[The Editors' Verdict] Transition to Platform-Centered Horizontal Regulation

Professor Shin Minsu, Department of Business Administration, Hanyang University

Professor Shin Minsu, Department of Business Administration, Hanyang University. / Photo by Hyunmin Kim kimhyun81@

Through the report titled "Key Legislative Policy Issues of the 21st National Assembly," published last June, the National Assembly Research Service presented the newly emerging legislation and major issues in the 21st National Assembly. The report anticipated that the policy of defining OTT services as a type of media service would be discussed.

This approach signifies a change from the current vertical regulation, which governs content differently depending on the method of transmission. Under vertical regulation, laws must be amended or created each time a new media service emerges. Vertical regulation fails to effectively respond to an environment where convergence accelerates, leading to confusion caused by overlapping and gaps in regulation, as well as issues of regulatory fairness and efficiency arising from different regulations applied to similar services. In contrast, a horizontal regulatory system is suitable for the current media environment, where broadcasting and telecommunications converge and new media services continuously appear. Horizontal regulation allows for predicting which regulatory domain new converged media will belong to, enables flexible and immediate regulatory application, and reduces unreasonable regulations, thereby activating market entry for businesses. This is expected to resolve the limitations of vertical regulation.

Two classification systems have been proposed for transitioning to horizontal regulation. One is the three-tier classification system of Network-Platform-Content. The other is the two-tier classification system of Transmission and Content. The three-tier system has the advantage of being able to regulate platforms, which serve as content intermediaries, separately from networks. However, separating networks and services may reduce incentives for facility investment and cause administrative inefficiency due to the separation of licensing systems. On the other hand, the two-tier system, with a simple licensing structure, can enhance administrative efficiency. In the two-tier system, since transmission includes both networks and platforms, it is possible to regulate platforms and networks comprehensively.

Networks have traditionally been regulated due to natural monopoly characteristics caused by network externalities and essential facilities, which can lead to subscriber concentration and entrenchment. Recently, however, platform operators’ business models have become regulatory targets due to concerns about monopoly possibilities arising from network externalities and data monopolies akin to essential goods. A recent example of this controversy is Google’s in-app payment system. Regulatory issues arising from the expansion of platform influence are clearly reflected in recent discussions on the European Digital Services Act. The Digital Services Act points out that a few large platforms capture most of the value generated in the platform market and enjoy significant network effects while acting as gatekeepers among platform users. Furthermore, the Act explains that these platforms control the entire platform ecosystem and face very low chances of being challenged by current or future market participants. Platform operators have the ability to easily expand their business areas into new markets by leveraging their capacity to accumulate large amounts of data and relatively easy access to various other devices, thereby gaining economic power. A notable aspect of this Act is the renewed focus on vertical abuse issues. This marks a departure from the past perspective that only considered cases where market-dominant operators distort competition by abusing their position. Accordingly, even if an operator does not hold market dominance, it can still be included in the issue of unilateral abuse if it causes harm.

Along with this comprehensive regulatory trend, it is necessary to consider regulating networks and platforms at the same level, given the market characteristics they share and their intermediary functions. Regarding platforms’ role in public opinion formation and cultural diversity, these issues can be addressed from the perspectives of content diversity and public functions. Considering these points, future discussions on transitioning to a horizontal regulatory system should be based on a platform-centered two-tier classification system. It is hoped that a swift transition to a horizontal regulatory system will strengthen the competitiveness of related industries and enhance regulatory effectiveness.