Different terms are often used in connection with digital platforms and gatekeepers. On this page we explain some of those terms that are essential for our work.
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What do we mean by the term "digital ecosystem"?
RTR.Telecom.Post distinguishes between digital ecosystems in the narrower sense and in the broader sense.
An ecosystem in the narrower sense includes all those services which are under common corporate control. Services are often owned by such an ecosystem, which in turn initially developed from a service. For example, Facebook Messenger (instant messenger) and Facebook as a social network (digital platform) are services that are offered by Meta and which were ultimately the basis for the development of Meta´s ecosystem.
An ecosystem in the broader sense is characterised by a number of companies complementing each other with services in order to create new services and functions. In this way, they ultimately produce goods and provide services with high value to customers. For example, Zynga ("FarmVille", "CityVille"), as a developer and publisher of games, uses services from Meta's ecosystem, has access to the platform's participants and is integrated in various ways via application programming interfaces (APIs). Consumers often benefit from synergies in the consumption of these services and functions within a broader ecosystem. Companies may also be in competition with each other for the provision of a particular service.
For further reading:
Monitoring of digital communications platforms and gatekeepers of the open Internet Monitoring of interpersonal communication services with a focus on Instant Messaging -
What is the relationship between the digital ecosystems in the narrow sense and in the broader sense?
The owner of an ecosystem in the narrower sense can set rules for associated services, especially with regard to access conditions or data exchange. The owner therefore influences the openness or closedness of the ecosystem for
the development of components or services by third parties, for example through programming interfaces for apps (application programming interfaces or APIs).Using the example of digital ecosystems, a third party would be a company that develops games for Facebook Messenger and uses data from Facebook. This company is not part of the ecosystem (the Facebook group) in the narrow sense,
but it is part of the ecosystem in the broader sense (because it uses Facebook's social graph, for example).An ecosystem is all the more closed the more restricted the access to certain inputs is for others. In the wholesale sector, access to application programming interfaces (APIs) is crucial for third parties. In principle, closed
ecosystems can more easily assume a role as gatekeepers. On the other hand, however, open ecosystems may have a particularly strong position that succeed in tying a large number of other applications to their ecosystem as
wholesale buyers (such as Facebook or Google).For further reading:
Monitoring of digital communications platforms and gatekeepers of the open Internet -
What is a gatekeeper?
A gatekeeper stands at a key point, as a gatekeeper so to speak, between upstream and downstream suppliers and buyers. Gatekeepers thus control essential parts of the interaction between different users of this key point and have
independent room for manoeuvre vis-à-vis them. This intermediation service is to some extent unavoidable for customers of the gatekeeper. As digital platforms can serve multiple sides of a market, they often acquire a gatekeeper
function.For further reading:
The Open Internet: OS, Apps and App Stores -
What are instant messengers?
Instant messenger (IM) enable communication in a closed circle with the corresponding response option (individual communication). Common functions include sending and receiving messages (text, picture, voice or video messages),
confirmation of receipt and reading, profile picture, group chat and voice and video calls. These enable users to communicate in a more diverse way than traditional telecommunication services or e-mails. Instant messengers are
OTT services, developed at the application level of the OSI 7 layer model and are also referred to in the EECC as number-independent interpersonal communications services (NI-ICS). Instant messengers can also beplatforms at the
same time if they integrate several market sides (such as WeChat with advertising, payment functions, etc.).For further reading:
Monitoring of interpersonal communication services with a focus on Instant Messaging European Electronic Communications Code (EECC) -
What does interoperability mean?
In the context of electronic communications services, interoperability enables the realisation of direct network effects independent of a specific service. For example, different fixed or mobile networks are interconnected and
thus made interoperable. As a result, every user can reach all other users in the fixed or mobile network, independent of the respective provider. Positive externalities are thus created, which make it possible for new entrants to the market to also reach the customers of operators already active in the market. This significantly reduces barriers to market entry.In addition to this interoperability at the service level, there are issues of inter-operability in many systems (such as operating systems). Interoperability, apart from its undoubtedly positive impact on the breadth of ompetition, may also have a negative impact on innovation behaviour.
