No. 416: Market definition and significant market power with regard to OTT-0 and OTT-1-services
No. 416: Market definition and significant market power with regard to OTT-0 and OTT-1-services - Project outline on instant messaging services
(Full version only available in German)
Authors: Lorenz Nett, Christian Hildebrandt
The following paper refers to the WIK discussion paper No. 410 "Market analysis with regard to multi-sided online platform markets" written by Christian Hildebrandt and Lorenz Nett. As a main result it was concluded that economic theory does not provide general welfare economic or competition policy results. In fact each OTT market is specific in its characteristics and requires a detailed individual analysis.
In the presence of direct and indirect network effects the SSNIP (Small but Significant and Non-transitory Increase in Price) test to determine a relevant market turns out to be quite complex and intellectual challenging. A comprehensive set of data is required to apply the SSNIP concept in practice. Uncertainty and incompleteness in this regard creates legal risks and legal uncertainty. In addition new concepts are required to deal with services which are offered free of monetary charge. The provision of data - which can be regarded as an implicit price for using OTT services - has to be incorporated into a modified SSNIP approach to determine the relevant market. This requires a comprehensive understanding how data sets are used by the service provider and how these data sets can or are monetarised.
In the context of multi-sided platforms, besides the traditional criteria, especially the following aspects are of relevance to determine the existence of market power: Direct and indirect network effects and its implications on market entry barriers and switching costs of users, scale effects, possibilities to differentiate service and multi-homing as well as so called "BIG DATA" as an entry barrier. Due to a high degree of innovation disruptive competition might happen for several OTT services. This may restrict market power to a high degree. However, to determine market power in a multi-sided platform market requires a detailed individual market analysis.
To obtain a better understanding of how market analysis has to be conducted in online platform markets in which services are offered free of (monetary) charge a detailed empirical analysis of such a specific market is necessary. Instant messaging services are the most popular and most often used smartphone application in Germany. Thus, in this paper we present an outline for a project listing what elements have to be looked for and evaluated to determine a relevant market with regard to instant messaging services as a (starting) reference.