How Big Tech Uses Net Neutrality To Subvert Competition

By Roslyn Layton. Excerpts:

"net neutral internet regulations have been in place for more than a decade in dozens of countries, but not in others. This inconsistency makes for a global natural experiment, which we studied in a five-year research project at Aalborg University’s Center for Communication, Media and Information Technologies by measuring mobile apps on mobile networks across 53 countries."

"To test these claims, we coded the panel countries in our study for their type of net neutrality regulation: soft, hard, or none. Soft rules include guidelines, multi-stakeholder models, and self-regulation with reported key performance indicators. Hard rules, made through legislation and administrative decree, entail price and traffic controls on broadband; prohibitions on prioritization and partnerships with broadband providers, and punitive fines for violation. No net neutrality rule countries like Australia and New Zealand opt for ex-post competition law to police net neutrality. Apart from 2015-2017 when the FCC’s Open Internet Order was in place, the US Federal Trade Commission (FTC) has policed the broadband market with competition law. However a volley of lawsuits have been waged on the issue over the years in US.

To test the premise that better net neutrality rules result in higher levels of innovation, we constructed a data-science model to record the degree to which the introduction of net neutrality rules stimulated mobile app innovation in the given country. Two enterprise-level mobile app store measurement tools provided the data for app frequency, downloads, rank, and revenue for the period 2010-2016, before and after rules were imposed.

This analysis found statistical support for soft net neutrality rules promoting innnovation (eg South Korea, Japan, Switzerland), however there was no innovation advantage for countries with hard rules (eg Chile, Canada, Brazil).

To avoid spurious conclusions from differently endowed nations, data was further regressed on two similar socio-economic countries with advanced mobile broadband networks but different rules: Denmark, which launched a ‘soft’ self-regulatory regime in 2011, and the Netherlands, which legislated the world’s toughest rules to date including bans on price differentiation in 2012. Denmark produced 115 apps in the study; Netherlands, 102. The differences thereafter were stark: the average Danish app increased in popularity rank to 26 from 42 during the period, whereas the average Dutch app decreased in popularity rank from 31 to 42. Moreover, Denmark succeeded to export the killer app ‘Subway Surfers,’ which had more revenue and downloads than the top 18 Dutch-made apps. Of the foreign apps used in the two countries over the 5-year period, just 20 apps came from countries with hard rules; 150 from soft rule countries; and 130 from no rule countries.

However, the preponderance of US apps complicated the study, an additional 302 apps mainly from the major US platforms Google, Meta (Facebook), Amazon, Apple, Microsoft, and Netflix. They were all founded years before hard rules in the US were implemented, and rules seemed to freeze the status quo in place to cement their advantage.

Looking more closely at Denmark and Netherlands found that while both countries each had 4 advanced mobile networks and many internet developers, Denmark’s commercial freedom to market mobile subscriptions was higher. Danish mobile operators were more liberated to use free data and partnerships to stimulate next generation mobile adoption, things which were illegal in Netherlands under their net neutrality rules. As a result, Denmark enjoyed greater levels of advanced smartphone penetration and post-paid contracts, allowing Danish developers a broader test bed in the local market.  

Today, both Denmark and Netherlands are part of the EU’s net neutrality regime, among other EU internet regulations. Before net neutrality rules were imposed, Europe accounted for many of the top 20 internet companies but not anymore. Today the top European enterprise is Germany’s ‘Delivery Hero’ at #53 in the global internet market value ranking. Europe’s share of global internet value is less than 2 percent on the world’s total and will soon be surpassed by Africa. Meanwhile, the US enjoys two-thirds of the internet’s market value.

China is the only nation which has succeed to produce platforms which rival the US giants — a country which has never had net neutrality rules and which hardly fits the definition of “open.” All the same, China’s TikTok surpassed Google to become the world’s most visited domain with 150 million US users and CapCut, the Chinese mobile video editing platform, has 200 million. Chinese apps like Shein and Temu exceed downloads for Amazon and Wal-Mart in USA."