WIK conference platform bundling

Transcription

1 BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C. WIK conference platform bundling Tim Cowen

2 Outline Raise questions about the approach to date: products, packages and platforms. Emphasise the importance of platforms and ecosystems: platforms are more valuable than closed systems. See Apple iphone and apps. Raise the issue of platform bundling and the social policy tools the authorities can use.

3 7 layer model technology stack

4 Products, Packages and Platforms Products: hardware and software or separate individual products? When is a component not a component? When it is part of a package that makes up an economic product. (see Microsoft case). Packages: What is a package? A combination of products and services that together meet the customer s need. i.e. A package of Loosely-coupled economic products not a single independent economic product. Platforms: technology systems, often proprietary, but may be open, providing a basis for new and innovative products, packages and solutions to customers needs; significant supply side sunk costs and embedded technology, can be thought of as closely-coupled components. (e.g telecoms networks and cloud computing systems are technology platforms offered as a service ). All of the above are parts of a stack of technology. Vertical integration can promote engineering efficiency. What is the EU principle against which intervention is to be judged?

5 Bundling: prohibited (Art 102)when performed by Dominant firms. All products are bundles of components. However, only economic products are relevant for anti trust analysis. E.g sale of cellular devices involves a combination of handset and airtime. Is this an illegal bundle? Cellnet case? Access to platforms by 3 rd party apps developers may require app to closely couple with the hardware. IBM/Turbo Hercules case. See also Apple s iphone case.. Anti competitive bundling when one or more (monopoly) components are contained in the package, and the offering is exclusionary or exploitative. ( Telia Sonera 2011 case)

6 NB: costs and cost recovery Recovery of stand alone costs of the monopoly component may be enough to defend a case of bundling. BUT. This may now be questionable after Wanadoo and DT cases where the input costs were judged against the exclusionary effect on downstream markets. i.e. Even if internal input component costs are covered the effect may still be exclusionary unless the they cover the costs of a reasonably efficient downstream operator. How can you tell? See recent case law.: Telia Sonera ADSL case.

7 Platforms and platform bundling Anti-trust analysis tends to start with the product and ignore the platform. Product characteristics, price and substitutability by geography become the focus of enquiries, supply side factors often less important. True competition between major systems may be taking place and the authorities may miss that which hides in plain view: e.g. Sony Play Station and CD s and CD systems. Platforms include telcoms players based on underlying technology from Alcatel/Lucent, Siemens, Northern Telecom etc. Platforms at higher levels offered by Apple, Google, Microsoft(with interoperability), IBM, Oracle, VM Ware etc

8 Approach to date Prohibits exclusionary and exploitative abuse. Promotes and creates efficiency and competitive markets. Differs from the USA; no need to show Recoupment following predation. DT case rejects the approach in Trinko: Anti-trust can override telecoms regulation. In practice intervention that creates markets at wholesale level is accepted: anti-trust is frequently an overlay on regulation. Could lead to chilling of innovation for EU telcos.

9 EU: Digital Agenda/ US: National Institute for Science and Technology NIST shapes the environment: recognising need for data protection, data security, developing standards for interoperability between cloud platforms. Respects intellectual property rights. Supports competition in upper levels. EU: Digital Agenda agrees, and adds the need for interoperability where pervasive technology is controlled by significant market participants. Action Point 25. Prevents platform bundling? See IBM mainframe enquiry and the extension of mainframe to embrace the cloud computing. Cloud computing standards may address technology lock-in allow data portability and prevent platform bundling

10 Standards and interoperability Standards only naturally exist where there is a competitive market; or where the risks of not being able to capture the market are so great that they are shared with others. Standards exist by mandate of government to keep markets open: ITU standards ensure that communications systems interoperate; (nb that the ITU is an example of multilateral cooperation to ensure state to state interoperability for telephony and a forerunner of the UN and competition law). TCP/IP is a de facto standard that supports the Internet at above level 3 in the technology stack. Do technology platforms need to interoperate? Apple has its app store: developers complained that they were being excluded from the platform, EU intervened to support more objectivity in access/developers guidelines. Where should competition develop? A public policy question beyond traditional anti-trust?

11 Outline Raise questions about the approach to date: products packages and platforms. Emphasise the importance of platforms and ecosystems: platforms are more valuable than closed systems. See Apple iphone and apps. Raise the issue of platform bundling and the tools the authorities can use.

12 World Offices BEIJING FRANKFURT LOS ANGELES SINGAPORE Suite 608, Tower C2 Oriental Plaza No. 1 East Chang An Avenue Dong Cheng District Beijing China T: F: BRUSSELS NEO Building Rue Montoyer 51 Montoyerstraat B-1000 Brussels Belgium T: F: CHICAGO One South Dearborn Chicago, Illinois T: F: DALLAS 717 North Harwood Suite 3400 Dallas, Texas T: F: Taunusanlage Frankfurt am Main Germany T: F: GENEVA Rue de Lausanne 139 Sixth Floor 1202 Geneva Switzerland T: F: HONG KONG Level 39 Two Int l Finance Centre 8 Finance Street Central, Hong Kong T: F: LONDON Woolgate Exchange 25 Basinghall Street London, EC2V 5HA United Kingdom T: F: West Fifth Street Los Angeles, California T: F: NEW YORK 787 Seventh Avenue New York, New York T: F: PALO ALTO 1001 Page Mill Road Building 1 Palo Alto, California T: F: SAN FRANCISCO 555 California Street San Francisco, California T: F: SHANGHAI Suite 1901 Shui On Plaza 333 Middle Huai Hai Road Shanghai China T: F: Battery Road Suite Singapore T: F: SYDNEY Level 10, 7 Macquarie Place Sydney NSW 2000 Australia T: F: TOKYO Sidley Austin Nishikawa Foreign Law Joint Enterprise Marunouchi Building 23F 4-1, Marunouchi 2-chome Chiyoda-Ku, Tokyo Japan T: F: WASHINGTON, D.C K Street N.W. Washington, D.C T: F: Sidley Austin LLP, a Delaware limited liability partnership which operates at the firm s offices other than Chicago, London, Hong Kong, Singapore and Sydney, is affiliated with other partnerships, including Sidley Austin LLP, an Illinois limited liability partnership (Chicago); Sidley Austin LLP, a separate Delaware limited liability partnership (London); Sidley Austin LLP, a separate Delaware limited liability partnership (Singapore); Sidley Austin, a New York general partnership (Hong Kong); Sidley Austin, a Delaware general partnership of registered foreign lawyers restricted to practicing foreign law (Sydney); and Sidley Austin Nishikawa Foreign Law Joint Enterprise (Tokyo). The affiliated partnerships are referred to herein collectively as Sidley Austin, Sidley, or the firm.