French proposals to tackle internet regulation are half-right and half-wrong, writes James Waterworth, arguing that there is a danger in the idea of prescribing too much control over the web.
James Waterworth is the vice-president of the Computer & Communications Industry Association, based in Brussels
Over the 20 years since the invention of the World Wide Web there is barely an industry, a state or a society that has not been challenged to some degree by this new, general purpose, technology.
For some the loosening of the control has been liberating: the citizen has an enhanced ability to scrutinise and interact with leaders; the consumer can more easily transact with a greater range of businesses; innovative business can more quickly identify and exploit niches.
These opportunities work both ways however and online life also provides opportunities for those with dubious aims. Economically there are winners and losers. There is a new generation of industrial success stories from Spotify to Etsy and Facebook. But what next?
Proposals that were made by the French government in the run up to last month’s (Digital) European Council were simultaneously proactive and pessimistic. They proactively sought to build a policy framework for continued European success in the Internet economy; they were pessimistic because they (wrongly) assumed that the disruptors of the last decade will not be disrupted themselves.
Internet markets are typified by dramatic change. Cool factor and market share have passed from one apparently unassailable company to another, witness MySpace being overtaken by Facebook, Flickr by Instagram and Nokia and Blackberry by Apple and Samsung. New products, services and markets are constantly invented: Twitter has not replaced another company as market leader. Rather, it supplements and competes with all other modes of communication.
Most concerning among the proposals floated by France is the vague idea of ‘platform neutrality’: demanding Internet platforms like app stores, social networks, search engines and ecommerce sites meet certain publicly specified criteria, whether to achieve economic, social or political ends. Such regulation would, supposedly, facilitate the emergence of European Internet platforms and guarantee ‘open access’ to users.
It is not clear how regulating online platforms might help new, competing, ones to emerge. Given the range of competing services available online it is not clear why regulation is necessary: in such fluid markets will consumer preference not decide the winners and losers and force firms to adapt and localise their offer?
Rather, by ensuring that the platform of platforms, the Internet itself, is kept open, by introducing net neutrality safeguards, innovators and consumers have their greatest protection.
While the idea of regulating for platform neutrality is an unnecessary concept that smacks of protectionism, the issue of how to regulate the behaviour of companies, states and individuals online is a real one, and here the French approach hit upon something: the need for speed. Fleur Pellerin has publicly bemoaned the 10 years it took to reach a settlement in the competition case against Microsoft and must be concerned that the case against Google may also drag on. In such a fast paced environment consumers, citizens and authorities cannot afford to wait a decade. She is right to call for flexibility and speed.
Regulation in the Internet era requires a number of complementary instruments, used in different proportions to the past.
Firstly, European Union legislation has its place, not least to bind the single market, but a five-year process means that the world you are regulating for has moved on by the time law is enforced. Its relative inflexibility means it should be used sparingly.
Secondly, competition enforcement will remain a vital tool. In Internet markets this will mean not only being able to identify abuses, but also being able to resolve them rapidly. Lengthy competition cases will likely resolve problems related to services that are no longer market leading, in markets that may no longer exist.
Thirdly, voluntary approaches allow policymakers and companies to remedy problems in a timely fashion. They should not replace, but complement, democratic processes. They also need transparent oversight.
The Internet economy is buoyant. Fostering the right framework that encourages rapid business creation, particularly for Internet start-ups will allow Europe to extract even more value from the talent we have. Polish antiques sellers, makers of traditional Bavarian costumes and Spanish jewellers all sell well beyond their home markets because of the Internet.
October’s European Council ultimately said nothing radical on the Internet economy, but successive controversies mean these debates will resurface. When control is necessary the tools of regulation need to be used differently from the past. Policymakers should adapt to the new conditions for innovation and ensure that business across Europe are making the most of the new tools at their disposal. There is no time to be lost.