Hanno Kaiser on Open vs. Closed Systems & the Zittrain-Wu Thesis

by on May 17, 2011 · 4 comments

Hanno F. Kaiser, a U.S. and EU antitrust lawyer and partner with Latham & Watkins LLP, has just released an important essay on a topic I have devoted much time to here over the years: the debate over the relative advantages of “open” vs. “closed” technological systems and the Lessig-Zittrain-Wu school of thinking about these issues.

Kaiser’s essay is entitled, “Are Closed Systems an Antitrust Problem?” and it appears in the latest edition of Competition Policy International.  This essay is not to be missed. Kaiser’s terrific paper helps us better understand and debunk many of the myths and misperceptions that continue to riddle this debate. Here’s Kaiser’s key insight:

At bottom, the bad reputation of closed systems or walled gardens in the “open versus closed” debate is quite undeserved. Walled gardens generally benefit their environments—both in the real world and the digital realm. The primary purpose of a garden wall, after all, is to shelter plants from wind and frost, not to keep intruders out. In the protected space of the garden, flowers can grow that would not otherwise survive in the wild. Walled gardens thus deliberately create a microcosm that is different from the surrounding ecosystem. Therefore, as long as the garden does not take over the entire ecosystem, walled gardens increase, not reduce, overall diversity. From a competition policy perspective, enjoying the fruits of a walled garden is generally not a guilty pleasure.

Therefore, “as a policy matter, ‘open’ is not necessarily better than ‘closed’,” Kaiser argues, and elaborates as follows:

Our initial question whether “closed” systems are inherently anticompetitive can be restated as follows: “Is there a reason to believe that intra-platform restraints imposed by the platform sponsor on various contributors are commonly exclusionary?” To that question, the answer is no. Is it possible that such restraints can lead to anticompetitive exclusion? Yes, but not unless the platform has significant market power vis-à-vis rival platforms.

In other words, it is foolish to over-simplify the debate as many scholars do when they imply that “open”=good and “closed=bad. (For a recent example, see my essay here earlier this month about Cory Doctorow’s misguided effort to equate open systems with “techno-optimism.”)

In my work, I’ve tried to focus on the happy balance and healthy competition that exists today between such systems. Shouldn’t that be what counts most? Scholars like Lessig, Zittrain, Wu, and Doctorow sometimes seem to want to force a false ‘open-or-nothing-else’ choice upon us. Such thinking is troubling from a policy perspective since it means law might force many consumers to use systems that may not be to their liking.  Moreover, such thinking reveals an ironic insecurity among these “Openness Evangelicals,” as I have called them: they seem to have very little faith in the open systems and technologies they trumpet. If such systems really are superior, shouldn’t they win out in the end?

Importantly, however, Kaiser also debunks the simplistic notion that “open” and “closed” systems are easily defined:

As an analytical tool the labels “open” and “closed” are of limited utility, because they cannot adequately capture the complexity of selective openness at various layers of a system within their single binary distinction.  Addressing the central antitrust issue requires that we move past the “ready labels” and focus on whether specific vertical restraints at all levels result in anticompetitive exclusion and foreclosure.

Quite right. I also appreciated Kaiser’s thought’s on Tim Wu’s “Separations Principle,” which would rigidly segregate all information services into three buckets–content, conduit, and devices–and keep them there. Kaiser says:

The Separations Principle amounts to a general rule against vertical integration in the information sector irrespective of market power, foreclosure, and efficiencies. Such a sweeping rule requires extraordinarily strong justifications, which Wu fails to provide. In fact, our analysis of the competitive effects of open and closed systems does not suggest that closed systems pose anywhere near the level of concern that would justify such a radical expansion of antitrust market regulation.

Kaiser is actually being too generous. Wu’s radical prescription for the information sectors flies in the face of decades of antitrust scholarship and would have devastating ramifications for the Digital Economy in practice, as I noted in part 6 of my multi-part review of his book The Master Switch.

Anyway, read Hanno Kaiser’s terrific paper. It’s a major contribution to the literature in this arena and a real breath of fresh air compared to what I regard as the hopelessly pessimistic (and usually overly-simplistic) literature on “open” vs. “closed” technological systems.

P.S … I put together a separate page here at the TLF to house my 30 or so essays addressing “Problems with the Lessig-Zittrain-Wu Thesis.”  Also, this chapter from the Next Digital Decade book on the case for Internet optimism ties together all my various critiques into one essay.


Previous post:

Next post: