Web firms may have an interest in pursuing the monetization of users’ data with some more moderation. If they don’t, privacy concerns as well as adoption of tracking and advertisement blocking tools could grow to a point where innovation will suffer.
As part of a recent keynote during the inaugural workshop of the Data Transparency Lab (Nov 20, 2014, Barcelona) I hinted that a Tragedy of the Commons around privacy might be the greatest challenge and danger for the future sustainability of the web, and the business models that keep it going.
With this post I would like to elaborate a bit more on what I meant and maybe explain why my slides are full of happy, innocent looking cows.
What is the Tragedy of the Commons?
According to Wikipedia:
“The tragedy of the commons is an economic theory by Garrett Hardin, which states that individuals acting independently and rationally according to each’s self-interest behave contrary to the best interests of the whole group by depleting some common resource. The term is taken from the title of an article written by Hardin in 1968, which is in turn based upon an essay by a Victorian economist on the effects of unregulated grazing on common land.”
In the classical Tragedy of the Commons, individual cattle farmers acting selfishly keep releasing more cows onto a common parcel of land despite knowing that a disproportionate number of cows will deplete the land of all grass and drive everyone out of business.
All the farmers share this common knowledge, but do nothing to avoid the impending tragedy.
Selfishness dictates that it is better for a farmer to reap the immediate benefit of having more cows, diverting the damage to others and/or pushing the consequences to the future.
The utopian outcome for each farmer is that he can keep accumulating cows without having to face the tragedy because, miraculously, others will reduce the size of their herds, saving the field from becoming barren. Unfortunately, everyone thinks alike and thus, eventually the field is overgrazed to destruction.
Are there cows on the Web?
There are several.
Not only in .jpeg, .gif or .tiff but also in other formats that, unlike the aforementioned compression standards, can lead to (non-grass related) tragedies. In my talk I am hinting on the following direct analogy between the aforementioned cow-related abstraction and the mounting concerns about privacy and the web.
Farmer: A company having a business model around the monetization of personal information of users. This includes online advertising, recommendation, e-commerce, data aggregation for market analysis, etc.
Cow: A technology for tracking users online without their explicit consent or knowledge. Tracking cookies, analytics code in websites and browsers, browser and IP fingerprinting, etc.
Grass: The trust that we as individuals have on the web, or more accurately, our hope and expectation that the web and its free services are doing “more good than bad”.
The main point here is that if the aforementioned business models (farmers) and technologies (cows) eat away user trust (grass) faster than its replenishment rate (free services that make us happy), then at some point the trust will be damaged beyond repair and users … will just abandon the web.
As extreme as the last statement may sound, the reader needs to keep in mind that other immensely popular media have been dethroned in the past. Print newspapers are nowhere near when they used to be in, say, the 30’s.
Broadcast television is nowhere near where it’s height in the 60’s (think the moon-landing, JFK’s assassination, etc.).
The signs of quickly decaying trust on the web are already here.
– More than 60% of web traffic was recently measured to be over encrypted HTTPs, and all reports agree that the trend is accelerating.
– AdBlock Plus is the #1 Firefox add-on in the Mozzilla download page with close to 20 million users. Other browser or mobile app marketplaces are heavily populated with anti-tracking add-ons and services.
– Regulators on both sides of the Atlantic are mobilizing to address privacy related challenges.
If ignored, the mounting concerns around online privacy and tracking on the web may lead to mass adoption of tracking and advertisement blocking tools. Removing advertising profits from the web probably means the end of free services that we currently take for granted.
The impact on innovation will be a second negative consequence. Last, lets not forget that advertisement and recommendation is something desired by most users, provided that certain red lines are not crossed.
What constitutes a red line may change from person to person but certain categories are safe candidates (health, sexual orientation, political beliefs).
In a recent study we have shown that it is possible to detect Interest-based Behavioral Targeting (IBT) and have delved into specific categories to measure the amount of targeting that goes on.
What can we do to avoid an online tragedy of the commons?
“Sunlight is the best disinfectant”
The famous quote of American Supreme Court litigator Louis Brandeis may have found yet another application in dealing with the privacy challenges of the web.
Despite the buzz around the topic, the average citizen is in the dark when it comes to issues relating to how his personal information is gathered and used online without his explicit authorization.
A few years ago we demonstrated that Price Discrimination seems to have already creeped into e-commerce. This means that the price that one see’s on his browser for a product or service may be different than the one observed at the same time by user in a different location.
