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No. 85 - Cloud ecosystem and platforms competition

Communications & Strategies - 31/03/2012 No. 85 - Cloud ecosystem and platforms competition

1st quarter 2012

Cloud computing is substantially changing the way computing is performed. Indeed, it allows for on demand self-services, resources pooling to serve multiple users using multi-tenant models, elastic provision of capacity, better control and use of resources through measured services. Content in the cloud is opening the way for a vast array of content and innovative applications. However, the benefits of cloud computing, come along with additional challenges in the area of privacy, security, consumer protection, … The papers selected for this special issue develop various thoughts on these issues. They provide original analysis of the platforms competition, and flexible and adaptable approach on the policy side as well as innovative technical and market solutions. With an exclusive interview with Mrs Anne BOUVEROT, Director General GSMA


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Dossier





Cloud ecosystem and platforms competition

Jacques CREMER, Yves GASSOT, Bruno LANVIN & Lorenzo Maria PUPILLO


Introduction

By the Editors

Papers

Competition, Neutrality and Diversity in the Cloud

Andrea RENDA

Competition in the Cloud:
Unleashing Investment and Innovation within and Across Platforms
Annabelle GAWER & Tim COWEN

The Gathering Storm: Analyzing the Cloud Computing Ecosystem
and Implications for Public Policy

Kenji E. KUSHIDA, Jonathan MURRAY & John ZYSMAN
   
Evolving Cloud Ecosystems: Risk, Competition and Regulation
Anastassios GENTZOGLANIS
   
Migration to the Cloud Ecosystem:
Ushering in a New Generation of Platform Competition

Chaim FERSHTMAN & Neil GANDAL

Private Clouds with No Silver Lining:
Legal Risk in Private Cloud Services

Rebecca IGLESIAS & Rob NICHOLLS


Interview

Anne BOUVEROT
, Director General GSMA
Conducted by Yves GASSOT




Other Papers

The Price of Copper and the Transition to Fibre
Martin CAVE, Antoine FOURNIER & Natalia SHUTOVA

The Cost of Nationwide Fibre Access in Germany
Stephan JAY, Karl-Heinz NEUMANN & Thomas PLÜCKEBAUM





Features


Firms and Markets

The ICT Landscape in BRICS Countries: China
Jean-Paul SIMON

Technical Innovations

Technical Architecture and Advantages of Cloud Gaming
Laurent MICHAUD

Book Review

Marie CARPENTER, La bataille des télécoms - Vers une France numérique
By Jean-Pierre COUSTEL

Nico CARPENTIER, Media and Participation. A site of ideological - democratic struggle

Caroline COLIN, Droit d'utilisation des oeuvres
By Isabelle POTTIER











Dossier

Cloud ecosystem and platforms competition




Competition, Neutrality and Diversity in the Cloud
Andrea RENDA

Key words: cloud computing, electronic communications, neutrality, security, data protection, competition, business models.

The emergence of cloud computing is promising enormous benefits for small businesses, due to the dramatic reduction in IT costs caused by the service-oriented architecture. At the same time, the transition to a cloud ecosystem is more controversial for individual end users, as emerging business models can potentially affect both competition within and across layers, and the end-to-end nature of the Internet. The paper argues that policymakers should work on several fronts, including privacy, security and competition policy, before the transition to the cloud ecosystem can be seen as really conducive to a desirable outcomes for end users. Work in the direction of the inter-cloud architecture and a European partnership for cloud computing should thus be oriented towards an open, competitive environment, compatible with different levels of quality of service, and such that end users can still access a robust, best-effort Internet infrastructure, along with managed services with guaranteed QoS.



Competition in the Cloud:
Unleashing Investment and Innovation within and Across Platforms
Annabelle GAWER & Tim COWEN
Key words: platforms, double-sided markets, innovation, incentives, cloud, competition law, ecosystem, telecom, market performance, market structure, regulation, technologies.

