Page 106 - Trends in Telecommunication Reform 2016

in the context of M2M, where there is continued users with very high bandwidth or reliability
demand for telephone numbering resources for requirements may be affected by neutrality
vending machines, smart meters, and in vehicle rules that limit the ability of telecommunication
communications modules. companies to discriminate between Internet data
from different sources. Such rules usually still
allow telecommunication providers to offer such
3.5.4 Competition customers “specialized services” with specific
speed or reliability guarantees . The terms
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IoT technologies likely will have a range of impacts attached to such services, however, will be a key
on the competitiveness of different markets. In the area of review for competition regulators .
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short term, firms adopting IoT systems will have
better information on their business processes, In the longer term, an important factor affecting
enabling an increase in efficiency and more flexible competitiveness of IoT systems is the extent to
responses to supply, processing and demand which end users can gain access to the raw data
shocks. This could strengthen the market position gathered and stored by components. Systems
of larger firms that have greater access to capital usually process sensor data extensively to
(to build their own IoT infrastructures) or brand make it more useful to users. While this makes
loyalty. Some products will have network effects systems more user-friendly, it reduces the users’
– i.e., the purchase of a product will increase its ability to transfer data to different providers if a
value to all other purchasers. A good example of better service is offered (or to understand what
this is telephone service, where a new customer inferences could be drawn about them from the
can call and be called by all existing customers. data) . It also makes it more difficult for end-users
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With network effects, greater sales volumes to combine systems from different providers. This
can increase the likelihood of consumers being could become a competition issue if a provider
locked in to existing suppliers – especially if the becomes dominant in one area and tries to extend
supplier uses non-standard interfaces and sells that dominance into other areas by blocking
complementary services . interoperability with competitors’ systems.
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Over time, if IoT technology is adopted in ways One example of regulatory activity to promote
that require high capital spending, increase firms’ competition is in Rep. of Korea, where the
pricing power, or strengthen network effects, government’s Telecommunications Strategy
then early adopters can drive out competitors. Council has the responsibility to adapt existing
Market structure will also be affected if large laws and regulations to ensure a liberal and
companies can build their own IoT systems but competitive industrial environment for IoT. Where
smaller companies have to subscribe to them or the Council finds regulations that hinder ICT
connect to networks operated by larger firms. convergence, it can request related ministries
If a “core” of large businesses adopts IoT, this to improve these regulations. For new products
could increase competition between them while and services, attention will be given to prompt
reducing competition between core and peripheral processing and interim licensing .
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firms. This could benefit consumers by turning
quality-based competition into price competition. At this relatively early stage of IoT market
But if firms feel they have to adopt IoT simply development, it is not clear whether it will
because competitors have, this could lead to support “more than a relatively small number of
over-investment by incumbent firms and reduced very large players,” as is the case with existing
market entry by firms not willing to make this Internet markets such as search and advertising.
investment . Competition regulators will need to monitor
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whether ex post investigations of market abuse
The terms on which IoT service providers can will be sufficient to foster a competitive market
access customers through the public Internet will and rapid innovation, including the ability of start-
have a significant impact on their ability to enter ups and individual entrepreneurs to create new
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new markets. Baseline access could be protected products and services .
by “network neutrality” rules that have been
implemented by communications regulators in
the United States, the EU, and elsewhere. IoT

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