Voluntary sharing of intangible assets in ICT markets: a new challenge for regulators

ICT regulators need to tackle a phenomenon of sharing intangible assets by companies in a dominant market position. It requires a new approach, a synthesis of two contradicting trends: top-down extortion by the state, targeted primarily to the companies with significant market power (essential facility), as well as bottom-up voluntary sharing of the assets (long term strategy of standard recognition and related network effect).

Top-down state regulations

State regulations are directed primarily to the companies with significant market power. These firms need to share its information and knowledge in situations where their absence makes it difficult or impossible for  other companies to conduct their business (essential facility). The business world has seen many attempts to force companies to share their confidential know-how.

Let's take for example a case IBM vs. Compaq, Digital and Intergraph who wanted IBM to share with them its know-how. The court ruled that cooperation should not interfere with intellectual and industrial property that IBM has developed on its own and which led to leading position in this field. However, this view has subsequently evolved towards wider desirability and acceptability on forced sharing of confidential knowledge (such as Microsoft sharing its proprietary source-code).


Bottom-up voluntary sharing

Companies can benefit from voluntary sharing of their proprietary products in the long term provided that it will become the industry standard. It is primarily related to the service development on the platform and the value chain built around a certain standard. It attracts the market through the network effect.

This strategy is undoubtedly good for consumers, but raises some concerns from the competitive perspective. We can observe here a classic paradox. Provision of intangible assets - a seemingly advantageous from the perspective of the consumer - will have a deterrent effect on new entry into the market, which will prevent dominant companies from potential competitors. Companies with significant market power that open-up their products and build a platform around them, can in fact displace independent suppliers from the market.

Conclusions

In ICT markets standardization, interoperability and compatibility are crucial for business development. Sharing of knowledge undoubtedly accelerates innovation, but proprietary knowledge is also used to create strategic entry barriers for potential competitors. The good new is that commonly used model of closed innovation is currently evolving towards an open innovation system. 

As information and knowledge are becoming more and more public goods, regulators should pay more attention to the perspective of dynamic competition and innovation, allowing markets to improve consumer welfare in the long run. 

Let's have a look on developments of new equipment, software or infrastructure (Next Generation Networks) and the Open Access movement. Together they created new opportunities for sharing knowledge and benefited from research in innovative ways or in new fields. Benefits came not only from the diffusion of knowledge, but also from numerous services, products, bringing added value to all stakeholders.