Innovation in the cloud is challenging Europe's telecoms industry and its regulatory system. The shift from 'desktop to data centre' and the provision of computing in the form of a service means that cloud offerings are increasingly dependent on the quality of the underlying communications infrastructure. Critical parts of the infrastructure are regulated, and the role that regulation plays may limit services innovation and in turn may  mean that communications infrastructure could become the 'weakest link' in a cloud offering. This article presents an argument that draws on law, economics, and business platforms strategy to expose the incentives and impediments to innovation in cloud computing. It assesses how European policy goals, the Lisbon Treaty and regulatory action interact, and proposes a change in the EU regulatory regime to reflect a duty to promote innovation as a stated goal. This change would encourage new business models to emerge, allowing the incumbent EU telecom network providers the opportunity to contribute to innovation in the cloud. Such innovation would help spur investment and wider competition across platforms which would help realise Europe's objective to drive growth and competitiveness.


The Gathering Storm: Analyzing the Cloud Computing Ecosystem
and Implications for Public Policy
Kenji E. KUSHIDA, Jonathan MURRAY & John ZYSMAN
Key words: cloud computing, industry analysis, business models, policy.

We contend that cloud computing is historically unique by simultaneously being an innovation ecosystem, production platform, and global marketplace. In the 1st Part we define cloud computing as a 'dynamic' utility, listing key characteristics of what it is and what it is not, both from providers' and users' vantages. In the 2nd Part we characterize three competitive battles in the broader cloud ecosystem - winning the User (cloud providers), the search for value (network providers), and the device wars (device providers). We then provide a new and simple, but powerful and practically applicable typology that combines the type of providers with the commonly understood architecture types. The 3rd Part applies this framework to analyze the business strategies of global cloud service providers and select others in the broader ecosystem. We conclude with policy implications and where to take research from here.

Evolving Cloud Ecosystems: Risk, Competition and Regulation
Anastassios GENTZOGLANIS
Key words: competition, cloud capacity, cloud utility, distributed computing, hybrid ecosystems, multi-cloud, regulation, risk, traditional IT platform.

Cloud ecosystems are evolving rapidly in the midst of competitive, regulatory and technological uncertainties. The business opportunities cloud computing (CC) is creating are the driving forces behind its acceleration. At present, traditional IT, cloud and hybrid ecosystems vie for market shares and market dominance. The intensity of competition and the absence of regulation in the new markets that cloud computing has created explains the emergence of new platforms and the pre-emptive strategies used by major CC companies. Regulation or the absence of it, security and privacy are the most important factors that hinder the full development of CC industry. The emergence of hybrid ecosystems is viewed as a reply to these problems. The latest research shows that the regulatory differences between the US and the European Union with respect to the CC industry, may explain the current gap that exists in the level of innovation between these countries. Unless the governments and regulatory authorities address the issues of regulation and security at both national and international levels, the orderly growth of this industry is at risk. It is argued that a kind of "producer-consumer protection regulation" is more appropriate for the CC industry.


Migration to the Cloud Ecosystem:
Ushering in a New Generation of Platform Competition
Chaim FERSHTMAN & Neil GANDAL
Key words: cloud computing, platform competition, network effects, two-sided markets.

Cloud computing is defined to be Internet based computing technology, where the term 'cloud' simply means Internet - and cloud computing refers to services that are accessed directly over the Internet. There are essentially three categories of cloud computing. (i) Iaas (Infrastructure as a Service) - number crunching, data storage and management services (computer servers), (ii), SaaS (Software as a Service) - 'web based' applications, and (iii) PaaS (Platform as a Service) - essentially an operating system in the cloud. Much of the attention and literature has focused on the revolution in Iaas services provided via the cloud. Despite the major changes in technology in IaaS services, estimates indicate that more than 90% of the cloud computing market (in terms of revenues) will involve (virtual) operating systems and applications software services (i.e., PaaS and SaaS services.) In this paper, we examine how several key economic factors will likely affect competition in SaaS/PaaS services in the cloud.



Private Clouds with No Silver Lining:
Legal Risk in Private Cloud Services
Rebecca IGLESIAS, Rob NICHOLLS & Anisha TRAVIS
Key words: cloud computing, private cloud, lawful interception, data protection, professional privilege.