Even at the same location, the personal traits of a user, such as his browsing history, may impact on the obtained price.
To permit users to test for themselves whether they are being subjected to price description we developed (the price) $heriff, a simple to use browser add-on that shows, in real time, how the price seen by a user compares with the prices seen by other users or fixed measurement proxies around the world.
Researchers at Columbia University and Northeastern University have, in a similar spirit, developed tools and methodologies that permit end users to test whether the advertisements or recommendations they received have been specifically targeted at them, or they are just random or location dependent.
Tools like $heriff and X-ray improve the transparency around online personal data. This has multifold benefits for all involved parties:
– End users can exercise choice and decide for themselves whether they want to use ad blocking software and when.
– Advertising and analytics companies can use the tools to self regulate and prove that they abstain from practices that most users find offending.
– Regulators and policy makers can use the tools to obtain valuable data that point to the real problems and help in drafting the right type of regulation for a very challenging problem.
Mooo, who needs more tragedy????
Photo credit: b3d_
Much of what the Commission proposes goes in the right direction although some actions, such as plans to harmonize copyright, could stir controversy. Even US tech giants might be less worried than expected.
On May 6th, more quickly than expected, the European Commission released its much anticipated “Digital Single Market Strategy” (DSM).
The Juncker Commission has made the DSM the top priority of its five-year term, claiming €340 billion in potential economic gains, an exciting figure that should be supported by quantitative research analysis.
Much of what the Commission proposes in the 20-page document seems to go in the right direction, setting out three main areas to be addressed:
– Better access to digital goods and services. The Commission claims that delivery costs for physical goods impede e-commerce, pointing the finger to parcel delivery companies; that many sellers use unjustified geo-blocking to avoid serving customers outside their home market; that copyright needs to be modernized; and that VAT compliance for SMEs should be simplified.
– Creating the right conditions for digital networks and services to flourish by, encouraging investment in infrastructure; replacing national-level management of spectrum with greater coordination at EU level; looking into the behavior of online platforms, including consumer trust and the swift removal of illegal content and personal data management.
– Maximising the growth potential of our European Digital Economy by, encouraging manufacturing to become smarter; fostering standards for interoperability; making the most of cloud computing and of big data, said to be “the goose that laid the golden eggs”; fostering e-services, including those in the public sector; developing digital skills.
It is understandable that the Internet provides a channel for businesses to reach consumers more widely than traditional media, both in their own markets and abroad, and for consumers to have a wider choice and bargain-hunt more effectively.
In a truly single digital market there are opportunities to scale up that are not present in the much smaller national markets.
More controversial are the commission’s plans to harmonize copyright law, in particular its plan to ban “geo-blocking”, the practice of restricting access to online services based upon the user’s geographical location.
However, the most problematic point concerns “platforms”: the digital services, such as Amazon, Google, Facebook, Netflix and iTunes on which all sorts of other services can be built upon and which have come to dominate the internet.
Worried that the mainly American-owned platforms could abuse their market power, the Commission will launch by the end of this year an assessment of their role.
However the fact that most of the 32 internet platforms identified for assessment by the Commission are American and only one (Spotify) is European, hints more towards the fact that it is harder for new firms to scale up rapidly rather than abuse of market power.
What it is interesting is that Mark Zuckerberg doesn’t seem to consider a Digital Single Market a disadvantage for Facebook.
Instead, he supports the idea. Facebook has to deal with different laws in every country and a single set of regulation for the whole European continent would actually make things easier for Facebook.
The digital economy also depends on the availability of reliable, high-speed and affordable fixed and mobile broadband networks throughout Europe. There are no good reasons to still have national telecom laws in this field.
How will Europe successfully deploy 5G without enhanced coordination of spectrum assignments between Member States?
Let us not forget that these networks do not only have an economic value; they are increasingly important for public access to information, freedom of expression, media pluralism, cultural and linguistic diversity.
The following two pieces of legislation are related to the DSM:
– The General Data Protection Regulation (GDPR), replacing the 1998 Directive that generated the data protection regimes of 28 Member States, with a single one, was proposed by the Commission in 2012, has undergone amendments by both the EP and the Council of Ministers and could be adopted in 2015 or 2016.
– The Telecoms Regulation, reviewing the 2002 Telecoms Regulation to cover net neutrality and roaming fees, was proposed by the Commission in 2012, was amended by the EP and is currently with the Council, which has scaled back the EP’s amendments.
