Platforms and Policy in the Telecommunications and High-Technology Industry

Project manager: Joacim Tåg

In two-sided markets, platforms connect and facilitate transactions between separate groups of agents that value each others presence. Platforms are common in the telecommunications and high-technology sector. For example, Internet service providers connect consumers and companies providing services and software platforms (such as operating systems) connect consumers and companies developing applications. Platforms in these markets must serve both groups of customers and design pricing and business strategies so as to get both sides on board.

This research project aims to develop the theory of two-sided markets and use this theory to provide guidance for regulation and policy in the telecommunications and high-technology industry. The focus is two-fold.

1. To evaluate Net neutrality regulation on the Internet. An important feature of the Internet is that it can be characterized as a two-sided market. Since the inception of the Internet, information packets are transported on the Internet under “net neutrality,” a regime that does not distinguish in terms of price between bits or packets depending on the services that these bits and packets are used for. But recently, Internet broadband access providers in the Unites States have demanded rights to additional compensation for carrying valuable digital services. Granting them this would be a sharp departure from the net neutrality regime and has started an intensive debate about the underlying structure of the Internet and how communications companies operating the network should be regulated.

2. To develop theory and to evaluate policy relating to open and closed platforms. It is important to recognize that many software and hardware platforms in two-sided markets have a choice. They could allow external companies to interface with their product (and provide open platforms), or they could choose to close the interface (and provide closed platforms).

Period: 2008.

The project was part of a doctoral thesis at the Swedish School of Economics and Business Administration in Helsinki and was financed by the Ministry of Education in Finland and the Academy of Finland.

Publications

Tåg, Joacim (2009), "Paying to Remove Advertisements," IFN Working Paper No. 789 (published in Information Economics and Policy, Vol. 21, 245-252).

Tåg, Joacim (2008), "Efficiency and the provision of open platforms," IFN Working Paper No. 748.

Tåg, Joacim (2008), "Open versus closed platforms," IFN Working Paper No. 747.

Competition and Regulation in Electronic Communications

Project manager: Johan Stennek
Participant: Thomas Tangerås

The purpose of this research project is to contribute to the understanding of the determinants of interconnection charges in electronic communications and the effect of competition and regulatory policies on market conduct.

Broadly speaking, the purpose of this research project is to analyze three issues. First, how does the mobile telecom market function, and what is the need for public intervention? Despite the many sources of market failure in telecommunications, the benefits of public intervention are uncertain. In fact, there are estimates that the 26 US states with price controls had prices that where 15 percent higher than the states without price controls, holding other economic factors equal. Second, how should one evaluate the effects of political intervention in the mobile telecom industry? Concerning the new European regulatory framework such an evaluation is already scheduled to be started in about two years time. Third, how should the national regulatory agencies carry out their duties under the new regulatory framework, such as delineating markets, measuring market power and metering out appropriate remedies?

Period: 2005-2008.

Publications

Stennek, Johan and Thomas Tangerås (2007), "Better Regulation of Mobile Telecommunications", SIEPS European Policy Analysis No. 1, 2007.

Stennek, Johan and Thomas Tangerås (2006), "Competition vs. Regulation in Mobile Telecommunications", IFN Working Paper No. 685.
 

Globalization and Localization of Service Production