Authors: Dr René C.G. Arnold, Dr Martin Waldburger
An increasing number of devices that collect and transmit data have been improving access to data. New data transport, storage and analysis procedures have been enabling more and more businesses to utilise data in their business models. This indicates a trend towards data becoming a new driver of economic growth. In light of this development, this paper first traces the evolution of business models built around data and it finds evidence for a sustained structural change leading to a data-driven economy that policy-makers and regulators need to be alert to. Hence, a structural approach to analyse this economy and its development is devised: the data value circle. When applied to analyse the market size and prospects for each of its parts, three important characteristics of the data-driven economy emerge. First and foremost, this first analysis underlines data's economic influence stretching across almost all sectors. Second, it is found that the data-driven economy is shaped by two-sided markets that seem prone to create dominant positions in the market and thus should be monitored by policy-makers and regulators – especially since, third, the analysis indicates that it is still uncertain which players will win the most powerful position.
This last finding merits a closer investigation of business models, strategic options and emerging challenges in the data-driven economy. Thus, this paper analyses five key value propositions and surrounding business models: (1) Mobile device ecosystems; (2) Connectivity; (3) Cloud services and content delivery networks; (4) Targeted online advertising; (5) Video streaming. From these analyses, strategic options of market players and emerging challenges for all stakeholders were identified. Finally, the paper sketches potential avenues for policy-makers and regulators in response to these challenges. The following challenges and potential responses represent the main findings of this paper:
Independent from their position in the data value circle many actors aim to gain a foothold or even control in additional parts of the data-driven economy. If they are successful, they might be able to gain a dominant position and may be able to exert it to hamper competition. On the other hand, such a dominant position would grant them access to data that would allow full profiling and potentially may lead to concerns as privacy and data security. Policy-makers and regulators should be aware of this trend and closely monitor it.
Instead of entering other market segments themselves, the paper shows that partnerships can be a powerful way to build successful business models. Such partnerships may be an attractive avenue for OTTs and operators, for instance, as regards preferential treatment of specific OTT services that can increase the operator's value proposition. Such partnerships may lead to quasi managed services for some OTTs in some networks and they deserve the attention of regulators to ensure sustained fair competition.
Due to the value that data hold for successful business models today, there are strong incentives for all actors in the data-driven economy to collect as much data as possible. Consumers are often unaware about if and which data are collected about them and what happens with these data. More often than not, they cannot make informed decisions. Policy-makers should take steps to enable consumers to such informed decisions. First and foremost, it will be necessary to find out how consumers conceptualise personal data and what terminology they use. This will enable effective information and more transparency for consumers. Next to information and transparency, one may also consider steps to enable consumers to access the data that, for instance, OTTs and operators have about them.
Finally, it became obvious that the data-driven economy is very much a global economy. Thus, all the above interventions may have little effect if they are only applied on a national level. In essence, the structural change towards a data-driven economy calls for internationally agreed responses by policy-makers and regulators. Consensus needs to be reached regarding governance, the organization of the process, implementation, enforcement, and cooperation for all major policy actions that may be necessary to ensure an overall positive economic effect of this structural change.
Paper is available for download on the Website of the ITU.
See also presentations of Dr. René Arnold and Dr. Martin Waldburger at the 14th Global Symposium for Regulators "Capitalizing on the potential of the digital world" from 3 - 5 June 2014 in Manama, Bahrain and at the ITU MIIT Seminar 2014 "Broadband Development and Innovation using Internet" from 30 June - 1 July 2014 in Yinchuan, China.
