be here soon. That would be unfair. So let's not have that. And the last thing they suggested was to ban ride sharing so even though that would make it cheaper for me to get a ride, even though it would reduce the carbon emissions from the ride and improve the drastically horrible levels of congestion in London, nonetheless, that wouldn't be fair. That wouldn't be a level playing field. And this is London, which is actually quite open. When I go to Brussels, Uber is being completely extinguished, and I get some of the most hostile cab drivers in the world.
My experience ‑‑ you can share yours later. I frequently come out of your offices, and I'm refused ‑‑ illegally, I might say, refused a ride from a licensed taxi driver to get back to London because they want to have the more expensive trip to the airport. And that is the kind of behavior you get when you do not allow the disruptive competition to come in and demand better service for the consumer. I would say that the public interest lies in an improved service for the consumer. Not for the producer. I'm not interested in a level playing field for the producer. I'm interested in the consumer so what is the value of a level playing field?
>> ELI NOAM: I would say the examples you gave are quite persuasive and you wonder where this comes from, but level playing field has to have a different answer. For example, you want the driver to be reasonably competent in terms of safety. You want the driver to have insurance in case something goes wrong. You want to have an identification of the driver in the cases you have to go after them. Those, presumably, are part of the requirements on regular taxicabs. And there's nothing wrong with extending them to Uber, too.
>> MEGAN RICHARDS: May I just add something as well on the level playing field? The level playing field doesn't mean necessarily that you take existing legislation which is already very heavy and you raise the bar for the new entrants. It may be much better to lower the regulatory provisions for the heavily regulatory areas in view of the new competition.
>> ELI NOAM: That's right. But it never happens.
>> MEGAN RICHARDS: Well, hope springs eternal. And just to clarify something that Malcolm mentioned. Many time people use Brussels as the European union. Many times, when people are aggressive, they say Brussels, not my home country. But in the particular case that Malcolm is speaking, it's the city, just to specify.
(laughter)
>> So on the level playing field question, as the others said, I understand where you're coming from. Innovation is key. Disrupting markets is important, it's healthy, as long as there is a fair behavior by all of them and I think what happens there, and this is where the level playing field concept is actually quite important to consider is where it comes from is every player should have the same basis to start. And if that is not the case, then you're not creating that playing field. Now, in the case that you were using of Uber, I agree that it's important that everyone plays under the same rules.
Otherwise, disruption is not really helping anyone and one thing is that disruption will not ultimately benefit the consumer that's consumer as the consumer is going to be independent on having Uber drivers and other people in the digital space that make fair wages, that are employed, that are paying taxes in their societies, so there's a lot of other linkages it how decisions get made in a particular sub sector of an economy and the implications that it has outside of that. We don't have to go into the externalities of all of those decisions but it is important and actually there has been lots of research from some of the people on this panel and maybe many of you here in the workshop that proves time and time again that healthy competition starting with a level playing field benefits consumers and ultimately is much, much, much better for the public and for the public interest. And almost never an unlevel playing field will ever benefit.
And if there is a hint of benefit, it's only temporary because eventually, it will fall apart. And that is the role of regulators, to not allow that to happen. So regulators have a big responsibility not just to set the rules and policy makers but to ensure to anticipate that such disasters don't happen and I think we've had quite a few in the history of time and I'm a little older than many of you in this room to remember many of those so I won't go into those right away. But I think there's many examples of where lack of competition has proven to not be the right solution so when we think about solutions and predictability and all the different policy and regulatory instruments to create that in the market it's because ultimately and it has proven, it is in the public interest.
We all will benefit more in the end if we have that. So if I may, can I give one other example of an area we are working right now which is around infrastructure sharing issues, something that European union has done quite a bit of work on as well in other countries. We're working on infrastructure sharing issues in the Dominican Republic, Ghana, Mozambique, quite a few places.
