Regulation of data-driven business can help telecoms differentiate from Internet players, but also comes when telco products and processes increasingly use and monetise data. How should telecoms companies adapt?
Regulation has a significant impact on global communications markets
Telco relationships with telecom regulators and the governments that influence them are very important. For data-driven telecoms, telcos must now also understand the regulation of digital markets and how different types of data are treated, stored and transferred around the world. Data-driven telecoms is an essential part of telecoms’ growth strategy. The massive growth enjoyed by the global tech giants, in contrast with the stagnation of growth in the telecoms industry, provides a significant lure for telcos to harness data and become digital businesses themselves. Of course, this necessitates complying with digital regulations and understanding their direction.
Additionally, by participating in digital markets and digitising their own systems, telcos are necessarily working with and sometimes competing against the global digital, for whom this legislation is essential to their ongoing business practices. Political reaction against some practices of these digital giants is leading to some toughened stances on digital regulation around the world and a tarnished public perception.
Most businesses are impacted by digital regulation to some extent, but it is those most deeply embedded in digital markets that feel it the most, especially the digital hyper-scalers. What do Google, Meta, Microsoft et al need to do differently as digital regulations evolve and new standards come into play? And for telcos, apart from compliance, are there opportunities presented by new digital regulations? How can telcos and digital giants evolve their relationships with the entities that regulate them? Can they ultimately work together to create a better future based on the Co-ordination Age vision, or will they remain adversarial with lines drawn around profit vs public good?
What is digital regulation?
The latest STL Partners report covers two important aspects of digital regulation for telecoms players – data governance and digital market regulations.
It does not cover a third theme in digital regulation – the regulation of potentially harmful content and the responsibilities of digital platforms in this regard. This is a complex and far-reaching issue, affecting global trade agreements, sparking philosophical debates and leading to some tricky public relations challenges for digital platform providers. However, for the purposes of this report, we will set aside this issue and focus instead on data governance and the regulation of digital markets, which have the most direct relevance to telcos in particular.
Data governance is a large topic, covering the treatment, storage and transfer of all kinds of data. Different national and regional regulatory bodies may have different approaches to data governance rules, broadly depending on where they find the balance between prioritising security, privacy and the rights of the individual against the need for a free flow of data to fuel the growth of digital industries.
Regulation around data governance also naturally splits into two areas, one concerning personal data, and the other concerning industrial data, with greater regulatory scrutiny focused on the former. The regulation of these types of data is necessarily different because concerns about privacy only really apply to data that can be associated with individual people. However, there may still be requirements around security and fair access to industrial data. Examples of data governance regulation are the EU’s General Data Protection Regulation (GDPR) concerning personal data, The Data Act concerning industrial data, and the Data Privacy and Protection Act in the US. All of these examples will be discussed in greater detail in the main body of the report.
Significant types of digital regulation
Regulation specific to policing digital markets has emerged when regulatory bodies decide that general competition law is not sufficient to serve digital markets and that more specific and tailored rules or reparations are needed. Like other forms of competition law, this regulation aims to promote fair and open competition and curb market participants deemed to possess significant market power. Regulations of this nature are always, to some degree, controversial because the exact boundaries of what constitutes significant market power have to be defined and can be argued to be arbitrary or incorrectly drawn. Examples of this type of regulation that will be discussed in depth later in the report are the Digital Markets Act in the EU and the Innovation and Choice Online Act in the US.
A global perspective
The market for digital services is, by its nature, global. Digital giants like Google, Meta, Amazon and Apple are offering a wide variety of digital services, both B2B and B2C, all over the world. Those services will be provisioned using storage, compute power, and even a human workforce that may or may not be located in the country or even region in which the service is being consumed. Thus digital regulations, especially those concerning data governance, are globally significant.
A global market
The full report is available here.
Related article: The reasoning behind becoming a data-driven telco