The upcoming negotiations on the Telecoms Single Market will give a hint of the challenges to come in creating a Digital Single Market over the next years.
If the latest leaked version is a good indication of where things will come out, there are serious grounds for optimism about the Juncker Commission’s Digital Single Market
As a Brussels veteran, it is tempting to lapse into cynicism when confronted with a new Commission’s policy programme. Recent Commissions have often re-packaged existing policy initiatives and added generous doses of jargon and waffle, guaranteeing under-delivery.
But if the latest leaked version is a good indication of where things will come out, there are serious grounds for optimism about the Juncker Commission’s Digital Single Market strategy.
There are several reasons for this:
First, the Commission’s starting point is exactly right.
In striking an optimistic tone that is positive about Europe’s strengths, assets, and potential (“Europe has the assets to succeed in this global digital economy”), the Commission is allowing space for a shift in mind-set for the many decision makers who have been tempted to associate Europe’s digital prospects with doom and gloom.
It seems to be rejecting the politics of despair and defensive policy options that would simply guarantee Europe’s future as a consumer and importer of foreign digital services and technologies, rather than a producer and exporter – a follower rather than a leader.
Second, the Commission understands the barriers and challenges.
There has been a considerable amount of consultation, both formal and informal, and it looks like the Commission understands many of the key barriers to the digitalisation of the European economy.
It’s very important that the resulting policy initiatives stay focused on achieving the objectives of the DSM, rather than developing some kind of independent existence, or carrying on because they respond to political pressure from one or other interest group.
Just as importantly, it seems to be clear about the landscape of competing interests and to have an idea of where it wants to come out in terms of some of the big debates.
In other words, it looks like there is political will to tackle strong opposition from vested interests. It is to be hoped that this level of ambition can be matched by the Member States and the Parliament – no small challenge in a time of such economic uncertainty.
Third, the Commission understands the importance of evidence and problem definitions.
It’s too often been the case that the Commission has brought together stakeholders to discuss and find solutions to “problems” that are not clearly identified or proven.
This strategy has a welcome emphasis on tackling actual, rather than perceived, problems. It’s good to see that on some of the vaguer concepts like “platform regulation”, it is intending to deepen its understanding of the problems by consulting, and indeed via a sector enquiry.
This is obviously the direction that policy making must take. But it will not only be challenging for the policy makers. It will be just as tough for industry and civil society, which have relied on silver-tongued lobbyists in Brussels for decades.
Fourth, the Commission wants to integrate enforcement of existing rules with the development of new ones.
The launch of the DSM is an early test of the effectiveness of the new Commission structure and working method. Many of the key drivers in the policy debate on the DSM relate to competition and consumer protection.
In deliberately launching both open consultations and formal tools like the proposed e-commerce sector enquiry – policy responsibilities that are held by different Directorates-General, the Commission seems to be delivering on its promise to improve coordination in policy making. The debate on “platform regulation” is the best example.
Although there is considerable political pressure from Paris, Berlin, and Madrid to “do something” about “GAFA” (the playful French acronym for Google, Amazon, Facebook, and Apple), the Commission is rightly giving itself the chance to prove its executive and enforcement credentials, notably in the antitrust area.
Apart from the crucial tests that the Google cases constitute, DG COMP will be given an important opportunity to reinforce its position as the world’s leading antitrust regulator through the launch of a sector enquiry on e-commerce.
This position is one of the biggest achievements of the European Union writ large, and without it, the European project would lose a significant amount of respect among Europeans.
And of course, it’s very important to develop strong ex post enforcement capabilities if the Commission is serious about becoming a modern and digital-friendly government institution. This is because digital markets are so fast-moving that traditional, long-winded legislative processes will no longer be adequate to regulate with.
1. As noted above, the Commission’s starting point is excellent. However, it could go even further and embrace the concept of digital disruption and the value it provides, while noting some of the attendant challenges. The primary source of opposition to a pro-digital agenda like the DSM will come from disrupted industries, and it is important for the Commission to nail its colours to the mast from the start by laying down a challenge to them to modernise.
2. As it prepares a final version of the DSM strategy, we would urge the Commission to consider being explicit about which anti-competitive or anti-digital practices it is targeting, where these have been identified. One example would be some of the specific ways that big brands segment the Internal Market along national lines in order to control prices, to the detriment of SMEs, competition, consumer welfare, and the potential of the DSM. This is not to say that the Commission has to spell out all of its policy plans in detail, especially where these are not yet fully formed or where the evidence base is still missing (e.g. platform regulation). However, where the targets are already clearly defined, the pressure exerted by publicly “outing” them will go a long way. Another excellent reason to take this approach is that it will contribute to a more straight-talking tone. This is preferable to the usual euro-speak because it sounds more honest and dynamic, and because it’s obviously more measurable.
