Dear Readers,
This edition of the TechReg Chronicle® focuses on the issue of interoperability between technologies. Dating back to the 1970s and 1980s, regulatory remedies in technology-focused industries have often focused on “interoperability” in order to foster competition and address perceived foreclosure concerns deriving from the strength of incumbent companies. To this date, interoperability-type remedies are often mooted in order to address similar concerns.
The authors of the pieces in this edition of the Chronicle address the contemporary questions around the issue of interoperability as a remedy in modern tech markets.
Jay Ezrielev opens with a broad discussion of interoperability, noting that it is an essential mechanism of modern communication. However, he notes that not all interoperability is benign or efficiency-enhancing. Interoperability has an alternative role as a tool of regulatory policy for granting access to a closed network. Mandatory interoperability comes loaded with regulations that supplant market prices. Network access price regulation and the no self-preference rule are two such regulations. The resolution of this dilemma is key to understanding how interoperability can be implemented as a solution to the contemporary dilemmas where it is proposed today.
Although interoperability is usually associated with “Big Tech” markets such as operating systems or broader technology platforms, Cheyney O’Fallon & Avi Gopstein note that interoperability is also the last significant barrier to the full participation of distributed energy resources in electricity markets and operations. Enhancing interoperability to ease energy systems integration could potentially open opportunities for operational improvements and value creation in such markets. Interoperability could enable legacy assets to enter subsequent markets by equipping technical solutions purchased to meet present needs to continue delivering value even as public policy, operations, and market paradigms evolve.
Returning to the classic domain of interoperability, i.e. “Big Tech,” Luke Hogg notes how the concentration of the Internet economy behind the so-called “walled gardens” of select companies has led policymakers across the political spectrum to call for legislative action. In the author’s view, however, most legislation proposed thus far takes an excessively punitive approach to Big Tech that is unlikely to create the conditions necessary for a truly competitive digital environment. In his view, a better way to promote competition in digital markets would be by encouraging upstart companies to interoperate with dominant platforms.
Mitch Stoltz, on the other hand, makes the case for interoperability remedies in antitrust enforcement actions against Internet services. His article explains the problem of “gatekeeper” firms in Internet-related markets, and describes the ways that Internet services can interoperate with one another, including through “competitive compatibility” achieved without permission from an incumbent firm. It then lays out a spectrum of remedies that antitrust enforcers or private litigants can pursue to promote interoperability, from mandates on an incumbent firm to bans on interfering with a bona fide interoperator.
Finally, Cristian Santesteban notes how the U.S. Congress is currently considering legislation (in the form of the so-called “ACCESS Act”) that mandates interoperability in an effort to stimulate competition in digital markets such as social networking. In his view, however, as currently written, the legislation is likely to fail in its objective. The author’s key criticism is that it ignores one of the crucial forces that has allowed firms such as Meta (i.e. Facebook) to remain at the top of the social networking space: the indirect network effects from their rich streams of user-generated data that allow them to curate highly engaging content for their users.
In sum, the authors of the pieces in this week’s Chronicle address the question of interoperability from a broad set of perspectives. Although interoperability as a regulatory remedy was developed in a particular tech-focused context, it has found broader application; and is now being reflected in recent proposed legislative rules that could potentially be of broader application. It is a question that will doubtless be raised time and again, and the authors of the pieces bring valuable contributions to the ongoing debate.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team