For further reading:
Monitoring of interpersonal communication services with a focus on Instant Messaging Interoperability in Digital Markets -
What are network effects?
Network effects occur when the benefit for individuals is changed by the number of all users. A distinction is made between network effects based on their immediacy (direct or indirect) or on their effect (positive or negative).
Direct network effects occur when a product or service receives a different value depending on how many people use this product or service. A good example is the telephone: the more people can be reached by phone, the more a user
can also use the service. This generally increases the value of the service (positive direct network effects).Indirect network effects exist on multi-sided platforms if for one side of a platform, the benefit of the individual user changes with the number of users on another side of the platform. Indirect network effects can exist in one
or both directions, i.e. between the two relevant sides. An example of an indirect network effect is an online trading platform. Here, customers benefit from a large number of sellers and a related larger offer, while sellers
benefit from a large number of customers and thus more sales opportunities.In most cases, positive direct and indirect network effects are a relevant factor for the market power of platforms. Negative indirect network effects can occur, for example, if more advertising is displayed than desired by users.
For further reading:
Monitoring of digital communications platforms and gatekeepers of the open Internet -
What are OTT services?
So-called over-the-top services (OTT services) are services offered via the internet (or via the application layer). In the telecommunications sector, this category includes, for example, instant messengers or internet-based voice services (voice-over-broadband), video conferencing services, e-mail services or other types of applications that primarily serve individual communication. In the media sector, streaming services, for example, are considered OTT services.
For further reading:
BEREC Report on harmonised definitions for indicators regarding over-the-top services, relevant to electronic communications markets -
What is a platform?
There is no uniform definition of the term platform. From an economic point of view, services are platforms if they serve at least two clearly distinguishable user groups that are connected by an intermediary. This intermediation enables the realisation of indirect network effects. The intermediary "optimises" the network effects through elasticity-dependent pricing. This means that prices are set depending on the elasticity of the market sides: Where demand is inelastic, a higher price is set.
For the individual user, the platform offers added value primarily because of the platform's network effects. As a rule, platforms are also characterised by high fixed and low marginal costs. The main challenge when entering a market is ususally to acquire a sufficiently high number of users on both sides of the market, thereby realising indirect network effects. Due to low marginal costs, scaling is usually easier. Since network effects and economies of scale play a major role for digital platforms, these systems often tend to tip.
For further reading:
Monitoring of digital communications platforms and gatekeepers of the open Internet -
What are economies of scale?
Economies of scale occur when the average cost decreases as the quantity increases. The often global user base usually enables digital platforms to achieve enormous economies of scale and thus minimal average costs per user. The
decisive factor is therefore often rapid scale up in order to thin out the fixed or setup costs, which include in particular the initial (usually free of charge) build-up of a customer base.For further reading:
Monitoring of digital communications platforms and gatekeepers of the open Internet
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What does tipping mean?
Tipping means that the market tends to be served by only one service, through which ultimately everyone can be reached. In the process, the other providers drop out and the market virtually "tips" into monopolisation. The reason
for this can be very high network effects or economies of scale. Many digital platforms have precisely such characteristics that can lead to tipping.For further reading:
Monitoring of interpersonal communication services with a focus on Instant Messaging - What are barriers to switching?
Barriers to switching are efforts and costs that the user incurs or perceives when switching providers or services. Barriers to switching give providers a certain amount of market power with regard to users. On the one hand,
providers have the incentive to set low prices in order to attract new users ("up-front competition"), but on the other hand they have the incentive to increase prices for existing customers. Examples of barriers that can make it
difficult to switch to an alternative offer are network effects, habit or ignorance about the availability of alternative services or their functionalities.For further reading:
Switching barriers for key Internet services