Page 132 - Trends in Telecommunication Reform 2016

4.5.2.3 Transparency rules (labeling 4.5.2.4 Market power in procurement decisions
requirements)
The government may favor interoperable products
In order to reduce potential information or services when undertaking procurement
asymmetries, the government can use a traditional decisions, leading the market to adopt the
approach aimed at fostering transparency. It can interoperable solutions. Such an approach
mandate the disclosure of information about requires that the government possess substantial
the interop characteristics of a certain product purchasing power in the relevant market. This is
or service. Again, such regulation may vary in apparent in the move toward government use of
several ways, including the characteristics and cloud services, where governments are investing
appearance of the information to be disclosed. significant resources in moving services and data
The government need not establish transparency to third-party, cloud-based systems.
in "specific" legislation addressing interoperability
in a certain area. Such regulation could be -- and Cloud computing service providers, however, are
often already is, at least partially -- implemented interested in making their services as “sticky”
pursuant to consumer protection or competition as possible to minimize loss of customers to
law. competitors. Ultimately, governments can lock
themselves into a particular cloud service provider.
Although often not mandatory, certification In some cases, a fear of lock-in has proven to
programs often serve this role of bringing be a drag on the market, scaring away potential
transparency to interoperability. For example, after customers. This has been the case in Europe’s
the ITU set the home networking standard G.9954 market for cloud computing services. For that
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for existing-wire, multimedia home networking, reason, governments can try to influence the
the HomePNA association began certifying devices market by hiring only companies that support data
for compliance with the standard. Similarly, interoperability. This approach was described in
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the IEEE created a program to certify products the European Commission’s Digital Single Market
conforming to ITU-T Recommendation G.8265.1 report, which notes that the use of procurement
(relating to synchronization of mobile backhaul power is often the most effective way to translate
networks). In neither case was transparency standards into actual interoperability. 50
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explicitly mandated, but increasing transparency
about interoperability was necessary for those in This approach is effective only when a
compliance with the standards to maximize the government's procurement decisions have a
benefits of their compliance. considerable and lasting market impact. It may
turn out to be relatively inefficient when the
Because labeling requirements contribute to government has to choose between an offer
interoperability in indirect ways, their effectiveness with lower upfront costs and an offer with higher
is difficult to assess. Much depends on the levels of interoperability. The flexibility of the
design of the labeling provisions and how well procurement approach is comparatively low,
they balance between information insufficiency because the exercise of procurement power may
and overload. Recent research suggests that create a technological lock-in on the part of the
information needs to be embedded in consumer government (or else cause significant costs if the
decision-making processes in order to be effective. exercise of procurement power is to be repeated).
While there are monitoring and enforcement
costs associated with labeling requirements, it 4.5.2.5 Competition law
is likely that they are more efficient overall than
the regulatory approaches outlined previously. Interoperability also can be achieved through an
Finally, the flexibility of labeling requirements is ex-post intervention grounded in competition
high, given the indirect nature of the approach law. The refusal of a dominant market player
and, therefore, the limited conflict with future to disclose interoperability information may be
technological developments.
considered an abuse of that dominant position.
Even when a company discloses interoperability
information at the technical layer, competition law
still may prevent anticompetitive practices at the
data layer.

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