Independent research for DCMS examines the opportunities and potential harms associated with tech sector business models
Research for DCMS carried out by PricewaterhouseCoopers (PwC) sets out distinctive characteristics and business models associated with digital technologies, as well as what they see as the potential harms associated with these business models.
This report, published on 23rd March 2021, was commissioned by DCMS as part of an ambition to create a strategic framework on how Government can shape the role of digital in our economy and society. PwC looked at two key areas which might influence this framework.
- First, the researchers addressed how to define the scope of digital, concluding how no one existing definition of digital is sufficient for policy development processes.
- Second, they looked at how distinctively digital characteristics can drive potential benefits and harms, finding that in all cases analysed, the relationships between characteristics, opportunities and harms are complex.
techUK broadly supports the findings in this report which acknowledge the complexity and nuance of the digital ecosystem, while also emphasising the importance of adhering to an evidence-led approach towards policy development and regulation.
Defining the parameters of digital
The report highlights how the rapid pace of digitally driven change and mass uptake of digital innovations has created multiple, often competing, definitions of ‘digital’ formed by governments, international organisations, industry and academics.
To deal with this challenge, the report notes how policymakers often rely on categorisation of sectors, goods, and services to define and measure the economic contribution of digital, yet this may not be the most useful approach for broader strategic purposes.
Instead, a more holistic definition of scope of digital is recommended – one which considers a combination of the following 6 key dimensions, how they interact with one another and their associated characteristics:
- Digital goods and services
- Digital sectors
- Digital occupations
- Digital activities
- Digital business models
- Digital technologies
techUK firmly supports the conclusion of this section which states that “the digital ecosystem is complex, and no single dimension is able to describe it with sufficient precision to meet the needs of policymakers” and we will continue to highlight the nuance of ‘digital’ in our work with Government, officials, and Parliamentarians.
Identifying the distinctive characteristics of digital
The second half of the report identifies and analyses the distinctive characteristics of digital and the links to potential harm for individuals or organisations.
Some of the digital characteristics analysed include the value of data in digital business models, the role of identity, the lack of verification, the impact of behavioural biases and the factors which can cause markets to ‘tip’.
Snapshot of the harms associated with the 4 cluster areas of digital characteristics
The report groups the characteristics into 4 key ‘thematic clusters’ and looks at correlations to potential harms and benefits for consumers.
Key cluster area 1 - Ownership and portability of personal data: “lack of individual ownership over data, weak portability, and interoperability, and an inefficient market for personal data-driven harms for individuals and society”. (p. 10)
Key cluster area 2 - Identity, verification, and oversight of digital content: “where online content can be created and shared, externalities can arise, especially if it is unclear who is accountable for the consequences of content”. (p.10)
Key cluster area 3 - Transparency of digital technologies, data and algorithms: “individuals can be influenced by digital choice architectures to make decisions and/or to follow recommendations that can be biased”. (p.10)
Key cluster area 4 - Digital scale, scope, and network effects: “distinctively digital characteristics may make market power more likely in digital markets, with a potential to lead to economic harms and the exacerbation of social harms”. (p.10)
techUK and our members remain fully committed to helping form safe online environments for consumers and we encourage further analysis, including industry engagement, on the four key cluster areas to provide additional evidence on potential harms and opportunities.
The report concludes with an acknowledgement that there is no existing definition of digital which is sufficient for policy development and the relationship between digital characteristics, opportunities and harm is extremely complex.
PwC also conclude that additional evidence is required, recommending that the future of this work should be dedicated to conducting further analysis and evidence gathering, broadening the analysis, and considering the potential implications of this work on governance, policy and regulation.
techUK will continue to support Government and DCMS as this research develops, to ensure that the realities of digital businesses and how they operate continue to be acknowledged and considered when striving to form proportionate and effective digital regulation.
If you have any questions or would like to find out more about techUK’s work in this area, please feel free to get in touch.
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