The role of government in the Internet

Project experience | Regulation and policy


The problem

The Internet is becoming increasingly central to economic life. Entire new industries have sprung up overnight, and many others have found new ways of working. Yet for all its clear benefits, the Internet is also a source of economic upheaval, and many traditional industries suffering the effects of disruption – from media and retail to telecoms itself.

The Internet not only matters to businesses – citizens care too. From concerns about online privacy, cyber security and online safety, to calls for net neutrality and universal access, how the Internet is run is increasingly a matter of public concern.

As a result, governments increasingly find themselves having to come to grips with the Internet as a key area of concern. And yet, in general (with important exceptions) governments' role in the Internet has been one of facilitation rather than direction, in what has largely been a story of successful innovation by businesses, academics and the wider Internet community. Thus, when considering governments' future role in the Internet, it is important to bear in mind the possibility of policy failure, and in particular that excessive intervention might diminish the Internet's vitality.

These issues are particularly relevant to the Netherlands, a country with one of the world's highest levels of Internet adoption. In this context, in late 2012 the Dutch Ministry of Economic Affairs commissioned Analysys Mason to conduct a study into the role of government in the Internet. The request called for an ambitious project. Key questions to be addressed included: mapping out the overall value chain of the Internet; developing a framework for public policy analysis for the Internet; and applying this framework to four specific issues.

The solution

As a first step towards addressing this challenge, we developed a comprehensive view of the Internet value chain, highlighting the roles played by new and traditional players, and the relationship between national and global players. We identified six high-level industry segments (online services, Internet connectivity, access networks, devices, traditional telecoms and TV content), under each of which we further defined two sub-levels of categorisation.

Next, working closely with a high-level team at the Ministry, we developed a framework for addressing the question of the government's role in the Internet in specific contexts where market forces might fail to protect key public interests including privacy, security and openness. This incorporated traditional notions of 'market failure' and considered the possibility of economically 'efficient' outcomes that may not be optimal for consumers – an important case in the Internet, where consumers are often not service providers' only type of customer (for example, online players often have to balance the interests of advertisers and consumers, in addition to their own).

We then combined the two steps above – our map of the value chain, and our framework for analysing the government's role – and applied it to industry segments where government intervention may be needed in future. Based on a long list of areas proposed by us, the Ministry then chose four specific segments and issues that would serve as subjects for four in-depth case studies. These were:

  • cyber security in the case of certificate authorities
  • openness in the case of connected TV
  • privacy in the case of social networks
  • availability in the case of cloud infrastructure providers.

Figure 1: Our map of the Internet value chain, with the four case studies highlighted [Source: Analysys Mason, 2013]

Internet value chain

Finally, drawing on workshop discussions held with the Ministry team, we provided an analysis of some of the trade-offs involved in developing Internet policy, with a focus on the complex, potentially contradictory effects that non-discrimination (or 'openness') requirements can have on innovation.

At the end of our project, we presented a summary of our analysis to a government-wide audience of around 70 civil servants from across the Dutch government.

The result

The output from our work has been used throughout the Dutch government as a framework to organise policy discussions about the Internet. It has also been used to inform discussions on regulation and Internet governance at European and global fora.

Download the report here - The role of government in the Internet.

The Dutch government used Analysys Mason's framework to organise policy discussions about the Internet.