One of the key things to work on policy in countries depending on where they are in the regulatory continuum is precisely because in telecommunications and the wider internet sector there is a tendency for markets to become highly concentrated. We don't have to go into concentration discussions but that is the tendency. When that happens, no one benefits. Only the few that can benefit from that particular concentration can be the beneficiaries, but not the users. If you give me an example of where that kind of trend has resulted in better services for the users, I would love to hear. But I know of none.
So infrastructure sharing, for example, is one way where you can create systems and incentives to not only push companies that normally would not care on the KPAK side, on the traditional side of investment to share more and allow newer pliers and smaller players. Why? Because those don't have the ability to do very heavy capital investments can benefit from wholesale environments, can benefit from other kind of possibilities that in fact regulatory incentives have provided.
>> JOSEPH ALHADEFF: So I lie somewhere in between Malcolm and Eli's. I'm going to paraphrase and say the framework has to be level. The safety, all of those elements, you shouldn't have a variation. Because a person can't make a judgment getting into a car as to whether it's safe or not. You have to guarantee that a taxi is safe but at least they've gone through some inspections and maybe there's been a licensing procedure for the driver so that part is true. But then you get to the business model discussions so right away we say Uber compared to a taxi. But is Uber compared to a taxi or private car service? Because they're not circling around picking up people. They're only in a different model. The only thing is that model didn't used to be competitive with taxis because it was more expensive than a taxi.
Uber used that model to make it less expensive. Now, some of the expense savings may have been in terms of work life balance, in terms of the benefit that's a driver may or may not work so there are big societal issues that go beyond the business model issue but we have to start thinking, are we comparing apples with apples or are we putting a societal construct in place that says, is this an issue?
Now, what's funny is cab companies in Washington DC which were never forward thinking companies to begin with, all of a sudden, they have these programs where you can call the cab, see where the cab is on the map because they realized that customers thought this was a really useful service so this created a market need because people understood this was an available option and that market need has to be met by cab companies also. In Paris, cab courtesy has gone up because the Uber drivers had been more courteous as a rule. So, these are things where there is a benefit in this competitive dynamic. The question of fairness comes in. But I think, you know, it goes way beyond level playing field because we're looking at societal constructs we're composing arguably in the level of public interest but that goes beyond level playing field. I think level playing field is the framework of issues. After that, we're talking about societal issues.
>> SONIA JORGE: Shouldn't they be at the same? At the same levels? How can societies go and be different ‑‑
>> JOSEPH ALHADEFF: One last thing. Data protection commissioners have never waited for an invitation. They fully believe they can apply themselves to everything that deals with personal data so don't worry about them getting into the picture. They're here.
>> VINCENZO SPIEZIA: We have another request from the floor.
>> Preempted a little of my thought but I'd like to go back to the metaphor of level playing field and new entrants. They're not new players. They're playing a different game. They're not playing the same field. One is playing on a rug by pitch, the other on European soccer pitch and the other on American football pitch. You can't say, oh, they all need to be conformed to the Rugby pitch. We need to be understanding that I think this also goes to the concerns about current GAFA dominance of a few companies that seem to be an oligarchy because I've come through the era of the AOL prodigy Compuserve.
I've come through the era of the IBM computer dominance that turned into the Microsoft desktop dominance that then turned into the Google. We have to understand that the competition is among technologies and vastly different business models. Rather than saying we have to defend particular investments in companies, we should also recognize that we don't necessarily need to defend legacy industries. Do we need to say that mainframe computer makers need to have a rule that we need to support ‑‑ role that we need to support?
So, I think this all requires some adjustment in our metaphors and thinking.
>> There was a lady in yellow.
>> There's also another phenomenon we should be considering, and this is traditional service providers whether in telecom or taxi moving to these other platforms and creating competition among platforms. Not only Uber, there's Easy taxi. I can count five in Mexico. But I was recently in Chicago and you access Uber platform and then you can choose whether you want an Uber Uber or an Uber taxi. So taxi's union have now ‑‑ it's like opening access to the telecom network, well, they have open access to the Uber platform.
