Year after year, the economic and financial power of the GAFA quartet of Internet platforms continues to increase. Which brings two questions back to the fore, again and again: what trends might emerge to counter this seemingly inexorable rise? And do we need regulations that apply specifically to platforms?
A quick reminder of what economists mean by platform economics (digital or not): multi-sided markets (i.e. involving interactions between two or more parties) with reciprocal “network effects”. So the more iPhones that Apple sells, for instance, the more attractive its app store becomes to developers (and so to users), and vice-versa. In digital sectors, this characteristic is typically combined with a reduction in fixed costs (software), generating increasing returns as the platform becomes more successful.
Network effects usually go hand in hand with another property: asymmetrical prices. If Apple is starting to earn substantial income from the App Store, its business model and profits are rooted chiefly in the high price of its iPhones. With ad-funded models, one side of the market operates as a free service. As we have seen with Apple, digital platforms are a very efficient means of fostering open innovation, and capitalising on innovations from third parties. All of these aspects, which go some way to explaining why “winner takes all” when it comes to platforms, naturally need to rely on the ability to maintain the role of intermediary, and continue to become more proficient at it. Otherwise, the platform’s customers and suppliers will begin to adopt multiple homes, before eventually moving on to another, better platform. The efficiency of the leading platforms is the very reason for the current ambivalence over how much they are serving the greater good. On the one hand are concerns that a dominant OS will abuse its position while, on the other, this popularity can also mean an opportunity for developers, and can have positive repercussions for consumers.
The dichotomy needs to be resolved by taking account of the Internet’s dynamics as a whole. Windows has been through a number of anti-trust investigations but, today, this is the mobile Internet which has moved down the priority.
Worth reading on this topic is the recent IDATE report on "The future of the Internet: 2025". It takes a detailed look at the key technologies for the coming years, and especially at how development scenarios will be shaped by key variables, such as the openness of the Internet ecosystems, or the impact of restrictive privacy or security-related public policies. Here, we will add two other events that take us beyond a GAFA-centric environment. First, 2014 saw a number of Internet powerhouses emerge from the shadows of the GAFA quartet: in China (Alibaba, Weibo…) and in Asia’s leading markets in general (Rakuten, Line…).
We cannot entirely discount the possibility of these players gradually coming to compete head on with their Western peers. Second, we need to consider the position held by new players moving into vertical markets, many of which have carved out a place of sector-specific intermediary – Uber and Airbnb being two prime examples – and which have no intention of being taken over by Google or Apple or the like.
Nevertheless, faced with the realisation that GAFA continue to become increasingly powerful, the inefficiency of antitrust laws and the regulatory asymmetries compared to those imposed on other players along the chain, the idea of regulation that applies specifically to platforms is gradually coming to the fore. It may not be a good idea. Competition law, even ex post, is not necessarily ineffectual.
Plus it will be no simple matter to define the contours of the platform sector. And extending existing sector-specific laws, such as those that apply to electronic communications, to make OTT companies and telcos subject to the same principles, would take us down a path where, as businesses become more and more digitised, every economic sector would be more or less governed by electronic communications laws. Keeping in mind that the upcoming review of the EU regulatory framework for electronic communications is expected to focus on network access conditions and interconnection – and probably put more emphasis on symmetrical regulation. Should voice and SMS products not be removed from the scope of the telecom sector’s ex ante regulation, rather than adding in competing OTT products such as Skype, Viber, WhatsApp, etc.?
It nonetheless remains that in sensitive areas for digital industry players, such as those governing contract law, taxation, public safety and privacy, we can very easily identify laws that should apply across the board, such as what we find in consumer products and the retail industry. Without having to produce laws that are specific to platforms, the current juncture could provide an opportunity to merge national legal provisions with regional (EU) and global ones, and to ensure that they apply equally to all players along the value chain
For the publication of the last study about "the future Internet in 2025" and the 15th edition of the DigiWorld Yearbook, IDATE is organizing a conference on the perspectives and key trends that will structure the digital economy for the next decade, DigiWorld Future
More informations about IDATE's expertise and events :
Senior Consultant - DigiWorld Institute by IDATE
Mobile Internet is here and geared for growth, despite the global recession. For 2016 the worldwide penetration rate of Mobile Internet will reach 34.7% - or 2.89 billion users - generating service revenues (apps and advertising) of 43.3 billion EUR. IDATE has published a report dedicated to the mobile Internet providing its readers with detailed information about market's structure, data & forecasts 2008-2016, player profiles and strategies. It also spotlights the current and upcoming trends and the different kinds of mobile Internet usages.
“Since the introduction of the Apple App Store, the focus in the mobile Internet has been mainly on the ‘Battle of the OS’. This is now seemingly all but over, with Apple and Google in a victorious duopoly. The scenario has now shifted to the ‘Battle of the platforms’, with players such as FaceBook and Amazon, who do not own an OS, joining the fray, and who are providing alternative platforms which aim to bypass the native OS system”, says Soichi Nakajima, senior consultant at IDATE
Focus on the tablet market
It is just recently in 2010 that the tablet market started growing with the introduction of Apple iPad. In 2010, around 19 million tablets were sold, 16 million of them by Apple, which even in 2011 remained the clear leader.
Contrary to the smartphone market where Android has reached a leader position, the tablet market is still by far dominated by one manufacturer. Apple indeed has the advantage of being the first mover and different factors have hindered any significant growth by Android.
- Even when the Android Honeycomb was released, the Tablet OS was still a beta version, which found it difficult to compete with the already mature iOS. Because of this beta status of Android for tablets, Google only distributed the OS to selected partners. This resulted in some manufacturers launching products powered by the smartphone version of Android. This also led to voices being raised against Google for not respecting the Open Source agreement that tied it to the developer community. Although several improvements were gradually brought to Honeycomb, the next version of Android, known as Ice Cream Sandwich (Android 4.0), should bring more maturity to the system.
- The delayed and restricted release of Honeycomb along with its associated SDK did not help, leading to a lack of available apps adapted to tablets. While Apple App Store and Google Android Market are more or less on a par on the smartphone segment, they are still worlds apart in terms of tablet specific app catalogues. As of end Q3 2011, the App Store referenced 140,000 different iPad specific apps while there were comparatively few of them on the Android market
- The fact that the tablet is a new segment has enabled other tablet operating systems to gain some visibility, such as QNX OS that powers RIM Playbook or WebOS which powered HP Touchpad devices. Although these tablets were not hugely successful, they brought differentiated user experience in a world where it is very difficult to differentiate oneself in the Android ecosystem
Worldwide tablet sales ('000)
In the near future, it can be expected that Apple will gradually lose its market share as their competitors gradually come up with better counter-offers. What happened on the smartphone market will be repeated on the tablet market, although probably at a quicker pace. On the smartphone market, it took two years before competitors started having true ‘iPhone killer’ products. For tablets we expect Android to pass iOS in terms of sales in 2013. One big question mark is related to legal disputes on the market for patent infringement issues.
Soichi Nakajima - Project Manager - firstname.lastname@example.org
Jeremy Georges - email@example.com