On 15-16 June 2022, the Competition and Markets Authority (CMA) was hosting its first conference on new and evolving challenges in the tech industry and digital markets, and how competition and consumer agencies are developing technical capabilities and expertise to tackle these challenges.

CERRE Academic Co-Director, Jan Krämer, joined the Data, Technology and Analytics Conference along with a long list of expert speakers, such as world-leading external data and technology experts – academics, thinkers and industry figures, who will discuss the following topics:

• What should competition and consumer agencies be thinking about in terms of digital transformation?
• What is the future of the open, ‘privacy-first’ web?
• What role will there be for interoperability?
• The future – What are the most important technologies or trends that competition and consumer agencies should pay attention to?
• The external perspective – What are the possibilities for competition agencies with data, technology and analytics?

The conference was free to attend, and open to all virtually. It was livestreamed via an online platform, with full interactivity. A recording of the panel can be found here: https://www.youtube.com/watch?v=Iovsp5aHcuU&list=PLJREEEp2I-xckXWl5O-_BELnqA0tf1bu-&index=2&t=21606s

For Prof. Krämer it has been a pleasure and honor to participate in this conference and to be able to contribute his views on mandated #Interoperability of #digital #services. He made four fundamental points that caution against mandating interoperability between competing service (which is very different to interop of complementary services), like interop between messaging services:
1) Interoperability can never be perfect. Thus, significant network effects remain and consumers will still prefer to be on the larger network, where they can interact with full features.
2) Interoperability is technically very difficult in practice, especially when trying to make systems interoperable that already exist and were not designed with interop in mind. For example, making existing messaging services to interoperable will inevitably require compromises in security and privacy. It’s a technical fact.
3) Even of interop is achieved and a standard has been agreed, that standard will inevitably become deprecated very fast and create path dependencies in regulation. Innovation will require all actors to agree on a new standard, which creates a collective action problem. For example, faced with competition, WhatsApp rolled out E2E encryption over night to all users.  It could only do that because it did not have to obey (existing) standards. With mandated interop, a fundamental change like E2E encryption would not have been possible without years of standardization efforts and mutual agreement.
4) Interoperability reduces incentives to Multihoming. But MH is a powerful driver of market contestability. Unlike interop, It allows users to use the full set of features on each network. It does not require agreement on standards. Nor heavy handed regulatory oversight. MH is easy and cheap to do for many digital services. Many users have several messengers installed. If you want to reach a user on a different network, installing the other messenger can be done in minutes. No need for heavy handed regulation. While interop requires continued regulation and establishes only weak incentives to innovate, multihoming preserved competition for the market and thus strong incentives to innovate and compete.

Against this backdrop, horizontal interoperability has many pitfalls, is very costly to implement and to enforce and can even undermine competition. Regulators should focus attention on more promising interventions to discipline big tech, like vertical interoperability (eg allowing alternative app stores or payment systems) or data portability.

More details can be found in our recent report for Centre on Regulation in Europe (CERRE) here: https://cerre.eu/publications/interoperability-in-digital-markets/