1. Digital Platforms An analytical framework for identifying and evaluating policy options Pieter Nooren European Consumer and Competition Day, Amsterdam, April 18, 2016

2. Background: assignment from Dutch ministry to create an analytical framework 2 Create coherent analytical framework for assessment of policy questions related to digital platforms Platform types: strategies, revenue models Opportunities offered by platforms: products and services Risks introduced by platforms: which risks, under which circumstances Role of government, given opportunities and risks? Role of current and potential new instruments? Effects of instruments on ‘level playing field’ Role of European and national instruments?

3. Digital platforms are growing in many sectors … 3

4. … and raise many questions 4

5. We have developed a framework for analysis of digital platform cases 5 Platform types and characteristics Public interests Instruments and application We focus on aspects that differentiate digital platforms from regular businesses

6. The analysis framework promotes a complete and consistent analysis of key platform aspects 6

7. Check of our on-line voting tool 7

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9. 1. Platform types and characteristics 9

10. Examples of platforms: Facebook (1) 10 users data & algorithms advertisers € indirect network effects direct network effect other apps & platforms ILLUSTRATIVE ONLY

11. Examples of platforms: Facebook (2) 11 Direct network effects Revenue model -direct payment -advertising -access to -acquisition Data and Content -internal usage -external usage Indirect network effects Use of platform by other applications or platforms Platform characteristics

12. Examples of platforms: Apple (1) 12 users other apps & platforms data own apps

13. Examples of platforms: Apple (2) 13 What are the characteristics of Apple’s platform? Direct network effects Revenue model -direct payment -advertising -access to -acquisition Data and Content -internal usage -external usage Indirect network effects Use of platform by other applications or platforms Platform characteristics

14. What is Apple’s main revenue model? 14 users other apps & platforms data own apps Revenue model -direct payment -advertising -access to -acquisition €

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16. Where are network effects important in Apple’s platform? 16 users other apps & platforms data own apps Direct network effects Indirect network effects

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18. Do other apps and platforms depend on the Apple platform? 18 users other apps & platforms data own apps Use of platform by other applications or platforms

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20. How does Apple use data in its platform? 20 users other apps & platforms data own apps Data and Content -internal usage -external usage

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22. These and other examples show lots of variation in digital platforms 22 Direct network effects Revenue model -direct payment -advertising -access to -acquisition Data and Content -internal usage -external usage Indirect network effects Use of platform by other applications or platforms Direct network effects Revenue model -direct payment -advertising -access to -acquisition Data and Content -internal usage -external usage Indirect network effects Use of platform by other applications or platforms Direct network effects Revenue model -direct payment -advertising -access to -acquisition Data and Content -internal usage -external usage Indirect network effects Use of platform by other applications or platforms Direct network effects Revenue model -direct payment -advertising -access to -acquisition Data and Content -internal usage -external usage Indirect network effects Use of platform by other applications or platforms

23. 23 Each platform is different – look at the underlying characteristics Starting point: the business and revenue model of the platform owner The characteristics themselves are well known from many other digital and non-digital environments These characteristics play out stronger and develop faster for digital platforms

24. 24 Coarse typology of digital platforms Reseller / distributor Marketplaces (peer- to-peer) Social networks Platform of platforms Network effects No (or limited) network effects Indirect network effects Direct and indirect network effects Indirect network effects (in multiple directions) Use of platform by other platforms None Limited High, other platforms depend on the platform Product and service markets affected New/matureMatureNewNew/mature Case in this study:

25. 2. Public interests 25

26. 26 The government needs to step in when public interests need to be promoted or protected Public interestInterpretation in this study Sufficient competition and innovation Ensuring static and dynamic efficiency through competition and innovation Safeguarding consumer interests Promoting consumer choice, offering sufficient levels of consumer protection and safeguarding fundamental rights. Freedom from improper influence Avoiding unnecessary restrictions by governments, while safeguarding societal interests through positive obligations Providing integrity and continuityMarket players, consumers and government need to be able to rely on safe and reliable digital communications provided by networks and services

27. Example: platform characteristics and public interests ILLUSTRATIVE ONLY

28. 3. Instruments and application 28

29. Many existing instruments can apply to digital platforms

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31. Many existing instruments can apply to digital platforms

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33. 33 There are five key considerations in the application of instruments to digital platforms TopicConsiderations Existing/non-existing instruments What generic or sector specific regulation/instruments are already in place? Are areas not covered and should they be covered? Application and enforcement Are regulatory frameworks implemented, and are regulators actively enforcing, or attempting to enforce, regulation to digital platforms? Static/DynamicDigital platforms are in transition and require a more normative/functional approach instead of overly detailed regulation common to static markets. Risk/harm Ex ante/ex post Policy question on weight to be attached to certain public interests. Risk/harm approach can be used to assess innovation opportunities. SubsidiarityHow much space have (or should have) national governments to intervene with generic and sector-specific regulation, taking account of EU regulation? Time horizon: how much time does it take to coordinate on a European level (static/dynamic)?

34. Using the framework 34

35. 35 ILLUSTRATIVE ONLY The intended and unintended effects of instruments are assessed in a return-path analysis

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37. 37 Wrap-up and key messages Key messages from our study Look at the underlying characteristics of platforms and business models rather than trying to deal with digital platforms as single category Explore existing instruments and options that can be applied to digital platforms before considering new rules The analytical framework promotes completeness and consistency in policy development From characteristics to public interests and instruments And back to assess intended and unintended effects

38. Thank you for your attention! pieter.nooren@tno.nl report available at http://bit.ly/1OdotO6

39. Additional slides 39

40. 40 The pros and cons already hint at many areas where the government may have a role The platform economy offers me new opportunities My job is destroyed by the platform economy employees/entrepreneurs I benefit from the many advantages that platforms offer me I cannot trust platforms users/consumers Platforms offer me an opportunity to enter the market Platforms increase my dependency providers I have to compete harder on platforms, particularly on price

41. 41 The intended and unintended effects of instruments are assessed in a return-path analysis

42. Multiple platforms in audiovisual ecosystem 42