Martijn Poel, Senior Researcher, Delft University of Technology, Technopolis Martijn Poel is senior researcher and consultant at Technopolis. Fields of expertise include service innovation, innovation-friendly regulation, interactions in the policy mix, evaluation of information society policy and impact assessment of research programmes. He worked in projects for the European Commission (DG Connect, DG ENTR, DG RTD and JRC-IPTS) and the Dutch Ministry of Economic Affairs. From 2009 to 2011, he was chair of the European Communications Policy Research conference (EuroCPR). November 2013, he will defend his PhD thesis at Delft University of Technology, Faculty of Technology, Policy and Management. Title: The impact of the policy mix on service innovation: the formative and growth phases of the sectoral innovation system for Internet video services in the Netherlands. Prior to joining Technopolis, Martijn worked at TNO. He received his master’s degree from the University of Amsterdam, Faculty of Social Sciences. Legal courses were taken at the Institute for Information Law (IvIR).

1. The valley of death for European
OTT services? The role of policy
and regulation
Martijn Poel
20 November 2013, Montpellier
Challenge the future
1

2. Pre-roll
Challenge the future
2

3. Outline
• Valley of death
• Functions and phases of innovation systems
• Deficiencies in innovation systems
• The policy mix
• Case study on Internet video in the Netherlands (1997-2011)
• Conclusion
Challenge the future
3

4. The valley(s) of death
• Although innovation is a non-linear process, one can
distinguish between:
• Fundamental research > applied research > implementation
and commercialisation > large-scale production and export
• A persistent concern for European policy makers and firms
• Often studied in the context of components and goods, e.g.
Key Enabling Technologies
• Seldom studied in the context of media and other services
Challenge the future
4

5. Functions of innovation systems
Knowledge development
and diffusion
Resource
mobilisation
Influence on the
direction of search
Legitimation
Entrepreneurial
experimentation
Market formation
Challenge the future
5

6. Phases of sectoral innovation systems
• Across the formative and growth phases, the relevance and the
details of the six functions change (Bergek et al., 2008)
• From knowledge development and diffusion to legitimation and
market formation
• From knowledge about technologies to knowledge about largescale production and commercialisation
• From experiments to living labs and large-scale demonstrators
• From long-term funding of research to short-term funding of
implementation and international expansion
• Etc.
Challenge the future
6

7. Deficiencies in innovation systems: market failures
and system failures
Market power
Failures in infrastructural
provision and investment
Information asymmetry
Lock-in/path dependency
failures
Externalities/spillovers
Institutional failures
Public goods
Interaction failures
Capabilities failures
Challenge the future
7

8. Deficiencies (problems) can be either increased or
decreased by policy and regulation
Challenge the future
8

9. Challenge the future
9

10. OTT: European actors pushed away from the centre
of the value network for media services?
• Note that the study focused on Internet video services, with
international competition and low switching costs
• Whereas the settop-box model provides European actors
more opportunities to maintain their clients
Challenge the future
10

11. Challenge the future
11

12. Formative phase (1997-2006) and growth phase (2007-).
The innovation system is getting more international,
Internet video services are bundled with other
services, and converge with online video services
Growth phase, top 10 alters, i.e. actors not interviewed but mentioned
1, Apple, US
6, Hulu, US
2, NPO/NOS, NL
7, KPN, NL
3, Philips, NL
8, Google, US
4, YouTube, US
9, UPC/Chello, NL/US
5, Microsoft, US
10, Facebook, US
Challenge the future
12

13. Two types of market failures hindered functioning of
the innovation system
Challenge the future
13

14. All five types of system failures hindered functioning
of the innovation system
Challenge the future
14

15. Innovation policies decreased the market failure of
information asymmetry (and access to funding)
• “The Snelnet pilot was crucial. A lot of things were developed, with
a lot of publicity.” (formative phase)
• “We are not good at sucking up subsidies. Only when it’s really
easy, we participate, for instance the WBSO tax credit scheme.”
• ICES-KIS R&D programme: ‘the Dutch FP7’ (relevance for
SMEs?)
Mixed signals about non-innovation policies, e.g. media policy
• “Most probably, other actors in the sector benefited from the
initiatives of public broadcasters; the dynamics that public
broadcasters created; consumers that got used to video services.”
Challenge the future
15

16. Both innovation policy and regulation impacted on
system failures such as interaction failures
and institutional failures
• “We meet at PICNIC, TEDx and some smaller events that are
frequented by the same type of persons. This is also where
foreign actors show up; where we are inspired. Technology is
coming from abroad.”
• “Copyright is killing.”
Challenge the future
16

17. Examples of interaction in the policy mix
• While contributing to the function of knowledge development and
diffusion, service providers benefited from development programmes
(e.g. Pieken in de Delta), support for pilots (e.g. Snelnet and First Mile
TV), WBSO and support for networks (e.g. iMMovator)
• While contributing to different functions of the innovation system, service
providers were hindered by media policy, copyright policy, electronic
communications policy, competition policy (‘it all adds up’)
Challenge the future
17

18. Conclusion
• Policy matters: the impact of the policy mix on service innovation
was substantial in terms of timing, scale, direction
• Timing: impact of innovation policies was stronger during the
formative phase. Support was reduced ‘halfway the valley’
• Emphasis was on R&D rather than pilots, incubators and export
• Persistent regulatory uncertainty/ burdens during both phases,
instead of easing the way through the valley (for EU firms)
• Interaction in the policy mix. It all adds up
Challenge the future
18

19. Recommendations
• Service innovation requires time, money, several iterations and,
hence, persistent and coherent innovation policies
• Speed up clarification or adaptation of product/market regulation,
by policy makers with domain expertise
• Stimulate public actors to collaborate with private actors, also for
online services that are linked to education, health and transport
• The need for policy coordination, not just window dressing, can be
underpinned by empirical studies about the policy mix
Challenge the future
19

20. • This is not the Dutch Netflix. I repeat: …
• Announced November 2013
• After 2 years of discussions with policy makers, legal experts,
competition authority, copyright holders
• Public broadcaster (NPO), SBS and RTL
• Other broadcasters can join
• Paid service
Challenge the future
20