Posts Tagged ‘Cloud’

Soft Law: Google & The Coffice

The EU regulators should settle the long running case[1] against Google. They should present Google with the opportunity to amend any alleged or putative anti-competitive practices. Markets are evolving eco-systems – contest, combat and scramble market systems[2] – and new markets are created by technology. The challenge for the law is how to handle technology not in terms of the application of black letter competition or antitrust law but in terms of how differences in company treatment can be justified. Technology impacts on existing markets, it creates new commodities, it displaces old commodities, and in some respects a sceptic could begin an economic analysis by disputing the very premise of a market as understood in this case. Is there an alternative?

Frozen Markets

Yes. In the book Political Economy of Law we introduced the concept of a frozen market.  If you are reading this Blog on a laptop or smartphone while sipping coffee conducting business in your favourite coffee house – you are in a ‘coffice’ – half coffee half office[3] facilitated by the smart technology created by Google and myriads of new and evolving companies. As an antitrust practitioner you can recognize a frozen market (empirically) as the market with zero prices, long-run marginal cost converging to zero, scope economies in functionalities, time dependent consumer preferences, aged competition, technology convergence and average fixed costs declining.

A frozen market is a market that evolves as companies like Google, Apple, Amazon, Microsoft, Baidu, Uber, Facebook, Airbnb, LinkedIn, Twitter, Spotify, Symphony inter alia, discover new products, new services, new production and delivery processes. Former beliefs about competing and innovating change as end-user coffice workers demand more and firms risk lagging behind the technology curve. In traditional markets monopolies were transparent and the impact of monopoly power, for example, was defined in terms of alleged higher monopoly prices. However the new architecture of the Internet and cloud computing makes centralised control of services going over IP technology almost impossible. Using IP technology information can quickly reroute around and within specific countries. Regulators will not be able to implement rules on products and services in the evolving frozen markets. EU competition and antitrust law runs the risk of lagging behind technology companies. The treatment of personal data and the owneship of the data is an equally important topic.

Legal Principles to Adapt

Google today, new start-ups tomorrow are companies in a frozen market, companies that evolve from a latent underbelly of technology struggling to meet new challenges and set new standards in a modern evolving economy. In disputing the very premise of a market as understood in antitrust a case could be made that Google is neither an abuse of dominance nor a monopolist case; the perfect ‘frozen’ market does not imply perfect competition – the bedrock of modern antitrust. Rather, Google is a data-driven platform, an information pharaoh facilitating new innovative firms in the sharing economy, start-ups touching every aspect of our daily life. It is the creator of a momentum effect across myriads of multiple goods and services. Start-ups search for growth in an eco-system as we breathe for life with the intensity and frequency of effort and investment to affect our eco-system of life both human and economic. Technology is of the essence. Legal principles are adapting to reflect both the concept of a market as an evolving sharing eco-system but more needs to be done.

Indeed the intricacies and entanglement of engagement that companies face with Google provide a network of unavoidable transaction costs and insurmountable gains and leverage. This allows start-ups to grow exponentially in a technology convergence type of competition where cooperation and joint enterprising is more the norm than competing as frozen markets ‘thaw’ out to create new and unimagined products and services. There appears to be some resistance in the inn of black law antitrust for an alternative definition of a market as an evolving eco-system despite the importance of evolving technology to economic activity and to the innovation process.

Soft law

There is also a need to redefine ‘competitor’ in an era of rapid innovation and technological change. Arguably there is no black letter law directly germane to Google activities in the 21st century nor should there be an unquestioning and unchecked progress of Google and others in the technology market – but every effort should be made to amend, adapt the black letter law to facilitate rather than retard Google and the leveraged industries it has helped to create. Regulators should benchmark Google against a soft law of zero prices, long-run marginal costs converging to zero, economies of scope in functionalities, time dependent consumer preferences, aged competition, technology convergence and average fixed costs declining.

We need a soft law approach to Google. There is a need for further integration of the economics of technology and information markets into antitrust and legal reasoning with less focus and emphasis on competition in the product market and more focus on market systems. In the nineteenth century Alexis de Tocqueville once remarked[4] that ‘only a newspaper can put the same thought at the same time before a thousand readers (p517)’. Today, in the 21st century, Google and the Internet are doing that and, at an alarming speed. Ultimately, in assessing the merits of any case centred on geography, frozen markets and the role of technology, cloud computing and Internet information, law may be as relevant as the colour of the judge’s eyes.

[1] Check

[2] Described in McNutt (2014) Decoding Strategy

[3] Read

[4] Alexis de Tocqueville’s 1841 classic text: Of Democracy in America, vol 1 and 2.

