Martin Cave and Luigi Prosperetti
Martin Cave and Keiko Hatta
Today’s smart devices – especially mobile devices such as smart phones and tablets – have already changed the pattern of many people’s lives. This is reflected in the proliferation of smart devices which by 2017 (according to Cisco forecasts) will account for 99% of mobile traffic. A future replete with more radically smart self-learning and spontaneously communicating devices almost certainly awaits us. These developments provide ever more opportunities and challenges, including in the area of regulation. This chapter focuses on two regulatory challenges which are already upon us, relating to fixed/mobile convergence and the cloud. The coming together into single markets of both fixed and mobile retail services has been in prospect for some years. As it occurs, regulators will find the number of competing networks in existence trebling or quadrupling and will struggle to apply the traditional market analysis in a way which has entitled them to regulate and unbundle fixed networks in most jurisdictions, while mobile services, save for termination, are largely left alone. They may find salvation for the status quo by identifying co-existing groups of end users some of whom of whom treat fixed and mobile services as substitutes, some of whom use them in a bundled, complementary way. Or, as in the famous case in 2009 of convergent fixed and mobile broadband markets in Austria, a regulatory sleight of hand can limit the repercussions of convergence. Our second application concerns the cloud, a two-sided platform which represents a further decomposition in space and in ownership of the components of a communication and computation system. The regulatory dilemma here is more over where and whether to intervene in an innovative market which is not yet fully formed, but clearly represents a possible candidate for market failure. Both of these examples illustrate the continuing tensions between promoting competition and innovation and continuing to protect end users in via an ever-changing regulatory regime.