Industry regulators are struggling with digital disruption just like the businesses they regulate – and it’s threatening to hinder the very innovation that old and new businesses alike need to thrive in the new digital era.
That was the overarching theme of a stakeholder panel session at last week’s ConnecTech/CommunicAsia summit in Singapore, in which panellists generally agreed that the answer isn’t less regulation so much as refocused and relevant regulation that fosters innovation, establishes consumer trust in these new digital services, and enables everyone to participate.
“Regulatory regimes, like any other element of this industry, are being disrupted as well,” said Tim Goodchild, senior VP of government and strategic affairs at StarHub. “Ten years ago, in the good old days, regulatory regimes could be based on the assumption that if you wanted to operate in my country, you would have to have assets here, you’d have to have infrastructure, you would have to have people here and you would have to follow my regulatory regime.”
Clearly that’s no longer the case, he continued. “In an OTT environment, your voice provider, messaging provider or content provider may be sitting 2,000 kilometers away. And they frankly are not going to be interested in the local regulatory conditions. So one of the critical things that regulators are needing to work through is how you regulate in the age of disruption.”
Traditional regs won’t cut it
Complicating things are the emergence of new technologies such as artificial intelligence and blockchain that don’t fit neatly into any existing regulatory regime, observed Aileen Chia, deputy chief executive (policy, regulation and competition development) and director-general (telecoms and post) at Singapore’s IMDA.
“When you look at blockchain, for example, internally we’re looking at whether the algorithm itself create problems, because the way you code defines many things down the chain,” Chia said. “So this brings up a new problem – do you then regulate the way the coders code algorithms, or are you talking about ethics? So these are new things that a regulator now has to wrap its mind around.
Dr Robert Pepper, head of global connectivity policy and planning at Facebook, said that operators are struggling to make the transition from voice companies to data companies in part because regulations in their particular market are making that transition even more difficult than it already is.
“The answer is not more traditional telco regulation,” he argued, but rather “sensible, appropriate and proportionate” policies that not only reflect the new data-driven business model and underlying economics, but also support innovation, investment and digital inclusion that helps connect the unconnected (adding that by Facebook’s calculation, around half of people in Asia-Pacific are still not connected to the internet, the majority of them women).
Permission vs prohibition vs innovation
As for how regulators actually go about creating and implementing those policies, obviously the answer will differ from market to market. However, Pepper suggested that we may see a shift from sector specific regulations to more functional horizontal regulation.
“For example, if you are concerned about competition, maybe it’s better for the competition authorities to regulate that than sector specific authorities, especially as we move into a world of more convergence and more different players, because the market definitions are shifting, and how we think about competition is evolving,” he said.
Pepper also noted that regulatory policies are often underpinned by two competing philosophies: (1) if something is not explicitly prohibited, it’s permitted, and (2) if it’s not explicitly permitted, it’s prohibited. Pepper argued that the first option is far more conducive to innovation.
“One of the reasons people say that regulation is trying to catch up – they’re trying to catch up because they think they feel some cases that they have to give permission, which actually conflicts with innovation,” he said. “So the real question is, how do we think about innovation? And what’s the regulatory regime that actually enables it?”
Leah Camilla Besa-Jimenez, chief data privacy officer at PLDT, agreed that regulation shouldn’t hinder innovation, but added that regulation should also focus on protecting consumers.
“Everyone wants to leverage the digital economy, but I think people forget that the digital economy starts with the consumer,” she said. “And if you talk about customer experience, at the crux of it is trust that people have in the service and the product.”
That’s where tough privacy regulations like GDPR can play a role, Besa-Jimenez said, noting that the current Philippines data privacy law needed only minor adjustments to align with GDPR. One notable difference with the Philippines law, she added: “It is the only privacy law in the world that comes with jail time.”
Industry collaboration essential
Paul Marriott, senior VP at SAP, argued that whatever policies regulators settle on, they should be forged in collaboration with the private sector for a simple (if cynical) reason: if they don’t, and if the policies hurt innovation or profitability, businesses will just find a workaround, or even move their operations to countries where regulatory regimes give them more freedom to innovate and accelerate more quickly.
“Irrespective of the conflict that you have between policymakers, businesses will look at what is the most profitable way to serve the customer and survive,” he said.
Chia of the IMDA agreed that regulators must coordinate more closely with industries. “In certain cases, we may have to have a partnership with the industry to talk about how do you self-regulate and how do you co-regulate, especially when you talk about players who are not in the country but have got huge presence in the services they provide to consumers.”
StarHub’s Goodchild offered one other key tip for regulators devising policies for the digital era – never assume a given policy will stay valid for long.
“Regulation has to be constantly reviewed,” he said. “Some markets, for example, still regulate the delivery of SMS messages, a technology that was great in its day. But if we’re not regulating WhatsApp, Viber or Telegram, why we still regulating SMS?”