Digital Platforms: A Practical Framework for Evaluating Policy Options
32 Pages Posted: 17 Mar 2016 Last revised: 10 Aug 2016
Date Written: August 9, 2016
The increasing economic and societal impact of digital platforms, such as Google, Apple, Uber and Airbnb, raises a number of questions for policy makers. On the one hand, digital platforms offer efficiencies and opportunities for innovation. On the other hand, they challenge existing policy frameworks by disrupting markets. Questions are raised whether the current regulatory approaches and instruments suffice to promote and safeguard public interests. We have developed a practical framework that provides structure and guidance to policy makers who design policies for the digital economy. Our framework differs from other approaches in that we take the digital business models of platforms as the starting point for our analysis. The framework consists of three pillars:
1. Platform characteristics that capture the various technical and business aspects of platforms, such as the revenue model (direct payment, advertising, revenue share), network effects, use of data (internal, external, curation/editorial control) and dependence of other companies on a platform.
2. Public interests categorized in four broad areas: competition and innovation, consumer interests, freedom from improper influence, and integrity and continuity of applications.
3. Policy options broadly divided in three categories: removing obsolete instruments, using existing instruments (e.g., enforcing them stricter, tailoring their application to the digital economy) and adopting new instruments.
The analysis of a platform case starts with determining the platform characteristics, relating each of these to the public interests, and formulating policy options. Then, the framework invokes a return-path analysis for assessing a) how the interventions affect the business model, b) whether it has the desired effect on public interests, and c) does not have undesired side-effects on public interests. In this way, the analytical framework gives policymakers a practical tool for consistent and balanced decision making in the context of digital platforms. The framework has been applied to a number of case studies in the European context and puts forward two key messages for the current national and European discussions on digital platforms. First, one should look at the underlying characteristics of platforms rather than trying to deal with digital platforms as single category. In particular, policy makers should steer clear of attempts to force digital platforms into a single category, as the positive and negative impacts on public interests differ from case to case. Second, policy makers should explore existing rules and policy options, as they seem fit to deal with several characteristics of digital platforms in a time frame that matches the rapid development of platform technologies and business models.
Keywords: digital platforms, digital economy, business model, public interests, policy options
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