3. It would also be helpful to couple the regulatory agenda with a more explicit de-regulatory push. This is certainly present in the leaked draft, but could be emphasised more clearly. The benefit of emphasising the de-regulatory agenda is that it will provide the carrot that some industry actors need in order to engage more constructively than they might otherwise. Good examples that can be more explicitly enumerated could include the ePrivacy Directive and other rules that apply to the telecoms sector (on SMS, for example, since that will soon be completely overtaken by other messaging services), or aspects of the Audiovisual Media Services Directive, which also contains outdated provisions.
4. Linked to this is the need to take a much closer look at legislative initiatives that are already underway. In particular, versions of the Data Protection Regulation, the Network and Information Security Directive, and the Payments Services Directive being debated by the Parliament or the Council each contain provisions that could seriously undermine the objectives of the DSM. These could be addressed by carrying out impact assessments of texts adopted by one or both legislative institutions.
5. When promoting an investment agenda, the Commission would do well to ensure that investment is promoted up and down the value chain, and not just in infrastructure. This is important because applications and services drive the demand for capacity that is capable of raising consumers’ willingness to pay for Internet access. Too often, telecoms companies have been allowed to get away unchallenged with passing the message that net neutrality is somehow inimical to investment in infrastructure, when the opposite is likely to be the case.
photo credits:Howard Ignatius
On paper (almost) everyone in Europe is lining up to praise the benefits of building a digital single market, including national governments. However, of late, member states have shown little appetite for “europeanising” their digital policies.
“One response to the digital revolution must be the Europeanisation of digital policy,” EU digital commissioner Gunther Oettinger proclaimed on Monday 16 March at the CeBIT fair in Hannover. His statement comes not as a surprise. Ever since its early days the European Commission has expressed the intention of going after national silos in the digital market.
We have also known for some time that such ambitions are being packed into a grand strategy due to be unveiled in May which will comprise a set of reforms in as many areas as copyright, telecommunications, audio-visual services, e-commerce, and so forth.
On paper (almost) everyone in Europe is lining up to applaud the move, including national governments. Only two weeks ago, a Council meeting of EU Competitiveness Ministers gave its blessing calling various actions aimed at removing unnecessary barriers in order to enable a smooth and quick transition to the digital age.
Building a European digital market is also one of the 10 key actions outlined in the German government’s digital plan for 2014-2017 that was presented by Angela Markel in person at the opening of CeBIT.
Yet behind these rosy appearances the reality may be way more challenging for Mr. Oettinger and his fellow commissioners. In fact, of late, member states have shown little appetite for “europeanising” their digital policies. The perfect illustration of this ill-concealed reluctance is the recent agreement reached by the Council on the so-called “Connected Continent” package.
Originally, the proposed regulation provided for less red tape for operators (for instance by creating a single authorisation to provide services across the EU), more coordination of spectrum use, a higher level of standardization for fixed access products as well as for consumer rules.
None of these proposals has survived the compromise text endorsed by member states, who removed from the package everything but its provisions on net neutrality and roaming charges.
At the end of the day, the irony is that the amended text of a proposal named “Telecom Single Market” would do nothing to sort out Europe’s fragmented telecoms market and regulatory imbalances.
And this is not an isolated case. From the data protection reform to the EU cyber security directive (most) national governments have so far appeared more prone to water down than to embrace the Commission’s drive for more common rules (and, conversely, less national powers) in many key areas of the digital sphere.
This is a worrying signal taking into consideration that the balance of EU power is tilting back towards governments at the expense of Brussels’ supranational institutions (European Commission and the European Parliament).
Things may perhaps change. No doubt the European Commission will try its best to build consensus using all its diplomatic leverage to push through digital reforms.
But given the precedents, as the forthcoming plan on the digital single market will entail several legislations that will touch upon sensitive national interests, not to mention the pressure coming from corporate lobbies, the fundamental question that should be asked is: Are our governments enough serious about building a truly digital single market? Or will they persist in striking “watered-down” and unambitious compromises that would clearly harm Europe’s chances to link its future prosperity to the digital economy?