So this is creating a new form of competition and many traditional paid TV networks are now building their own OTT and video on demand and playing in both platforms for traditional and non-traditional. And now, but I see that very different from anticompetitive practices like predatory pricing and I haven't heard much about whether that's the concern, a very important one, then we should also look at exposed measures and that would trigger competition, investigations whether someone is involving in their collusion or anticompetitive such as competitor pricing. But that, I mean, I don't know the specifics in Nigeria. In Mexico, we have preferred to, in those cases, act as competition authority and not with regulation. Or yes, regulate, but only wholesale markets. And sharing infrastructure is an important point. Thank you.
>> ELI NOAM: I would like to add to the Uber discussion something that relates to what I started with which is we have been discussing this in the context of producers, providers such as Uber or consumers will get a better service and that's wonderful. But there's also the other side that should not be derided. Those are the people driving today and who are also kind of human beings so we really should not forget them because they're the ones who vote as you have seen how they did. So it's not only losing out to new kind of drivers and companies, but also in the near future to self‑driving cars and so on. So these are people who actually will be kind of at the losing end of all this. So therefore, this is not an invitation to use regulation to restrict change but rather that all these openings have also to be accompanied by societal programs to deal with people who are getting displaced by these things because otherwise you have backlash and the backlash leads then exactly to those regulations we don't like.
>> MEGAN RICHARDS: Sorry I just want to add one thing that relates to the public interest outcome. It falls a little on El I and some of the others. The public interest outcome isn't always, is it better for consumers which is always important and we want to have competition improve facilities and choice. No question on that. On the other hand, the public income also includes making sure that people are not making sure people are working slave wages or having to work 24 hours a day. I don't know what all the different possibilities might be. You raised this, too. This forms part of the public interest outcome. There's no question about that, so I won't go on because there are more questions, I'm sure.
>> VINCENZO SPIEZIA: Sorry, maybe somebody can ‑‑
>> You have to come get the microphone.
>> Good afternoon. From the ‑‑ program. In the country where I'm from, the authority of the ICT sector always opens to a public consultation during projects whether they are about user protection, consumer protection, or whether there are about infrastructure and network issues. However, the only participants in this so‑called public consultation is the private sector that is traditional contract that implies legitimacy issue around the regulatory dialogue. The only question is, how account other stakeholders can be equalated to the regulatory dialogues in order to establish a legitimate process.
>> VINCENZO SPIEZIA: Sonia, want to try to ‑‑
>> SONIA JORGE: Sure. I can tell you only our example, the Alliance for Affordable Internet. We work through national Coalitions that are multistakeholder Coalitions and we make sure that in every single country that we work our Coalitions not only integrate the public sector, and when we say the public sector, it's not just the ministries of communication or science and technology but education health so they also understand the indications of our sector in their own agendas, especially with internet being such an incredible platform for academic growth, understand their roles in those processes, but we include the private sector and again, all different kinds of providers from smaller to bigger and different services, not just mobile operators but some are cables, vendors, ISPs, you name it.
And very, very important, civil society. And again, not just Civil Society involved in ICTD projects which tends to be like the group in IGF which is great because they already have the issues or know better how to communicate on those issues but we actually make a specific effort to increase the ability of Civil Society that should be involved in these consumer protections or commissions or units or departments, however different countries call them or others so it's very much a multistakeholder approach. We also include, for example, women's advocates. Different organizations working in spaces that they should be concerned by policy and regulation in our sector.
We think that, again, it's very important for the dialogue to be there but it's also important for people to understand, what is the role of policy and regulation. One of the things that I have to say is that it's really difficult sometimes to express for the most part because of the experience of regulation in many countries, people perceive regulation as controls as kind of purely around either fiscal issues or what have you. Don't think about regulation in this kind of new paradigm we've been working on for years now which is really about incentives. It's a very different way about thinking about regulation. The concept of dynamic regulation as well as the last few years and mentioned is really important but I have to say it's also really difficult to implement in many countries because as we know, it takes working with really strong regulators in some countries, it takes them a long time to go to looking at an issue, investigating and coming up with a decision. When you introduce concepts of dynamic regulation, it means that whatever instruments you have in place they need to be ready to be changed very quickly.
