Regulating Digital Platforms

In this issue we pursue our exploration of whether and how digital platforms, especially digital platforms as applied to the network industries, should and could be regulated. Indeed, as of recently, attention paid to these emerging digital platforms is exploding. Most of the related publications aim at making recommendations as to whether, and if yes, how to regulate these digital platforms in the interest of the consumer, the citizen, the public economy and even public values. Some of these recommendations may be drawn quite hastily, triggered by scandals and other (geo-)political considerations.

The four contributing authors, all professors, will take a step back and look at where we stand in terms of the more academic debate on digital platforms, especially on these platforms that clearly have public (service) implications. In turn, they will apply economic, competition, legal and political perspectives on the regulation of digital platforms and try to derive from there the current state of the debate. In particular, they want to crystalize what we already know – and therefore have sufficient reasons to regulate – and what we do not know yet.

In short, this issue should serve as another contribution to the current debate about the regulation of digital platforms, in particular digital platforms applied to infrastructures and public services.

This special issue opens with an article by Montero, who analyses the regulation of a new model of industrial organisation, which should be built on the understanding of the role of platforms as intermediaries, on a massive scale, with the power to coordinate markets without owning the assets for the provision of services.

Köksal summarises the current EU and US approaches towards the digital platforms, and then underlines two challenging areas in which competition policy tools should be actively applied.

Finger analyses the algorithms platforms use to constantly increase their market power. By doing so, platforms, thanks to their algorithms, make choices on behalf of their customers – choices that are of a public policy nature. Finger discovers, should platforms and/or their underlying algorithms be regulated, and if so, how?

Chakravorty examines how economists view digital platforms as digital markets with an intermediary platform and then considers some studies that discuss the general challenges in regulating digital platforms.

Digital Platforms – The New Network Industries? How to regulate them?

Digitalisation is transforming all industries, including the network industries. It is creating a new model of industrial organisation using online platform as intermediaries for multisided markets. As a matter of fact, digital platforms display all characteristics of the traditional network industries: network effects, efficiency, scale, concentration, market power, etc.

The involvement of online platforms in the network industries benefits consumers by fulfilling unmet needs, often efficiently and at low cost. Platforms do this partly by exploiting access to existing network infrastructures that are often vital for national economic growth and wellbeing. However, if online platforms are allowed to sideline traditional network operators, it may mean that vital investment in building and maintaining the infrastructures on which these markets are founded becomes unsustainable in the long-term.

Another pertinent issue concerns the regulatory approach to platforms, as the success of online platforms is achieved, in part, by exploiting regulatory environments that place incumbent firms at a disadvantage. There is a debate as to whether platforms should be subject to the same regulatory obligations as traditional network players, and whether platforms should have access to network services under regulated terms.

Following the 8th Conference on Regulation of Infrastructures, which took place on June 20 and 21, 2019 with a particular focus on the key challenges of digitalisation for traditional network industries in the transport, telecoms, water and energy sectors, four papers were selected for this publication due to their topical relevance.

This special issue opens with an introductory article by the Members of the Scientific Committee of the conference, Professors of the Florence School of Regulation, Montero and Finger, who consider digital platforms as the new network industries and explore the network effects created by platforms.

Fuentes et al. looks at the electricity sector, which is navigating major disruptions that are changing the regulatory and business landscape. The paper addresses whether these changes would help or hinder electrification, taking transportation as an example.

Becchis, Postiglione and Valerio examine how platforms are giving rise to a series of regulatory challenges, with a focus on their legal definition, labour-related issues in the digital sphere and the role of data between privacy protection and competition.

Knieps analyses the problem of division of labour among all-IP broadband network providers, virtual network service providers and platform operators concomitant with the implementation of adequate governance structures.

Ducuing analyses the phenomenon, when several (contemplated) data sharing legal regimes appear to essentially recognise and regulate data as an infrastructure, although without explicit reference to this notion. Her research is based on three cases, namely the Open Data and PSI Directive, the on-going institutional discussion on the governance of in-vehicle data and the freshly adopted regulation of data in the Electricity Directive.

Current Issues in Turkish Network Industries

In Turkey, following the economic crisis in 2001, comprehensive market-based reforms were launched in several sectors, including the network industries, such as telecommunications, electricity, and aviation. Privatisation of certain units has enabled the stimulation of investments in different segments and the establishment of sector-specific regulatory authorities, which in turn have resulted in significant improvements. However, the introduction of competition and regulatory achievements in the electricity and the telecommunications industries, have been slower than initially anticipated. Excessive infrastructural investments have created uncertainty around the future of the airline industry. Moreover, emerging platforms on the internet are witnessing problematic regulatory interventions.

This special issue of the Network Industries Quarterly will be dedicated to papers related to these developments currently observed across the network industries in Turkey. Academics and practitioners discuss the aforementioned evolutions in the electricity, broadcasting, airline, and platform industries.

Köksal and Uçar examine the public interventions towards the platform industries in Turkey. They emphasise the influence of interest groups and potential welfare effects of those interventions.

Gökdemir assesses the controversial decision of Turkish Competition Authority on sahibinden.com, which is the biggest classified advertisement platform in Turkey.

Ardıyok and Sağmanlıgil evaluate the draft regulation of Internet broadcasting in Turkey by including a comparison with other countries’ regulations.

Delibaşı provides a feasibility analysis on the Istanbul Airport by simulating the number of passengers under two different scenarios for the following thirty years.

Eroğlu analyses whether it is possible to increase renewable energy production without incentives and excessive regulation. He examines unlicensed electricity regulation in Turkey as an example.

Regulation of the Railway Industry

Across the world, railways are poised to face new challenges, as all transport modes are transformed by technological innovations, liberalisation, competition with other modes of transport and most recently by digitalisation. Consequently, the railway industry is required to increase efficiency while ensuring security and safety, as it has to address multimodality, such as buses, as well as compete with new transport modes, such as car-sharing. Regulation of the railway industry and its various dimensions, not the least competition, is central factor in the process of its transformation and will ultimately decide whether railways will or will not increase their modal share.

This issue of the Network Industries Quarterly (NIQ) is dedicated to some of the best papers presented at the Florence Conference on the Regulation of Railways, which took place on November 16 and 17, 2018. Selected academics and practitioners were invited to Florence to discuss the latest developments in the field of railway regulation, such as competition in the market, role of regulatory agencies and economic perspectives.

Vicente Mampel assesses the content of lease agreements concluded by the state-owned rolling stock operating company in compliance with the sectoral legislation.

Herfurth presents a brief result of a cross-sectional analysis of the full population of the 28 public transport authorities in charge of short-distance rail services in Germany.

Quinet and Brunel look at the role of climate change in the traditional cost – benefit analysis in France, and analyse the impact of the shadow price of carbon on the socioeconomic evaluation of rail projects.

Schmotz presents a research project that is to explore the shortcomings of cross-border passenger rail from an institutionalist perspective.