Christine Zulehner - Titular Professor of the Innovation & Regulation in Digital Services Chair - Professeure Titulaire de la Chaire Innovation & Régulation des Services Numériques.
More details

Distribution in the Digital Economy

The digital development has fundamentally changed the relationship between the producer and the consumer. Moreover, the economic and managerial literature analyse this evolution in distribution (platform, multisided?) and in its regulation.

The issues of the vertical integration and its effects on competition are not only to be found in the Internet but also in business, transportations and telecommunications. The problem comes from companies that have a great part of the market share as Internet Service Provider and as content provider. As Internet Service Provider the company can abuse its dominant market position to restrict the competition between content providers.

Thereby, the net neutrality designs the fact that the Internet must be available to everyone and everything except discrimination of price and quality. The opponents of the net neutrality defend the idea that there is no need to redouble the control of ex post anti-competitive behaviour by ex ante rules. In addition one must not forget that the costumer knows how to respond to discrimination (price and quality) of the network operators: He can avoid it (by multiplying the points of access), give wrong information (distinguish himself as a cheap client) or modify his consumption. Finally, because of the fixed cost of infrastructure the net neutrality could reduce the incentives to innovation.

Therefore net neutrality relates to the issues of vertical relations in the retail trade. The ISP will thereby be the distributor (the ISP are in reality the distributors in opposition to the content providers): He has access to the consumer, and the consumer has to put up with a fixed change cost, and the distributor can choose the sold products or sell them at different prices. If the material distribution might discriminate, why impose the neutrality to the Internet?

Henceforth, various research study distributional issues and deal with four series of questions, addressed during a seminar organized by the Innovation and Regulation Chair on February 2nd, 2009 on : “Producers and distributors : can regulation of retail help for better regulation of the Internet ?”

  1. Are the relations between providers and distributors on the internet or on the closed networks (VoD, TV, etc) specific and therefore need to be considered with a specific regulation? For example are the lock-in cost different, etc.
  2. Does the metaphor of retail embrace the meaning of the relation provider-supplier on the Internet? For instance, one could argue that the Peer-to-Peer or the active audiences do not embrace a vertical pattern like the providers-distributors-consumers relations.
  3. How can we more specifically characterize the distribution forms that emerge in the digital development and what problems do they cause: Aggregation functions, integration, interoperability, management, information, relocation, national constraints (TVA, regulations of sectors such as pharmaceutical), responsibility (operator?).
  4. What are the specific problems raised by e-commerce? How can regulation of e-commerce affect competition between traditional distributors?



This post is also available in: French