Not only regulatory companies need to be in practice, independent, they need to have the capacity to make those decisions quickly and move, and that is something we're working toward in many countries. Even companies that call themselves developed, regulation takes a long time and dynamic regulation in many countries is actually quite a schedule so when you think about it from my perspective and where I work, it's even more complex. But regardless, a multistakeholder approach as we work not only has proven to be effective, has proven to be more impactful, and if you don't do that, we're really never working in the full public interest. We're looking at elite but never in the full public interests.
>> JOSEPH ALHADEFF: My experience is more in the U.S. I'm going to use that as an example. You have notice of proposed rule-making. They'll be in the federal regulator. Everyone is allowed to comment. The people who can get through the notice then go to the proposed rule-making. The people who can understand that you can count on one finger of one hand and that then becomes a self‑limiting process even though it's a wide open process. In the interagency process, they've actually come up with a concept to try to address this.
It's not going to be for every regulation, but they take some forward looking broadly horizontal topics on mobile computing or other thing has. They convene under the auspices commerce or whoever but then they allow the multistakeholders to shape their opinion themselves being the convener rather than director of the process, and I think that's an interesting process but it's not the process of a level of regulation. It's the process by which you inform the policy makers to the regulation so it's even a better time to get multistakeholder input because you're not reacting to what someone wrote. You're putting in input when someone is thinking about what they are going to write and that's really the best place to have input because that's when the rich breadth of ideas comes to the policy maker who in their response to the consultation will only get very strict technical comments and not those rich ideas.
But you can't do that at the level of regulation. You can do it earlier.
>> MEGAN RICHARDS: This is what we also tried to do in Europe, to have a broad regulation to look up before any regulation is absolutely identified or set out as a draft but also the important thing, too, is that representatives of organizations that represent, for example, consumers or whoever it might be are those who primarily respond to these consultations because by definition, every individual 500 million European citizens are not going to respond to these things but representatives of consumers organizations will. Representatives of, I don't know, depending on what the issue is, trademark holders or whoever it might be, they're the ones who have the time and energy and capacity to go into these things in detail. And they, of course, then look to their members and their organizations but we follow a similar process. And then the other thing, too, you mention in the consultation in the countries you're referring to, it's primarily the incumbents who respond but we know what the incumbent position is going to be. It's regulate my neighbor or my competitor, so that's something we get all the time. That's not unusual. That goes with the territory.
>> SONIA JORGE: I just wanted to add one point that is really important with any kind of multistakeholder approach or process is that you need good information, you need really good advocates for anyone, regardless of who they are, to participate in the process. This is something that we focus a lot on and I see some people here in the room that also work on several elements of monitoring the sector, data collection, data analysis, and research. It's really important. I cannot emphasize enough if you don't have really good evidence to be part of the dialogue, it's really difficult to be part of the dialogue. One of the things we have done and many of our partners is working on not only data sectors to monitor aspects of development but to make that accessible to those who want to participate.
One of the things we do at the alliance through our national Coalitions, not only do we do the research. Bring research to the table. For example, I was mentioning to you the infrastructure cases that we are working on now in many countries with commission and have worked on in depth studies to look at the options for infrastructure sharing in each of those countries and the evidence and all the research is done is open and available. We run workshops so that everyone from a Civil Society stakeholder to a private sector stakeholder to a public sector stakeholder become convert ant about the knowledge and issues that are at stake and then they can have a conversation that is also, again, a more level playing field.
So the outcome of that conversation is much more balanced but we need to take responsibility of doing that. Several of the universities, including your program, Eli and others, probably from the center is doing a lot of that work here and many others in other countries are doing a lot of work. Our regional partners are doing fantastic research in that area and having the right evidence and data to help policy decisions is critical and we need to continue doing that better, more so that everyone can participate in a much more interesting and powerful way.
