Interoperability for number-independent interpersonal communications services under the DMA: More harm than good?

The Digital Markets Act (DMA) is a cornerstone of European digital platform regulation. Gatekeepers are required to enable interoperability of their number-independent interpersonal communications services (NI-ICS), which are designated as core platform services (CPS) like e.g. messaging ser-vice WhatsApp. To this end the DMA defines a three-stage implementation of interoperability, start-ing with simple bilateral text communication with further features to follow over a period of four years (DMA, Art. 7(2)).<br>Using a consumer survey in Germany with 2,826 respondents, this study examines the potential effect of interoperability on consumer preferences for using specific NI-ICS. As NI-ICS are subject to network effects, demand tends to gravitate towards services with a larger user base, which has re-sulted in a highly concentrated market. Horizontal interoperability could counteract such tendencies towards concentration. However, this desired effect is highly dependent on the willingness of con-sumers to use NI-ICS in an interoperable manner, and which NI-ICS they choose to use as a result of interoperability.<br>There are two main findings from our consumer survey:<br>First, we find that almost all NI-ICS users in Germany tend to use NI-ICS (97%), which are designat-ed as CPS. WhatsApp alone is currently used by around 93% of NI-ICS users and is typically ac-cessed on a daily basis. In contrast, only 50% of NI-ICS users use an alternative (non-gatekeeper) service. Overall, alternative services are used less frequently and tend to play a subordinate role in the interpersonal communication of German users.<br>Second, very few NI-ICS users are opposed to interoperability, 64% consider it useful, and at each stage of implementation more than half of respondents indicate that they would use interoperability - at least in some cases – to communicate with specific contacts, via certain functions or via certain services. However, the majority of NI-ICS users that intend to adopt interoperability expect to contin-ue to use gatekeeper services to the same extent as they do now. In addition, the proportion of users who intend to use gatekeeper services to a greater extent than before the introduction of interopera-bility slightly outweighs the proportion of users who intend to use these services less. With regard to the use of alternative NI-ICS, the proportion of users who say they will use alternative NI-ICS less than before the introduction of interoperability is about twice as high as the proportion of users who intend to use these services more. <br>Therefore, interoperability as mandated by the DMA could lead to a reduction in the use of alternative NI-ICS by those NI-ICS users who choose to enable interoperability. It may even increase the incen-tive to use gatekeeper services, thereby contributing to the strengthening of gatekeeper ecosys-tems. Our results therefore call into question the incentive for alternative NI-ICS providers to de-mand interoperability from gatekeepers in the first place. Overall, our analysis suggests that the effect of the horizontal interoperability obligation for NI-ICS in the DMA may be contrary to the in-tended effect, or at least will not mitigate the concentration tendencies in the market for NI-ICS.