This paper provides an overview of the legal risks that arise from the use of private clouds arising from lawful interception, data protection obligations and legal professional privilege. The paper uses an Australian perspective to provide examples, but concludes that there are significant legal risks in all jurisdictions.

The Editors

Jacques CRÉMER received his undergraduate degree from the Ecole Polytechnique in 1971, a SM in Management and a Ph.D. in economics, both from MIT, in 1973 and 1977. He has held appointments at the University of Pennsylvania and the Virginia Polytechnic Institute. Since 1991, he is "Directeur de Recherche au CNRS", working at the University of Toulouse. From January 2003 to July 2007, he was Director of the Institut d'Economie Industrielle (IDEI), and is now Scientific Director of the Toulouse School of Economics. His current research interests are the economics of organization, the economics of the Internet and of the software industries, as well as contract theory.

For more than fifteen years, Yves GASSOT has been at the head of IDATE-Digiworld Institute (www.idate.org), an institute that has established itself as one of the leading research centres in Europe concerned with the telecommunications, Internet and media industries. In this position, he has taken part in numerous studies of the various markets and the strategies being pursued in the telecommunications sector. He is on the panel of several expert committees, including the Conseil Général des Technologies de l'Information, ITS and the advisory Committees of the PTC and Iris Capital. He was special adviser of the European Commissioner of the Information Society during the last regulatory framework review. He serves as Executive Director of the journal COMMUNICATIONS & STRATEGIES and is scientific head of the annual DigiWorld Yearbook and DigiWorld Summit. With a background as DPLG architect, he is a graduate of the Institute of Political Studies, Paris (3rd Cycle).

Bruno LANVIN is the Executive Director of INSEAD eLab (www.insead.edu/elab) and a former senior executive at the World Bank and in the United Nations. His work focuses on competitiveness, innovation, skills and government reform. He has had a longstanding involvement with the World Economic Forum (participating in particular in the creation and annual production of the Networked Readiness Index and Global Information Technology Report since 2001). He has been playing leading roles in INSEAD's work on innovation (development of the Innovation Readiness Model - IRM, customization of the Global Innovation Index - GII, generation of skills for innovation - work for the European Commission and the European Business Summits since 2009). A frequent keynote speaker in high-level meetings, Dr Lanvin advises global corporations and governments on strategic issues.

Lorenzo Maria PUPILLO is an Executive Director in the Public & Regulatory Affairs Unit of Telecom Italia and Affiliated Researcher at Columbia Institute for Tele-Information. In Telecom Italia, he is working on cloud computing, next generation networks, ICT & energy, Net neutrality, geographic markets, functional separation and is providing policy advising to senior management. He is an economist by training and has worked in many areas of telecommunications demand and regulatory analysis, publishing papers in applied econometrics and industrial organization. He has also been Advisor to the Global Information and Communication Technologies Department of the World Bank in Washington. Before joining Telecom Italia in 1992, he was a member of the technical staff at AT&T Bell Laboratories in Murray Hill, New Jersey. Dr. Pupillo also serves on numerous committees for international organizations and on scientific and advisory boards around the globe. He obtained a Ph.D. and an M.A. from University of Pennsylvania, an MBA from Istituto Adriano Olivetti in Ancona Italy and an MS in Mathematics from University of Rome.

The interviewee

Anne BOUVEROT is Director General and Member of the Board of the GSMA. Before joining the GSMA, Anne was Executive Vice President for Mobile Services for France Telecom Orange, where she defined the strategic priorities and led transformation programmes for the mobile business and was also responsible for the selection of mobile devices sold to customers with mobile offers. She previously was responsible for international business development at France Telecom Orange, and her achievements include the privatisation of Telkom Kenya, new mobile licences in Armenia and Tunisia, and partnerships in Portugal and UAE. Prior to France Telecom Orange, Anne led a business unit of Equant and was responsible for developing IT services for Equant's multinational business customers. She began her career in telecommunications as project manager for Telmex in Mexico in 1991. Anne holds M.S. and Ph.D. degrees in mathematics and computer science from the Ecole Normale Supérieure in Paris and an M.S. degree from Telecom Paris.