>> JOSEPH ALHADEFF: And just to give a plug to our host, the digital economy outlook is actually a great source for that as well.
>> VINCENZO SPIEZIA: Thank you, Joe, for that. We're actually working to release the new one in 2017 so glad to know that is useful. Michael.
>> Mike Nelson. I do global public policy for Cloud fair and I was just at the EC last month and really encouraged by the support that's been given from Mexico. Since we're here in Mexico I'd be curious whether any of you have looked at what's happened to reduce competition. According to the report, there was about a 50 percent reduction in the cost of many basic mobile in three years. Again, giving a plug to the OACD because they helped Mexico with these policies.
>> MEGAN RICHARDS: Well, one element I'm aware of and I haven't worked at it in detail is that a lot of it is based on the European regulatory telecom framework. That's why it's so good.
(laughter)
>> Thank you. We certainly look at best practice around the world but I think it's a very unique reform. Both Congress and the new organizational design, we put together combining both competition and bringing investment and also passing asymmetric regulation for incumbents that was badly needed. We've seen investments and a 25 percent reduction of prices, in mobile over 30 percent not out of regulation, but out of competition. There's no roaming charges in North America, Mexico, U.S. and Canada anymore. You could spend maybe in a five day trip a thousand dollars in roaming. Not downloading films. Just emailing and calling out of the U.S. if you were traveling from Mexico, so that's a dramatic change. Now we need to make sure there's more employment of 4G and high speed broadband, and so it took very dramatic legal framework and really in practice autonomous entity of society.
>> JOSEPH ALHADEFF: If I can add a very specific question, though, in comparing Mexico to Europe to the U.S., Nelson's metric for judging telecom policy is that good policy reduces the number of billable hours for telecom lawyers and lobbyists. We know that the U.S. advances like net neutrality and the telecom act of 1996 dramatically increased hours. What's happened in Mexico? Are you actually seeing more lawsuits and more billable hours?
>> We don't get the bills, thank God. But no, you will never avoid litigation but there was one very specific policy but can you litigate as much as you want against our decisions, but they are not suspended while litigation takes place and that has made a huge difference. Because the public interest was being held back because of ten year litigation to declare an agent incumbent, a dominant player, for instance. It took more than ten years. Litigation is in average, I would say 90 percent of the cases at the federal courts because of when they are well motivated, reasonable, proportionate and evidence‑based and we are very transparent and also consulting before regulation.
>> Something about Mexico and U.S. to Europe. The roaming charges. See, you cannot go to an event with a European regulator in which it will not be mentioned that the European union reduced roaming charges.
>> MEGAN RICHARDS: I didn't say that.
>> ELI NOAM: But somebody did. And yet, in North America, it happened by ‑‑ correct me if I'm wrong ‑‑ but it happened purely by competitive forces and nobody even knows about it. So, it's just kind of happened without kind of much of a regulatory intervention of a sort. So, that's a really good example for market forces doing what kind of regulators believe they're essentially doing.
>> It's called the invisible hand for a reason.
>> ELI NOAM: Good point.
>> VINCENZO SPIEZIA: I just like to move briefly to another point that we had planned. It's a point that has already been mentioned a few times which is the tendency for certain markets, we have offline actors, online actors towards concentration. Maybe we're running out of time, just another one for the four speakers which is whether we're really seeing a rise in the digital markets, whether they have an input and whether policy can do anything to prevent or protect from this policy. Megan, you want to start?
>> MEGAN RICHARDS: Well, rise in Monopoly is always a difficult thing. There's certainly clear evidence that there has been some rise, there's no question to that. In Europe, the laws are that if there is a dominant player the question of whether that's been abuse of dominance is really what is looked at. That's different from the telecom sector where we have a different assessment of dominant market players but I think this is the element that has to be looked at. I think you mentioned earlier IBM dominating, Microsoft dominating, AOL, et cetera, et cetera.
