ITU/IDA ICT Regulators’ Leadership Retreat Preparing for tomorrow: Regulation in a data-driven connected world Session 2: The changing rules of the game.

ITU/IDA ICT Regulators’ Leadership Retreat

Preparing for tomorrow: Regulation in a data-driven connected world

Session 2: The changing rules of the game

Dr. John Ure

Director – TRPC Ltd (Singapore)Associate Prof. and Director - TRP, Social Science Research Centre

University of Hong Kong

Singapore 18-20 March 2015

Martha Lane Fox House of Lords and Founder of Lastminute.com 6th March 2015

“… it is in my strange new role in the House of Lords where, certainly, my fellow peers do not yet understand the internet.”

http://www.huffingtonpost.co.uk/2015/03/06/martha-lane-fox-internet_n_6818410.html?utm_hp_ref=uk-news

Warning!

Eight practical issues

1. Convergence and the

Regulator

2. Significant Market Power and Mergers

and Acquisitions

3. Technology and Copyright

4. Net Neutrality

5. Investment in Bandwidth

6. An Internet Economy

7. A Digital Economy

8. Data, Privacy, and

Security

1. Convergence and the Regulator

• Sector-specific vs. converged regulator: Were the advantages of converged regulation ever fully specified? Ever fully realised? One-stop shop of the public Spectrum allocation – comes from ITU/WRC recommendations Spectrum assignment ? – e.g. mobile network broadcast/streaming Silos or not within FCC? Ofcom? Etc. = horses for courses?

• Sector-specific vs. ICT sector-wide regulator: Regulators are the executors of policy makers (ministries) – implies ministries must be converged? IDA model (SG) – provides ICT back-up across the board OFCA model (HK) – confined to telecoms and broadcasting NRCs (EU) – harmonization is the key issue

1. Convergence and the

regulator

2. SMP and M&A

• How to define markets: In a non-linear and convergent world, what becomes a close substitute? Compete for audience? For revenue? (Subscription revenue? Usage revenue?

Ad-driven revenue?) How to distinguish cross-price elasticity of demand from sudden changes in fashions and behaviour of users?

Non-linear channels of communications = Fragmentation of markets, e.g. social media ups and downs

• How to estimate levels of competition: Is access the key strategic issue, given so many content and app alternatives? Is access a bottleneck? Non-traditional forms of access – e.g. WiFi + MVNOs (FB, Google in the USA) Is copyright stranglehold a source of unequal competition?

• M&A’s reflect different geographical markets – e.g. EU encouraging growth through consolidation? Other markets need more competition not less? US consolidation of RBOCs, but now competition from Internet companies

2. Significant Market Power

and Mergers and Acquisitions

3. Technology and Copyright

• Broadcast vs. streaming: Nielsen has agreed to revise audience ratings system to include non-linear audience estimates

Important for setting ad tariffs & therefore revenues Can copyright be enforceable over Paul Goldstein’s ‘Celestial Jukebox’?

(Copyright’s Highway: From Gutenberg to the Celestial Jukebox – 2003) – the public-private use distinction remains critical

3. Technology and Copyright

“… it would be a serious mistake for policy makers (and I include the courts) to reflexively reach for a new exemption or an expanded fair use any time copyright appears to stand in the way of the roll out of some new technology. It would be a mistake because the characteristic impediment in all of these cases is not copyright, but the transaction costs associated with securing licenses under copyright. The proper target, then, is not copyright, but transaction costs, and digital facilities, including the Internet, offer dramatic possibilities for reducing these transaction costs to close to zero.” (Paul Goldstein’s Copyright’s Highway: From Gutenberg to the Celestial Jukebox – 2003 - see: http://www.sociallyawareblog.com/?s=Paul+Goldstein)

4. Net Neutrality

• Utility model vs. Pragmatic model vs. No model?: How sustainable is a net neutrality model, and neutral with regard to which users? √0 = EU effort to square the circle? Allow ISPs to charge for higher speeds, but

preserve a minimum for all users = becomes new committed maximum? How to handle priority cases, e.g. health systems, early warnings, etc.? –

reserve channels/ at discounted prices to be vacated at short notice? Network management – how to recognize a smoke screen?

