Updated: July 25, 2020 9:29:40 am
“Build platforms, not products” has been the mantra for the last two decades. Amazon started by selling books but became a profitable behemoth by creating the e-commerce platform called Amazon Marketplace. The most valuable companies today are platforms for search, social interaction, advertising, insurance, travel, real estate, etc.
Fundamentally, these platforms are technology layers that leverage the internet to bring together producers, resellers and consumers, reducing transaction costs by cutting out intermediaries. There may be multiple platforms in the game to start with, but due to network effects and the non-portability/lock-in, only a few come to dominate each space, concentrating market power in those hands. Eventually, the participants face exploitation. Uber has been accused of exploitation by its driver members; Amazon by sellers; Google, Facebook and Apple by app developers. These neo-intermediaries so position themselves that the service providers cannot reach their customers, except through them.
That is not all. Big platforms have tried to create walled gardens in which to trap the customers, while fencing off the rest of the internet. Such a move in India was thwarted by laying down unambiguous net neutrality rules. In app stores and e-commerce marketplaces, platforms host their own brands and “preferred” partners, which then compete with the advantage of a home ground and friendly umpires. They may weaponise users, like Facebook did when it prompted its users to send emails to TRAI in favour of Free Basics.
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Finally, the platforms amass data about users, without the latter being aware of its extent or purpose. This helps them create insights with which to influence user behaviour, which is not limited to guiding the buying decisions. Such influence has been exerted for subverting voter behaviour, as was revealed in the Cambridge Analytica case, or to shape public discourse.
The promise of the internet was disintermediation, but the process has hit a speed breaker with major platforms taking on the role of mediation. All of them have faced penalties for anti-competitive behaviour by regulatory bodies or invited censure for undesirable activities at formal hearings by elected representatives. Their observed behaviour is a natural outcome of pursuit of greater profit and dominance. Levying penalties or breaking up large corporations is like dealing with symptoms only. It is not the cure.
Is there a solution to this conundrum? The answer is in the basic principles that created the internet.
In the beginning, people didn’t “get” internet. They would ask: Who operates it? Who owns it? What’s the service that it provides? What is its business model? Some of us, even today, conflate Google search or Facebook or Amazon with the internet itself. In reality, the internet is an open, inter-operable, scalable, and inclusive infrastructure built through a set of protocols that allow dissimilar computers to speak to each other over incompatible networks owned by entities that may even be competitors.
India has shown, in a few domains, how to create frugal solutions on top of internet with the same approach. For instance, Unified Payment Interface (UPI) is a set of protocols that standardises the language of money transfer. It is an interface (a simple and structured protocol for instructions) and a clearing house that relays well-formed requests to concerned parties for execution.
Once the language is there, a user may choose any app to link their bank account to a UPI ID and make a pay or collect request involving any other bank account. In early 2016, we launched UPI and a reference application BHIM and, with it, a revolution got underway.
UPI handled 1.3 billion transactions in June 2020, overtaking the aggregate number of transactions of all legacy “platforms” that also manage money transfers. It leverages Aadhaar and the mobile phones to allow people to make small payments — immediately and for free. UPI became the big daddy because it treated all players, big or small, equally. This allowed third-party innovators to drive adoption by creating solutions that addressed the need of the people.
Application Programming Interfaces (or API) are protocols that define the meaning of data exchanged between two computers. The API definitions are provided by the platform operators. Now, consider what happens if a set of APIs is adopted as a universal standard.
Universally accepted API definitions could allow a cabbie to be discovered by any cab aggregator app the rider may choose. Indeed, booking a cab could become a seamless extension of facilities offered by hotels or offices. In healthcare, it could facilitate finding a doctor, booking an ambulance, taking out insurance, filing a claim, sharing a medical report or purchasing medicines from a pharmacy — all with a phone and without knowledge about how to engage with specific service providers.
Open protocols create ecosystems that are non-rivalrous and non-excludable by design, unlike platforms where participation is at the discretion of the platform provider. By letting the smallest of application developers or start-ups offer low-cost, locally relevant solutions, we can address the needs of the diverse business community and achieve much greater penetration for e-commerce than the 10 per cent of today.
Open systems have the potential to transform education, food delivery, or professional services delivered at home, by enabling entrepreneurs to compete on their quality and reputation alone. Portability from one application to another, privacy and data empowerment will be some of the issues taken care of.
How to start and scale up open systems as alternatives to platforms? Would the big players bite the bullet? Can such systems achieve critical mass? Well, banks were once averse to joining the UPI but are happy now. Google has even recommended adoption of a similar system by the Federal Reserve in the US.
We need to create open protocols and open networks. Further, with open consensus (using distributed ledgers or blockchain) we could even eliminate the need for centrally managed clearing houses. Thus, extending the approach of UPI, eSign, and other solutions, India can demonstrate how to break the stranglehold of platforms, whether homegrown or operated by overseas players. Millions of flowers can bloom again. I am told that there are groups working on such designs and concepts. We should bring them together and take the lead as a nation.
We know how dependent we are on some of the foreign platforms, despite the claim of being a software powerhouse of the world. This situation is the very antithesis of an Aatmanirbhar Bharat and a threat to the country’s digital sovereignty. We can change that.
This article first appeared in the print edition on July 25 under the title “The digital sway.” The writer is Chairman, TRAI. Views are personal.
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