I think we go through these hills and valleys of rising companies and today's Google in ten years may be the IBM of 20 years ago. Who knows? There will be new competitors. There will be new innovative companies coming online. One thing I think is an element that worries me and I think some of my European colleagues, too, is the take‑up of small innovative companies which are immediately purchased by some of these very large companies. I think there is an unfortunate, less-than-perfect competitive element because we want those small companies to be competitive and when they're bought up by a very large dominant player, depends on the area, circumstance, et cetera, et cetera, but that can potentially have a less than beneficial impact.
Now, some of you may have been following the online platform discussion that took place in the digital single market review and I know that a number of U.S. companies and U.S. government officials were very nervous and they said, the European union is going to start regulating online platforms only in Europe and this is not fair, et cetera. Et cetera. There's no regulation that has been proposed it was a review of the circumstances, what are the terms and conditions. What is the impact of online platforms, level playing field argument, the competitive elements. We looked also at business to business practices and we're still looking at these issues, a communication was issued ‑‑ I can't remember exactly when, but in the last recent time on what happened in that assessment.
So just because we're looking at issues doesn't mean we are about to regulate or regulation should be feared. It's a question of examining the circumstances, looking at the fact, looking at the potential implications. And of course, we do have some complications that have been brought against large actors in the European sphere. There's no question about that.
>> ELI NOAM: So, briefly about the digital Monopolies. We it a study at Columbia and it's available for Oxford University Press, about 1,400 pages and $200 will get you there. It's a real good deal. That shows for 30 countries and for 13 digital and media, more traditional media industries, the trends over the last 20 or so years of concentration. And it clearly shows that the digital industries are in a state of not only of a greater concentration, of a concentration trends but that they're also much more concentrated than other media, advise. So it's this notion that somehow old industries are concentrated because they had more years. Actually, the print media are much less concentrated than traditional electronic media, radio, TV, that kind of stuff. They, in turn, are much less concentrated than the digital online media. Those are just facts. You can ask the questions after you acknowledge the facts. One possibility is basically saying ten years from now, there will be somebody else who will be overcoming it just because IBM isn't the big factor anymore.
The second possibility is a structural regulation, and the third one is a behavioral regulation. So what I think one can observe is that structural regulation in this field is becoming difficult, if not impossible. So if Google has a very strong ‑‑ and it does, market position around the world for almost everyone for search. What are you going to do about it structurally? Are you going to let them divest of the letters A to G? The vertical stuff, the vertical power is only derivative of the market powers.
Therefore, it gets you to behavioral registration and where structural registration has become much more difficult to do relative to industry, behavioral registration is much easier. There you'd to be a time where people thought you cannot ‑‑ today we know that maybe a bit is a bit is a bit but a pact is not a packet is a packet. A packet has an address, you can identify it, so in effect, you can have a much more fine-tuned regulation. So financial transactions, media transactions, you can actually do a much more fine-tuned regulation.
I'm not sure if I like that, actually, because on the one hand, financial regulation, you can deal with tax issues, illegal payment type issues and so on. You can monitor the transactions as a regulator almost in real time, but on the either, you could kind of switch off on an Internet of Things. So somehow the department of energy which dims the lights, your particular lights after midnight, it's time to go to sleep. So I'm not so sure if the possibility of its fine tune regulations, oh, I think kind of what I do is we'll observe a shift from the structural industry regulation to behavioral regulation that is enabled by the electronic technology.
So, I think I want to take a look at a couple things. One of them, I want to go back a little bit just to the level playing field. I think in the IT space we've seen when regulated players go into non regulated industries, they still carry their regulators with them even though those regulators shouldn't necessarily be in those industries of the knee jerk is, let's regulate everybody else, too, and that's a counter intuitive, counterproductive, and counter indication. I this we should all be working towards making sure that a regulated player goes into a space that isn't regulated they shouldn't be burdened by a regulatory structure that is not relevant to the place they're in.
