Introduction

The free-wheeling and chaotic early internet has matured into a powerhouse of commerce, culture, and personal expression. Tech platforms have become an integral part of our daily lives, offering products and services that help us fulfill critical tasks online, such as communicating with loved ones, shopping for goods, seeking employment opportunities, and more. The infrastructure that these platforms offer has become even more critical as we navigate the COVID-19 pandemic. While these platforms offer many societal benefits, they have also changed the competitive dynamics of the marketplace. Not only have various online services threatened the economic viability of such businesses as brick and mortar stores, but many platforms have secured market dominant positions.

While these platforms offer many societal benefits, they have also changed the competitive dynamics of the marketplace.

The open and diverse internet of the past has given way to concentrated power and data in the hands of a few large companies. Those companies now control most of the traffic on the internet.¹ Online platforms consist of complex businesses, and because they benefit from significant economies of scale and network effects, they have radically changed the competitive dynamics of the digital marketplace. As a result, it is important to scrutinize how platforms exercise market power and exploit their dominance.

These platforms have become “walled gardens” within the larger context of the internet. In the past, interaction between people on the internet might have taken the form of links from one website to another, comments on blog posts, emails sent from one organization’s server to another, or posts on a given newsgroup on Usenet (the first message board system, which operated without a single centralized server, and instead shared postings among many servers to which individual clients connect). Today, all of those actions are likely to take place entirely within the confines of a single company’s services.

Policymakers are beginning to look into how this change is detrimental to competition and the internet at large. As Rep. David Cicilline (D-R.I.) and former Federal Trade Commission (FTC) Commissioner Terrell McSweeny have written using Facebook as an example,

The same network effect that creates value for people on Facebook can also lock them into Facebook’s walled garden by creating barriers to competition. People who may want to leave Facebook are less likely to do so if they aren’t able to seamlessly rebuild their network of contacts, photos, and other social graph data on a competing service or communicate across services. This friction effectively blocks new competitors—including platforms that might be more protective of consumers’ privacy and give consumers more control over their data—from entering the market.²

One of the ways that policymakers can fight back against this growing centralization is to create holes in the barriers between these walled gardens. Through these holes, the users of other competing services can reach out and connect with the people inside the garden, decreasing the stranglehold that the service has on its own users. Commonly known as “interoperability,” these holes provide ways for one system to interact with a second system, often exchanging data or causing some processing of data to take place. Interoperability is familiar to most people in the context of email applications—regardless of which email provider and software people use, they can all email each other across systems because all are interoperable. But social media sites and other platforms are not generally interoperable. Thus, if individuals want to leave a platform, they will not be able to reach their friends or followers or other contacts on the platform they left behind.

Interoperability decreases barriers to entry and facilitates greater competition by enabling new players to offer access to the users on, and at least some of the features of, the entrenched platforms. It also expands the overall market around a particular service or type of service by letting third parties fill in the gaps around the platform’s feature set, as many games and other apps have done around Facebook’s platform.

Interoperability is a promising lever for regulators to use in their efforts to oversee and correct monopolistic abuses amongst the dominant online platforms. It has a unique ability to promote and incentivize competition—especially competition between platforms—and can also offer users greater privacy and better control over their personal data generally. This report examines interoperability—the ability for disperate computer systems and services to interact and exchange data—as a principle that underlies the operation of the internet in all its parts, discusses why online competition problems present unique challenges to regulation, addresses the privacy and security risks raised by interoperability and appropriate mitigations for those risks, and explains how interoperability can directly increase platform competition on the internet.

Interoperability…has a unique ability to promote and incentivize competition—especially competition between platforms—and can also offer users greater privacy and better control over their personal data generally.

Editorial disclosure: This report discusses policies by Facebook, Google, and Mozilla. Facebook, Google, and Mozilla Foundation are funders of work at New America but did not contribute funds directly to the research or writing of this report. New America is guided by the principles of full transparency, independence, and accessibility in all its activities and partnerships. New America does not engage in research or educational activities directed or influenced in any way by financial supporters. View our full list of donors at www.newamerica.org/our-funding.