Regulating digital technology

Regulation governing the telecommunications sector is gradually being relaxed, but is still relatively strict. Regulations governing OTT companies, on the other hand, are still rather light but this is changing quite rapidly, especially in Europe, due to the growing influence of digital industry players over the economy as a whole, well beyond just the digital realm.

An economic climate that is friendly to dominant players, hence to regulation

OTT companies are accelerating the pace at which digital technology is spreading, especially with consumers and small and medium businesses, by providing inexpensive, innovative services, and the ability to distribute them on a massive scale to their users. But they are also a source of concern for public authorities, due to the singular role they play in managing private data, their financial and technological clout, and their diversification strategies which now extend well beyond the digital economy (including services that are only partly digitised). Their approach, one that combines software platform and marketplace, enables the creation of dominant players thanks to the underlying business models this entails.

US innovates, Europe regulates

Regulation targeting digital industry players in general is tending to expand, not to prevent market domination but potential abuses of those dominant positions. Without going as far as countries that are the furthest along in this area (Canada), Europe is serving as a vanguard for the rest of the world on key issues, with a now stronger data privacy regulation (coming into effect on 25 May 2018), progress on taxation and VAT (based on the country of operation and not of origin), and pioneer investigations into competition and platforms. But there is still little harmonisation between countries which are introducing their own strict regulations and recommendations (starting with France and Germany) and countries that are keeping a lighter hand when it comes to OTT companies, offering more alluring tax schemes (the Netherlands, Ireland, the UK) as a way to attract investments and jobs.

Accelerated pace of regulation

Applying taxation schemes to all OTT companies, and particularly to multinationals (including digital heavyweights) remains a very tricky affair, and authorities are treading cautiously here, despite the competition between European countries. The ‘Google tax’ has been under debate for years, without any really concrete action being taken. Its introduction could in fact favour top Internet companies, and penalise new entrants. Progress is much more swift on the issue of competition, however, and appears to be accelerating by leveraging non-sector-specific texts. Because they do not have a dedicated framework for governing platforms (still being drafted), competition authorities are taking measures on a case-by-case basis in the different marketplaces. Particularly in the crosshairs are businesses in the sharing economy which are quite new but being subjected to traditional sector-specific regulations – the restrictions imposed on Uber and Airbnb are a case in point. Generally speaking, regulation targeting Internet companies is expanding, while telecoms sector regulation is being relaxed, and thus showing the first signs of a possible convergence.

 
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