The authors

Martin CAVE is visiting professor at Imperial College Business School, and a Deputy Chair of the UK Competition Commission. In 2010/11 he was BP Centennial Professor at the London School of Economics, and from 2002 to 2010 a professor at Warwick Business School. He is a regulatory economist specialising in the communications sector.

Jean-Pierre COUSTEL is currently a Senior Advisor to the France Telecom's Corporate Secretary. He has spent most of his carreer with France Telecom, where he held diverse management positions, building up experience in telco operations, international services and content distribution. He is the founder, and initial Chairman and CEO, of VIACCESS SA, a France Telecom company, a global leader in solutions for secure distribution of multimedia content. He is the author of several papers on the deregulation of the telecommunications industry and on the regulation of the cable television services in the USA, taking advantage from his experience and actions in the transformation of the electronic communications sectors. Jean-Pierre Coustel graduated from the Ecole Polytechnique (X72) and followed post-graduate studies at Télécom ParisTech (ENST 77) and in Economics.
jeanpierre.coustel@orange.com

Timothy COWEN
is a partner in Sidley Austin's London office, where he focuses on EU and UK competition law and EU regulation. He is a Visiting Professor at City Law school, and a guest lecturer in law and technology at Imperial College Business School. Mr. Cowen has handled competition and regulatory matters for over 25 years from both the perspective of private practice, in house counsel and as a board member of a major international technology company. He formerly served as general counsel for BT's international businesses, and as Chief Counsel Competition Law and Public Policy for BT Group. He is also the immediate past Chairman of the Competition Panel at the Confederation of British Industry. He is the founder of the Open Computing Alliance, an alliance of computer and information technology companies dealing with the legal and policy issues that arise with particular reference to cloud computing.

Chaim FERSHTMAN
is Professor of Economics at the Eitan Berglas School of Economics at Tel Aviv University. He received his B.A. and in Mathematics from the Hebrew university in 1978, and his Ph.D. from the Hebrew University 1984. Professor Fershtman has published numerous papers in industrial organization and the economics of the software & Internet industries. He was an editor at the Rand Journal of Economics and a research fellow at the Centre for Economic Policy Research.

Antoine FOURNIER
is a partner at TERA Consultants where he has provided economic and strategic expert-appraisal and consultancy services for telecoms and other network industries since 2001. He is specialised in fixed broadband and NGA access technologies. Antoine holds a Master's degree in Engineering (Telecom ParisTech) and in Industrial Economics (Paris Dauphine University).

Neil GANDAL
is Professor of Economics and Head of TAU International (School for Overseas Students) at Tel Aviv University. He received his B.A. and B.S. degrees from Miami University (Ohio) in 1979, his M.S. degree from the University of Wisconsin in 1981, and his Ph.D. from the University of California-Berkeley in 1989. Professor Gandal has published numerous papers in industrial organization, the economics of information technology, and the economics of the software & Internet industries. He is an editor at the International Journal of Industrial Organization and a research fellow at the Centre for Economic Policy Research.

Annabelle GAWER
is Assistant Professor of Strategy and Innovation at Imperial College Business School, Imperial College London. She is an expert in the strategic management of technological platforms. Her research focuses on platforms' impact on competition and innovation, and she has made significant contributions to the understanding of what drives the success or failure of platform business strategies. She has authored numerous articles as well as two books on the topic of technological platforms: Platform Leadershp: How Intel, Microsoft and Cisco Drive Industry Innovation (Harvard Business School Press, 2002) and Platforms, Markets and Innovation (Edward Elgar, 2009).

