The Internet of Platforms and Walled Gardens: Implications for Openness and Neutrality
Posted: 26 Mar 2016
Date Written: March 25, 2016
This paper will examine developments in the Internet marketplace that limit and condition access in light of growing incentives to offer prioritized interconnection at a premium price. Commercially-driven interconnection and compensation arrangements support biased networks rather than open ones. Single ventures, such as Amazon, Facebook, Google and Netflix have exploited, “winner take all” networking externalities resulting in the creation of dominant platforms and walled gardens. Advocates for network neutrality claim that limited and “pay to play” access will threaten a competitive marketplace of ideas by imposing higher costs on unaffiliated, disfavored and cash-poor content providers. Opponents argue that Internet Service Providers (“ISPs”) should have the flexibility to customize services and accrue marketplace rewards for superior products and services.
The paper identifies four types of government responses to price and quality of service discrimination that can exploit, or remedy choke points within the Internet ecosystem where large volumes of traffic have to traverse a single ISP network, or service provider platform. Governments can refrain from regulating access and accept aspects of market concentration as proper rewards to ventures offering desirable content and carriage services. Alternatively, they can impose access neutrality requirements to offset market-driven concentration and dominance. Between these poles, governments can apply antitrust/competition policy remedies, or rely on expert regulatory agencies to respond to complaints.
The paper examines case studies where ventures have created walled gardens and platforms as an intermediary between consumers and content providers. In some instances, government-imposed remedies offered a solution to a transitory, or possibly nonexistent problem. In other instances, governments have created an administrative process for responding to complaints and resolving valid disputes.
The paper concludes that governments have a duty to consumers for remedying marketplace distortions generated by firms engaging in anticompetitive practices. Rather than anticipate such an outcome, governments should offer remedies when and if they receive valid complaints documenting harm to consumers and competitors. Additionally, regulators should implement muscular transparency and truth in billing safeguards that possibly can prevent most conflicts, or help identify practices that harm consumers and competitors.
Keywords: open internet, network neutrality, platforms, walled gardens, interconnection, compensation arrangements
JEL Classification: K23, L51, L82, L86, L96
Suggested Citation: Suggested Citation