What is data portability?
A user has an account on a music streaming service–platform A–that stores information about their preferred artists and music genres. Through consistent usage, data and trends emerge that allow platform A to recommend similar artists and genres tailored to the user’s preferences. A new entrant, platform B, offers the same services as platform A, however, at a lower cost.
Data portability provisions facilitate data transfers in a secure, structured, and machine-readable format and would allow this user to switch services, taking along data history about their specific tastes and preferences. In this way, data portability provisions allow users to obtain and reuse their personal data across multiple services. Without the ability to port this information, however, the user may have to spend considerable time replicating their efforts on the new platform, platform B. This required time and effort could be a deterrent for many users, to make the switch from platform A to B.
Perceived benefits and potential adverse impact of data portability
As illustrated through the example, a data portability provision, in theory, can decrease the required effort for users to switch between services. Faced with the prospect of consumers switching services, firms are incentivised to innovate and offer attractive pricing to retain existing customers, and attract new ones. With a lowered incumbency advantage, new entrants are encouraged, and competition is fostered in the market. In turn, data portability may positively impact competition in the market.
However, for users to gain the full potential of data portability provisions, firms need to agree on and implement common standards to facilitate easy data exchange across platforms. The compliance costs associated with implementing standards could be high, which could deter new entrants. This could then produce the opposite effect on competition than what was intended.
Drawing from the previous example, platform A’s ability to offer the user a curated music experience is a product of their unique algorithm, a proprietary asset that differentiates platform A from its competitors. If a user chooses to move from platform A to B, they could potentially transfer insights and preferences derived from platform A’s unique algorithm. Giving platform B these preferences could subsequently give it an unfair advantage, and in turn adversely affect competition in this market.
Due to the complexities involved with implementing data portability standards, and its seemingly contradictory outcomes, countries around the world, including India, have been hesitant to incorporate this provision in their data privacy legislation. Even as it stands in Article 20 of the General Data Protection Regulation (GDPR), the provision has a broad and ambiguous scope, leading to varying interpretations and challenges regarding its application across different services and industries. Given the complexities in designing and implementing data portability, it is worth asking: Is introducing a data portability provision beneficial for market competition?
Neha Jain is an Analyst at Artha Global.
Banner image source: DALL-E.