Anastassios GENTZOGLANIS
is a full professor at the University of Sherbrooke, Canada, where he teaches graduate and undergraduate courses of Regulatory Economics, Industrial Organization and International Finance. He holds a Ph.D. in Economics from McGill University. He is director of CEREF (Center for the Study of Regulatory Economics and Finance) and member of GReFA and CIRST research centers located in Sherbrooke and Montreal, Canada, respectively. He published in numerous academic and professional Journals and he is conducting research in the areas of Regulation and Innovation in the network industries. His most recent publication is the co-edition of the book entitled: Regulation and the Evolution of the Global Telecommunications Industry (E. Elgar International Publishing, Northampton, USA and Cheltenham, UK, 2010).

Zdenek HRUBY
is Senior Fellow at Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic. His work is focused on Network Industries Economics and Theory of Regulation. Zdenek Hruby is Member of the BoD, European Investment Bank, and former deputy Minister of Finance.

Rebecca IGLESIAS
is a final year Bachelor of Arts Bachelor of Law student at Macquarie University Australia. She has completed a summer clerkship at Webb Henderson and is currently employed in the same firm as a paralegal.

Stephan JAY
is Senior Consultant within WIK-Consult's Cost Modelling and Internet Economics division focusing on analysis of Next Generation (Access) Networks from strategic, economic, technical, competition policy and regulatory perspectives. Between 2003 and 2007 he held various positions at bmp Telecommunications Consultants, a strategy consulting group operating in international broadband markets. He has over ten years of project experience regarding analysis of business models, cost models and strategy development in the context of international broadband markets for a broad variety of industry stakeholders. Stephan Jay studied business administration at universities of Duisburg (Germany) and Cardiff (UK) graduating with the degree Diplom Kaufmann in 2003.
s.jay@wik.org

Kenji KUSHIDA
is Research Associate at the Stanford University Walter H. Shorenstein Asia-Pacific Research Center. He is a research affiliate at the Berkeley Roundtable on the International Economy (BRIE), with UC Berkeley Ph.D. in political science.

Laurent MICHAUD
is Senior Consultant, Head of Digital Entertainment Practice at IDATE-Digiworld Institute. Laurent acts as project manager for market reports on video games, music, peer-to-peer, digital rights management and content protection, mobile electronics and the digital home. He provides OSEO Innovation (a national business development and support organisation) with expert technical-economic analysis of strategic issues relating to video games, TV, internet and video. Laurent has also created the International Video Game Forum, which has been taking place in Montpellier every year since November 2002. Prior to coming to IDATE, he worked as project manager for the Centre d'Études et de Projets, Montpellier University's Economic Sciences research laboratory. Mr. Michaud holds a post-graduate degree in Economic and Financial Regional Project Engineering from the Université de Montpellier.
l.michaud@idate.org

Jonathan MURRAY
is currently Executive Vice President and Chief Technical Officer at Warner Music Group. Previously at Microsoft, he was Vice President and World Wide Public Sector Chief Technology Officer.

Karl-Heinz NEUMANN
is a graduate of the University of Bonn with a Ph.D. in Economics. He rejoined WIK in April 2001 as General Manager and Director of WIK GmbH and WIK-Consult GmbH, a position he had previously held until 1995. From 1995 to 2001 he worked for RWE Telliance AG as Executive Director for strategy, regulation and national projects. In the last two years he was Member of the Management Board of the Company. In this position he also acted as Member of the Board and as Member of the Supervisory Board of several national and international telecommunications companies. Besides his telecommunications industry experience, Karl-Heinz Neumann has a broad experience in the consultancy of regulatory authorities, governments and telecommunications companies. He acted as a member of many expert and advisory commissions, related to German telecommunication authorities. Furthermore, Dr. Neumann has provided expert opinions on various regulatory cases among others in Germany, Switzerland and the Federal Court of Justice in Australia.
k-h.neumann@wik.org

Rob NICHOLLS
heads up Webb Henderson's regulatory consultancy, which focuses on regulatory strategy and implementation in the telecommunications and media sectors. Dr Nicholls delivers regulatory strategy and implementation advice in Australia, Asia and North America to governments, national regulators, operators and vendors. He is also a sessional lecturer at the University of New South Wales. Before joining Webb Henderson in November 2011, Rob was a General Manager at the Australian Competition and Consumer Commission and had responsibility for competition issues in content and applications and the ACCC's interaction with the Australian Convergence Review. Prior to his role at the ACCC, Rob was a regulatory consultant with another major Australian law firm.

