Submission to the Government of Ontario on Ontario's Data Strategy
November 29, 2019
Competition is essential to harnessing the power of the digital economy
- The digital marketplace is the fastest growing sector of Canada's economy. Since 2010, it has grown nearly 40% faster than any other sector and now represents a larger portion of GDP than mining and oil and gas extractionFootnote 1 – sectors often associated with Canada's economic strength. The digital economy is also essential to Canadians daily lives, with 87% having made an online purchase in the past year.Footnote 2
- In this new reality, it is more important than ever to focus on competition when developing rules and frameworks. Competitive digital markets can encourage innovative businesses to scale up and challenge established businesses. Faced with more competition, established businesses are forced to compete harder for consumers. These dynamics, when put together, deliver more choice, lower prices, and increased innovation to Canadians.
- In this submission, the Competition Bureau (Bureau) recommends that the Government of Ontario (Ontario Government) consider open access to its data and data portability, using shared data standards, as key features of Ontario's Data Strategy. These features can foster competition in the digital marketplace by allowing more firms to enter and expand their businesses, and allowing consumers to switch more easily between competitors.
About the Bureau
- The Bureau ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace. As an independent law enforcement agency, headed by the Commissioner of Competition, the Bureau is responsible for the administration and enforcement of the Competition Act, Consumer Packaging and Labelling Act, Textile Labelling Act and Precious Metals Marking Act.
- As part of its mandate, the Bureau promotes and advocates for the benefits of a competitive marketplace. Submissions to government bodies, such as the Ontario Government, form a key part of the Bureau's advocacy strategy. Such submissions aim to assist regulators in formulating and implementing rules that satisfy legitimate policy objectives, while respecting competition's central role in the Canadian economy.
Open access and data portability can empower consumers and help small and medium-sized businesses compete
- The emergence of the digital economy has given rise to a new form of currency: data. Access to data is often necessary for both businesses and consumers to take full advantage of the benefits of competition. For businesses, data can be a precondition to entering and competing in the marketplace.Footnote 3 For consumers, the ability to safely and efficiently share their data between service providers can increase their willingness and ability to switch to a competitive alternative. The importance of data in the digital economy has led policymakers in Canada and elsewhere to consider open access to data and data portability as a means of fostering competition and innovation.
- Open access to data levels the playing field in the digital economy, by providing all firms with access to data that they may need to compete. In the context of Ontario's Data Strategy, open access could allow businesses to access government data, with adequate privacy and consumer protections in place. Open access, where possible, can facilitate the creation of innovative services by equipping businesses with information to better tailor their products and services to meet the needs of consumers.
- In general terms, "data portability" allows users to take their personal data from one platform and securely and easily transfer it to another. When consumers can switch between competing businesses easily, businesses have to keep prices low or maintain value for their customers in other ways. If not, they risk losing customers to their competitors. Barriers to switching, called switching costs, can lead to less competitive markets where incumbents "lock-in" their customers and new competitors have no way to grow their business.
- Data portability principles have been used in several contexts, including:
- Number porting: The Canadian Radio-television and Telecommunications Commission implemented wireless number porting to allow customers to keep the same telephone number when changing wireless service providers.Footnote 4 Number portability eases the frictions associated with switching, which can spur more vigorous competition and lower prices.Footnote 5
- Digital identification: Some Government of Canada services allow users to verify their identity using SecureKey or their existing banking credentials. This allows customers to use the same verification credentials across multiple platforms, reducing the burden associated with creating another identity verification procedure. Digital identification can reduce the cost of customer acquisition for new entrants, facilitate more seamless switching and help reduce friction for individuals and businesses when interacting with government agencies.
- Open banking: Following a study on competition in the retail banking market which found that banking customers face substantial barriers to switching between providers resulting in low levels of customer engagement and poor competition,Footnote 6 the UK Competition and Markets Authority implemented reforms requiring banks to implement an open banking standard in order to reduce or remove frictions to switching.Footnote 7 This provided limited open access to consumer data through application programming interface's (API) to encourage product comparison by consumers and the development of third‑party applications or overlay services.
In December 2017, the Bureau published its market study "Technology-led innovation in the Canadian financial services sector". In it, the Bureau recommended that policymakers embrace "open" access to systems and data through APIs. Further, in response to Finance Canada's consultation to explore the merits of open banking in Canada, the Bureau's submission described the benefits of data portability as a means of spurring innovation and giving consumers greater control over their personal data.
- The potential benefits of increased data portability for competition and productivity could be profound. For instance, one study commissioned by the UK estimates that economy-wide personal data mobility could increase UK GDP by at least £27.8 billion (C$48.5 billion).Footnote 8
- In light of the potential benefits to competition, the Bureau agrees with the Ontario Government's proposal in the discussion paper "Creating Economic Benefits" (Discussion Paper) to "[e]nhance access to data for businesses." The Discussion Paper points out that "[t]he rise of open data presents new, broader opportunities for businesses to innovate". The Bureau encourages the Ontario Government to consider policies that promote open access and data portability, such as enabling open access to government data, with adequate privacy and consumer protections.
Data standards can help ensure a level playing field
- The Discussion Paper rightly recognizes that "[a] lack of standards, or the existence of many contradictory standards, is a barrier to economic growth because it both prevents data sharing and hampers the interoperability of our data ecosystem." The Bureau agrees that shared data standards are essential to promoting wider and more efficient data access. Establishing shared data standards not only helps to ensure effective oversight, but also ensures a level playing field that minimises the risk of abuse.Footnote 9
- However, establishing data standards can also create barriers to entry if the cost of compliance is disproportionately high for small and medium-sized businesses that may lack the resources necessary to ensure compliance with regulations; or where such standards rely upon proprietary technology that can be monopolized. To avoid unnecessarily increasing compliance burden, data standards should be proportionate to the risks they aim to mitigate and should be cast narrowly.
Policies that promote open access and data portability can help Ontario businesses and consumers thrive in the digital economy
- Competition is essential to realizing the full potential of the digital economy – where innovative new businesses can challenge the status quo and consumers have access to a wider variety of products and services. Access to data is essential to realizing that potential. The Bureau encourages the Ontario Government to consider policies that promote competition, including by adopting principles relating to open access and data portability. Doing so will ensure an innovative and competitive economy that benefits businesses and consumers.
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