Emerging Technology

day one project

Open Interface & Interoperability Standards for an Open and Transparent Digital Platform Marketplace

02.16.21 | 2 min read | Text by Thyaga Nandagopal

Summary

The United States leads the world in the market share – and ‘mindshare’ – of massive digital platforms in domains such as advertising, search, social media, e-commerce, and financial technologies. Each of these digital domains features one or two dominant market players who have become big through the ‘network effect,’ wherein large volumes of customer activity provide data inputs to make these platforms work even better. However, the gains that big players enjoy from the network effect often come at the expense of the platform’s customers. The network effect is further amplified by platform lock-in, whereby new platforms are unable to interoperate with existing market players. A more serious risk manifests when the dominant platform provider provides the same services as that of businesses using the platform, thus becoming a competitor with a built-in information advantage. This prevents new entrants to the market from growing big, limiting the choices available to consumers and creating the conditions for harmful monopolies to emerge.

Therefore, the Biden-Harris Administration should advocate for legislation and enact policies designed to bring openness and transparency into the digital platforms marketplace. A key aspect of such policies would be to require a set of interoperability standards for large digital platforms. Another would be to require open Application Programming Interfaces (APIs) that allow customers (end-users as well as businesses) to seamlessly take their data with them to competitors. These actions will unleash greater competition in the digital marketplaces that are becoming the mainstay of the US economy and increase transparency, choice and opportunities that the US consumer and businesses can benefit from.