Thomas PLÜCKEBAUM
joined WIK in August 2007 as senior consultant and leads the department of Cost Modelling and Internet Economics. Between 1994 and 2007 he held several positions at competitive operators in Germany and was CEO of ISIS Multimedia Net, Germanys first regional operator sited in Duesseldorf (founded in 1994). Dr. Thomas Plückebaum studied Electrical Engineering and Economic Engineering at the RWTH Aachen. In 1982 he joined the Institute for Electro Technology and Data Processing Systems as an Assistant Professor and finished his studies with a doctorate in Electrical Engineering. His research work concentrated on parallel computing architectures and communication protocols. He has published a major number of articles and speeches and has written a variety of studies and comments on regulatory developments in the past decades in Germany and the EU for the German industry association Telecom e.V., where he is member of the board.
t.plueckebaum@wik.org

Isabelle POTTIER
is attorney-at-law and head of the research and publications department of the law firm Alain Bensoussan; she has particular expertise in drafting studies on the assessment and legal protection of new technologies as well as on electronic evidence and archival.

Andrea RENDA
is a Senior Research Fellow at the Centre for European Policy Studies (CEPS), where he started and currently manages the Regulatory Affairs Programme. He is also the Manager of the CEPS Digital Forum. Andrea is Professor of "Economic Analysis of Law", "Antitrust and regulation", "Policies and policymaking in the EU" and "International Public Governance" at Luiss Guido Carli University, in Rome, and a Senior Research Fellow at Luiss' Law and Economics Lab. He also lectures at the Erasmus University of Rotterdam, at the University of Stockholm and the College of Europe in Bruges. He was awarded a Jean Monnet Fellow at the European University Institute from 2011 to 2013. He is also responsible for the Global Outlook 2012 initiative at the Istituto Affari Internazionali in Rome. Andrea is member of the Editorial Board of the international peer-reviewed journal Telecommunications Policy (Elsevier); a member of the Scientific Board of the International Telecommunications Society (ITS) and of the Scientific Board of EuroCPR. He holds a Ph.D. degree in law and economics from the Erasmus university of Rotterdam. Dr. Renda is the author of several publications, including Law and economics in the RIA world (Intersentia, September 2011), Innovation Policy in the EU (co-authored with Massimiliano GRANIERI, Springer, March 2012).

Natalia SHUTOVA
is a consultant at Tera Consultants and a Ph.D. candidate in Sorbonne Universités. Her main research interests are in industrial organization and competition policy, with application to network industries. Natalia holds master degrees from Sorbonne Universités, Ecole Polytechnique and Novossibirsk State University.
shutova@tera.fr

Jean-Paul SIMON
has been Senior scientist at the Institute for Prospective Technological Studies (IPTS), European Commission, Directorate-General JRC, (Sevilla, Spain) since January 2010. He works on the economic assessment of the IT sector, the IT sector in BRICs countries and the media and content industries. Prior to that he held different positions in the industry and worked as a consultant specialised in media/ telecom law and regulation. He holds a Ph.D. in Philosophy (1975) and is a graduate from the Ecole des Hautes Etudes Commerciales (HEC) (econometrics) 1971. He has written several books and articles on communications and public policy. He is a frequent speaker on telecommunications and media in Asia, Europe and the USA.

Anisha TRAVIS
is a partner at Webb Henderson where she focuses on telecommunications and information technology matters, including wholesale arrangements, network procurement and outsourcing and system integration arrangements. Anisha is head of the Singapore office of Webb Henderson and advises clients in the telecommunications, banking, media and energy sectors. Anisha also advises government sector clients on telecommunications and information technology issues, from the commencement of the tendering process through to dispute resolution.

John ZYSMAN
is Professor at the University of California Berkeley, co-director of the Berkeley Roundtable on the International Economy (BRIE) and Center for Research on Energy System Transformations (CRESTS).



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