Red FlagsWhere: When management tools are applied in the transit between the different networks (source network and the carrier network) in the routers below the transport levelWhat: If blocking or termination is used rather than QoS degradationWho: If it is a unilateral decision of the ISP When: If the tool applied only to (i) the source/destination or (ii) the service provider (Scott Jordan and Arijit Ghosh of the University of California, Irvine – see http://broadbandtoolkit.org/3.7 )

4. Net Neutrality

5. Investment in Bandwidth

• Options “Bend” – Regulators do not legitimately determine market outcomes, but do

legitimately determine the creation of a market Bend in favour of the carriers – Happens for SOTEs; issue of ‘capture’; = off-the-

books capex for Government Bend in favour of new entrants – Free up facilities licences; simplify convergent

licensing; facilities sharing; make markets contestable. [cf. AT&T’s response to Google in US cities; HKT’s broadband response to competition in Hong Kong early 1990s, etc.] Hybrid models – Wholesale/retail – open access/open entry Innovation models – Facilitate use of new technologies, e.g. dynamic spectrum

assignment, WiFi nets + MVNOs, HetNets, etc.

Note: Carriers have options – utilities, mobile apps, Internet, CDNs, etc.

5. Investment in Bandwidth

6. An Internet Economy

• Basic connectivity – Remains a supply side issue for all developing countries; 1st hurdle = international bandwidth - How to increase? More licences?

Liberalize resale? – a key issue = bring down transit prices! 2nd hurdle = national backbone coverage – More licences? Capacity resale by

public utilities/private corporations? Sharing of towers? 3rd hurdle = nationwide coverage of mobile networks – Most citizens in

developing countries access Internet by wireless devices• Elasticity of demand – Encourage ISPs to realise latent demand

Price elasticity of access is low, income elasticity is higher – typically >0.4% overall? – FB and others trying to promote the value of usage via apps to team up with carriers

• IPv6 – Anticipate the Internet-of-Things!• Peering – Carrier-neutral IXPs needed; IPX for 4G LTE on its way?

6. An Internet Economy

7. The Digital Economy

The following based upon forthcoming ISOC (23 March 2015) ‘Unleashing the Potential of the Internet for ASEAN Economies’:

• Digital economy here refers to a stage of development wherein the Internet has become an embedded part of the underlying infrastructure of all major sectors of the economy• Key policy & regulatory challenge – How to leverage the Internet economy into a

digital economy and society? Two preconditions: Interconnection of networks (economic of scale or ‘network’ economies) –

e.g. telecoms, mobile, payments, banking, travel reservations, etc. RIOs, role of central bank, incentives, market forces, etc.

Interoperability (economies of scope) – Apps on different platforms work across different networks – e.g. mobile bank and payment networks, collaborative working for enterprise, e-government services, etc. Mostly market driven, but role for planning, especially in public services

7. A Digital Economy

8. Data, Privacy, and Security

• Data privacy – Can reliance upon ‘consent’ work in an interconnected world of Big Data, wearable devices, etc.?

Should the emphasis shift towards “accountability” of the data controller? (NB. EU focus on location; USA and APEC on accountability)

Anonymous vs. pseudonymous vs. self-reg. vs technology fixes to data usage? • Cross-border data – Costs of compliance rising as more privacy laws enacted

Need for alignment? For industry codes of practice = ex-post regs.• Localization requirements – Part security (unrealistic?) and part protection of local

industry Keep FDI open for partnerships; “warehouse” for sensitive data?; Cyber breaches reporting? Cyber liability schemes?

Based upon ACCA/APCC (2014) Report on Cloud Data Regulations A contribution on how to reduce the compliancy costs of Cross-Border Data Transfers http://trpc.biz/report-on-cloud-data-regulations/

8. Data Security, Privacy

8. Data, Privacy and Security

Summary of Data Privacy Laws and Data Transfer ProvisionsY/N means laws agreed but not yet implemented

Country General law on

personal data

privacy protection

Separate regulator

Register of data

controller

Sector- specific

regulation

“White list” countries or requirement

on data controllers to ensure

protection on data

transfers

Individual consent required for data

transfers

Contractobligations

accepted as reason

for data transfers

Companies required to appoint

‘Data Protection

Officer’

Australia Y Y Y Y Y Y Y NNew

ZealandY Y N Y Y Y Y Y

India N N N Y Y Y Y YIndonesia Proposed N N Y N Proposed N N

Hong Kong Y Y Y/N Y Y/N Y Y NJapan Y N N Y Y Y Y N

Malaysia Y Y Y Y Y Y Y NPhilippines Y/N Y/N N Y Y Y Y YSingapore Y Y N Y Y Y Y Y

South Korea

Y N N Y Y Y Y Y

Taiwan Y N N Y Y Y Y NThailand Y N N Y Y Y Y N

EU Y Y Y Y Y Y Y ProposedUK Y Y Y Y Y Y Y Y

USA N FTC N Y N By sector Y Varies

8. Data Security, Privacy

Questions

Thank YouDr. John Ure

[email protected]