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Business News/ Opinion / Columns/  Different digital platforms require distinct regulations

Different digital platforms require distinct regulations

This is crucial to ensure that the market remains open in a way that helps both consumers and app developers

App stores are a very different type of platform. They offer mechanisms of discovery that allow user demand to be satisfied by developer supply (Photo: Reuters)Premium
App stores are a very different type of platform. They offer mechanisms of discovery that allow user demand to be satisfied by developer supply (Photo: Reuters)

Last week when I wrote about the brouhaha that erupted in the aftermath of changes to Google’s Play Store policy, I suggested that the laissez faire attitude of Android’s Play Store was why there is so much more malware in the Android app environment than in Apple’s iOS operating environment. While the openness and low touch management that characterize Google’s operating principles ensured its rapid proliferation, unless greater control was exerted—at least over some parts of the ecosystem—there was going to be a steady erosion of trust.

This is a theme I have explored previously. In an article that discussed these issues in the context of Bitcoin, I had pointed out how even the most open of systems typically have a tendency to eventually centralize.

We value open markets. They provide healthy platforms on which participants can freely interact with one another. More importantly, they offer consumers choice and impose the sorts of constraints on commercial behaviour that act as a necessary deterrent against the use of unfair trade practices.

History has shown us that as easy as it is to establish these platforms, it is challenging, particularly in the digital world, to maintain them over time. Even though different regulators have tried to hold platforms accountable for their actions, the measures they have adopted have had little to no effect. It appears to me that this is because all platforms are treated alike and regulated with an even hand. As a matter of fact, there are different types of platforms and each needs to be regulated in its own way. Unless regulations are suitably tailored to the requirements of each, the outcomes we arrive at will inevitably be uneven.

Operating systems are one such type of platform. These are the underpinnings on which entire ecosystems operate—the core systems that mobile devices need to function, and the digital infrastructure that various products built by developers depend upon. For these reasons, it would not be an exaggeration to state that developers owe their very existence to these platforms and depend on the functionalities they provide for their apps to work.

App stores are a very different type of platform. They offer mechanisms of discovery that allow user demand to be satisfied by developer supply. As important as they are to the ecosystem, they are not essential in the same way that operating systems are. They perform, at best, a useful function but are by no means the only means by which developers can distribute their applications. Unlike operating systems, where developers have no choice but to conform to the restrictions imposed on them, developers have many alternate ways through which they can reach their customers should they disagree with the restrictions imposed on them by any given app store.

It is precisely because of these differences that we need to think differently about these two types of platforms. When an operating system abuses its position, it affects the agency of users and developers alike. It forces them to comply since they have no other option. If an App Store, on the other hand, unfairly removes a developer from the store or imposes onerous conditions on the use of its facilities, the developer can list its product elsewhere at little incremental cost. While the companies that own the operating system are able to ensure that their own products have inherent advantages with regard to that operating system, all that an app store can do to influence consumer choice is make sure that other competitive products are also made available on the store.

According to Ben Thomson , who first articulated this nuance, we need to understand these characteristics of platforms in order to develop appropriate regulatory frameworks to govern them. He argues that because of their systemic importance, we should be encouraging operating systems to multiply while strongly strongly dis-incentivizing them from imposing untenable restrictions on developers.

App store businesses that rely overly on the revenues they earn from the sale of products could lose the incentive they need to ensure that their users remain happy. To the contrary, they should be encouraged to make sure that users, rather than the App Store itself, are the focus of their attention. At the same time, the app stores themselves should be prevented from joining forces with each other in ways that will reduce the options available to developers to list their products.

In a recent twist in the tale, it appears that despite the relaxation in the deadline for the applicability of Google’s new Play Store policy, a group of Indian startups are planning to move the Competition Commission of India against the company.

I believe that Indian startups need to look beyond these sorts of obvious regulatory solutions. A few weeks ago, I described the Beckn protocol, which frees providers of location-based services from the constraints of aggregator platforms.

Beckn is not designed for digital products the likes of which are distributed on app stores. However, to effect the change they seek, this is the sort of thinking that Indian startups need to adopt.

Rahul Matthan is a partner at Trilegal and also has a podcast by the name Ex Machina. His Twitter handle is @matthan

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Published: 13 Oct 2020, 08:43 PM IST
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