ICC policy statement on Regulatory Modernization in the Digital Economy
This policy statement explores principles for regulatory modernization for the digital economy and promotes a refreshed understanding of policy goals and market place facts, to ensure as much competition, investment and innovation across the ICT sector as possible. Given the imperative of business investment in delivering jobs and economic growth, as well as driving innovation and competition, regulators are encouraged to engage meaningfully with business throughout the policymaking process.
Setting the scene: Transformation and growth of the digital economy
Information and communication technology (ICT) and services have had a remarkable impact empowering individuals, transforming industries and economies, and bringing new ideas to governments. This transformation is more than mere digitization. It is more than converging services and industries, we are also seeing convergence across technologies, channels platforms and business models. This has brought unprecedented growth in flexible consumer access to communications and innovative applications in all industries via the Internet. The high levels of private sector deployment of new networks, services and applications supported by enhanced technologies and analytics have been driven by market liberalization, competition, investment and innovation. While critically important work remains ahead to realize the desired goal to connect all people and communities, achievements to date are profound in their transformational impact.
The digital economy is creating a transparent, inclusive and sustainable path for growth and development. It provides tools for transforming industries, services and economic structures, for open and accountable institutions; for partnerships and collaboration through extended networks; and for open and inclusive innovation . Globally, 82 percent of consumers are moving towards a networked lifestyle. To achieve the goals ahead, there must be a review of policymaking in the modern digital economy.
Globalization of the digital economy has brought unparalleled growth for all segments of the public and private sectors, enabling a globally accessible marketplace. Digital services and businesses have expanded their activities in parallel ways:
- Expanding geographical reach; the world is becoming a global market place for companies and communities both small and large, with companies of all sizes offering services across borders to a global customer base .
- Expanding into new or adjacent markets in all sectors is now easier and more costeffective; digital businesses have lower entry barriers compared to traditional “brick and mortar” business models, and have been able to quickly penetrate vast numbers of product markets, frequently using new business models that increase competition and consumer choice. Similarly emerging technologies like cloud computing have lowered both the cost and difficulty for entry to complex computing environments, by transforming fixed capital costs into operating costs in a pay as you consume model. This has also improved flexibility for businesses, by making it easy to add capacity, security and functionality.
- Increasing customer-centric services; as digital services expand markets globally, they also provide more customization to the individual’s needs and preferences. Concepts of customercentricity are a beneficial consequence of digital transformation.
Consequence of the digital economic transformation: The need for review and revision of outdated regulatory models
These trends have created remarkable growth, innovation and competition for the benefit of users and the global economy. Convergence and competition in digital markets have led to improved economic efficiency and productivity, fostered innovation, increased choice and lowered prices – benefiting consumers and businesses. Emerging technologies including big data, cloud computing and the Internet of things are driving new economic opportunity and enhancing societal benefit in applications including medical research, health care, logistics, urban planning, sustainable development and consumption.
At the same time, the rapid growth and pace of innovation both of new technologies and also convergence with existing ones have sometimes outpaced traditional regulatory models, which were often organized decades ago around silos for previously separate industries. As a result, public policies may not fully take into account the increased competition across former silos, which can now warrant a reduction of traditional regulation.
Similarly, consumer protection going forward would become more relevant and easier to understand for the consumer when harmonized to apply consistently to services from former silos that are now similar, competing and substitutable for users. This would reduce the confusion experienced by consumers that exists when similar services are not governed by similar rules.
However, this is not a simple task. In rapidly changing and innovative markets, it is not always easy to determine which services are similar, competing and substitutable. Careful analysis is required and sweeping generalisations should be avoided.
In modernizing policy and regulatory frameworks for the digital economy, policymakers should be expected to be guided throughout by their responsibility for achieving outcomes that serve the public interest. Smart, light touch policies that simplify and/or harmonize are potential mechanisms, and there should generally be a preference for horizontal regulations that apply across all sectors where possible (e.g., consumer protection, competition law).
Given the unprecedented changes in technology and competition in recent decades ― and especially the ways in which the Internet has enabled convergence within the digital economy ― there is a compelling argument that the policy and regulatory framework governing the digital services ecosystem requires a careful review to ensure that policies and regulations remain relevant.
The need for careful and fact-based review is especially evident in areas related to fast-changing and emerging technology. As new technologies spawn new services and business models, one should consider whether such innovations need to be regulated, and if so how. To optimize the interests of consumer protection and innovation, existing models of sectoral regulation should be evaluated for relevance and appropriateness before being applied.
When modernizing regulatory frameworks, one must also consider consistency, predictability and granularity of regulation as drafted and applied. Regulatory frameworks should be applied consistently across those engaging in similar activity; should have predictable outcomes and should be drafted at a level of granularity that is appropriate and proportionate to the subject matter in question. Rapidly evolving technologies and business models may be more suited to guiding principles than to prescriptive regulations, thereby ensuring flexibility to be relevant over periods of time. Overly granular or prescriptive regulation in those cases may result in premature regulatory obsolescence. One should also be careful not to confuse flexibility with a lack of rigour in the quality, application or implementation of regulation. Flexibility can be an attribute of a sound and effective regulatory model.