Who Owns our Personal Data?

 Who Owns our Personal Data?

Personal information and data stored in the cloud have an inherent high ‘tradable’ value – they facilitate the discovery of patterns.  We trust the providers and processors and distributors of the data, they retrieve our personal data and they can and do use it. Our data is now a tradable asset. But who owns the information? In Chapter 12 of our 2010 book Political Economy of Law we had discussed property rights and consumer e-needs in an Internet era arguing for the integration of the economics of information into legal reasoning. There is a new challenge for the law, relying on ‘material facts at time period t when technology has already taken the market to time period t+T (pp306)’. Google believes that the information it is harvesting is its own by virtue of the harvesting. But you and I, as e-consumers, have claim rights to our personal data. Data exchange has become a transaction and we need to ask: who benefits from the trade in our personal data?

At the recent Midland’s Think Tank in Mullingar, Ireland, I raised this issue in the context of how we could use this market exchange to our advantage in Ireland? A cloud services free trade zone [FTZ] in personal data and data patterns was presented as worthy of consideration.

At the Think Tank a range of interesting presentations were outlined and provided a great platform to showcase the greatest technology advance since the 1980s digital revolution – the Internet and all its applications.  The Internet is part of our daily lives. Not only is it the screen in front of us but also the back infrastructure of wires and machines.  We were told that there is an exponential growth in data and a reliance on data. Individuals are outsourcing memory to smart devices such as smartphones and tablets; we are reliant on pre-authorised smartcards, buying tools and Apps to support basic queries and purchases. SEPA when rolled out will smooth electronic transactions. Companies are migrating from in-house IT to outsourcing data storage.

We have become datified…..

In the June 2013 edition of Foreign Affairs the authors Cukier and Mayer-Schoenberger argued that we have become datified – Google’s augmented-reality glasses datify our gaze, Twitter datifies our thoughts and LinkedIN and Facebook datify our professional and personal networks. Datification, we contend, is a pre-requisite for third parties as they begin to extract an inherent ‘tradable’ value in our data patterns. But who owns the information? Do Google and Facebook, for example, own our data?  The EU Commission in their definition of ‘personal data’ in the Internet era are debating the traditional rules of data protection viz 2014 General Data Protection Regulation. Commissioner for Justice, Viviane Reding, commented recently in Global Insight that ‘personal data is the currency of the digital economy’ and that by 2020 it will account for 8% of EU-27 GDP.

Our data is at least worth the equivalent of 8% of EU-27 GDP before exchange and trading. Tradable personal data is a good example of the frozen market concept introduced in Political Economy of Law. Frozen markets uniquely evolve from ‘a latent underbelly of technology struggling to meet new challenges and set new standards in a modern economy (pp312)’. We should recognise the frozen market and persuade governments to transfer the trade in personal data to a cloud services free trade zone in personal data and data patterns.  With so many start-ups and legacy IT companies in Ireland, there may be an opportunity to bring them all together under one umbrella – a cloud services free trade zone, providing storage solutions, security and surveillance capabilities. The cloud zone could be designed as a ‘special services’ zone similar to the Shannon FTZ.  All IT companies registered would enjoy a 3 -5 year sunset clause of special tax incentives for employing IT staff. Information would be stored and processed into data patterns in the cloud zone. It is only when the data is traded does it become subject to Irish value-added tax or custom duties.

Free Trade Zone in Personal Data…

Mixing a tablespoon of skilled labour with a dose of FTZ is a recipe for baking the projected 8% of EU-27 GDP into an employment cake of highly productive Stakhanovite workers in the age of automation, technology and innovation.

One way to integrate the complexity and potential of the cloud is the organisation of a cloud free trade zone, subject to legal, regulatory and environmental issues. It could be established under an Irish or pan-European variant of the US inspired 2009 Alternative Site Framework [ASF] initiative, by re-organising the Shannon FTZ into an alternative site framework in cloud services spread across ‘magnet sites’ from Mullingar to the Inishowen Peninsula in Donegal. In this the 50th anniversary year of the Shannon FTZ it could be part of planning for the next fifty years of economic growth in Ireland reliant in part on personal data as a tradable asset.  Data security is paramount and our reliance on the data-keepers is dependent on trust and on transparency in their use of our personal data. A cloud services FTZ in personal data could provide both trust and transparency. Questions may arise – do we really own our personal data patterns? Who benefits from any trade in our personal data? Answers should be diverted into exploring options that will create new job opportunities in an Internet age characterised by a shrinking role for human labour.