The second thing, I want to take a point from the Nigeria example and that example is, there was an opportunity for the market to work and then there was the recognition that perhaps there had been a failure in the market because there wasn't enough players and that there may have been abuse by market players. And that's exactly the time which competition law should take place because you have someone who has abused the relative freedom of the market and I don't think there's any question that that is one of the areas where people come in to do that. Where I have concern is when you have a fear of that before the market even begins to operate and as an antecedent of that, like the Internet of Things.
They were suggesting Internet of Things before we had an Internet of Things so I suggested in Europe we would have the internet of fewer things because it would just never grow so I think we have to be careful about when it is appropriate to apply the regulation because you want to allow the dynamism of the market to work. As Eli pointed out, sometimes it works without us even paying attention, and that's the best way is when you don't even notice how to works but I think we have to be care. About not regulating innovation by getting there too early but we do have to make sure that in the public interest both failures of markets, overreaching of players or abuses of power is dealt with in an appropriate fashion.
>> Right, thank you for mentioning that and part of that appropriate fashion is exactly having the safe guards in place that should an intervention be required, you're ready for it. You don't start getting ready but you have the system in place to get ready. You have a clear method on how to go about doing that. That's why economic regulation is so big in so many jurisdictions because if you have the rules that are clear, everyone knows what we expect should that intervention be required. Ideally, we would never have to intervene. That's what we want. Regulators don't want that intervention to be required.
You want to have the safeguards in place, clear guidance, clear standards, et cetera. But should you have to intervene, you need to be prepared. In terms of the question that was asked and digital Monopolies, what I would say is that there may be a time and I think the European union is doing that that because of the trend of some players starting to look like digital monopolies and starting to look like dominant players in some markets that there is a need to be prepared for what should be done. The challenge is that, again, that we said earlier in one of your initial questions of the panel was how does the new internet role also change the way we think about firms and what kind of firms they are.
So, I would just say to close that the digital economy is far from straight forward. It actually is raising a lot of questions that this is the first time we are considering them. This is the first time we are trying to understand. We need to understand them clearly. We need to share a lot of information, but we also need to make sure that, as the markets progress, that there are clear standards across the board. Not just clear standards of behavior, clear standards of operation, and that's for the certainty but also so anyone knows, what is the expectation from a competitive perspective but also from a public interest perspective and issues like interoperability, for example, very important to create those expectations and that costs across different things so not just companies like you mentioned, Google or Uber or Alibaba and all these other big companies across the world that cut across different vectors of the economy, how to address that.
Part of it is starting to really be clear on what those rules are and if we have a better understanding of what those rules are, we're not there yet, then we can start knowing how to better address them. The challenge here and I think we all address these. Maybe we have cases from countries that have already addressed these. The challenge is, what are had the next steps? Where are we going to go interest here? How is there, for example, interoperability or other kind of standard that are going to come through in the space. Are they going to increase certainty or facilitate growth of dominant players.
Those are the questions we need to ask ourselves, now, tomorrow, and hopefully next time we have some clearances on how to address these. Unfortunately, I don't think we have them yet.
>> VALERIE: Thank you very much. I think we should bring this workshop to an end. I'd like to thank all of the participants, the panelists. I'm not trying to summarize any of the discussions. I'd like to make a quick point that is my direct take from discussion. The first one is that we should remind ourselves the regulation is about societal values, I think you mentioned.
What objective you want to achieve. We always have to keep that in mind when figuring out to how to implement a regulation, how to make them flexible. The second part has been the number of objectives about regulation that needs to be flexible, needs to adjust. And I like, pretty much the metaphor of a learning process. I think we should also make sure that as things change, as we live in different context, we put in place institutions or rules that facilitate this learning process. And the third point that you want to have all stakeholders in this process. I think there was attention there in how you make things efficient, flexible, and involve people without getting involved in levels of complexity and that's probably a trade-off which we need to work on more. But thank you again to all of you
(applause)
(Session was concluded at 4:30 p.m. CST)