What’s up with interoperability?
Thanks to BEUC for organising a great symposium yesterday on digital competition law reform. This was my five-minute introduction to interoperability:
1. Interoperability has great potential as a pro-competitive intervention in digital markets, as recognised in a range of recent reviews (e.g. by Commissioner Vestager’s three special advisers in 2019, by the UK Competition & Markets Authority in its 2020 digital platforms market study, and the Stigler Center and US House antitrust subcommittee reviews). Fiona Scott-Morton and colleagues summarised it thus: “Mandated interoperability is a form of regulation that is less intrusive than many other forms and is particularly suited to digital business models and fast changing digital technology” (Equitable Interoperability: The ‘Super Tool’ of Digital Platform Governance, 2021).
2. Interoperability has been a cornerstone of EU telecoms regulation, and we are all familiar with it from the Internet itself, and many older services such as e-mail and the Web. It is also beginning to have a significant impact in financial regulation (through the EU’s second Payment Services Directive, and especially the UK’s Open Banking.)
3. Interoperability mandates need to be carefully designed to fit both the target market, and to minimise unintended consequences for other factors, such as privacy and security. The EU Digital Markets Act (DMA) does this for “core services” including operating systems, app stores, search engines, social media, and in particular detail for Number-Independent Interpersonal Communications Systems/NIICS (such as instant messaging.) While there was some negative reaction from US and UK security commentators to the EU institutions’ announcement of political agreement on the DMA, the issues they raised (such as the effect on end-to-end encryption) have already been addressed in the final Act.
4. The Bundeskartellamt’s interim report on NIICS interoperability found many existing larger providers and some smaller providers are opposed to interoperability mandates, but many SMEs and open source firms are keen. And VZVB found in a 2021 survey of German users that the two most important reasons for choosing messenger services are that it can reach the most contacts (78%) and that it can reach specific people/groups (41%). This is a high hurdle for new messenger services to overcome without an interoperability requirement for the very largest platforms such as WhatsApp (which, according to the same survey, is primarily used by 84% of respondents, well ahead of Facebook Messenger at 5%).
6. The DMA only affects the very largest firms (such as Google/Alphabet, Amazon, Facebook/Meta, Apple and Microsoft). I expect these designated “gatekeepers” (I’m thinking of two in particular) to fight the interoperability obligations furiously — although it might be in the interests of some of the “smaller” NIICS, esp. those provided by Google, to support them. The Commission will need really expert technical advice to distinguish genuine concerns over issues such as privacy/security from simple obstructionism.
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