Untitled - CRC

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EXECUTIVE SUMMARY

In recent years, the discussion as to the impact of emerging technologies and the opportunities presented to countries to take advantage of the benefits of the digital economy has taken on ever greater relevance. Organizations such as the World Economic Forum (WEF) and the Organisation for Economic Co-operation and Development (OECD) have concentrated a significant portion of their efforts on analyzing and proposing best practices in terms of the policies and regulations required to maximize the benefits derived from the use of the new technologies. While the effects of the policies for the digital economy adopted in certain countries are only beginning to be seen, it is necessary to design the mechanisms by which to integrate best practices into Colombian policy and regulation in order to make progress in fostering the digital economy. To the extent that this goal is achieved, it will be possible to obtain the social and economic benefits of the digital economy. This study identified the actions and projects to be undertaken by Colombian government agencies to address the challenges and opportunities of the digital economy within the existing institutional framework over a timeframe of five (5) years. To reach this objective, the study went through three stages that are reflected in the structure of the document: 1.Competitive Dynamics of the digital economy

In the first section we analyze the theoretical approach for the creation of a regulatory framework that promotes the digital

economy. The competitive dynamics of the digital economy and its implications for public policy and regulation are treated as well. 2. International benchmarking and diagnostic of Colombia:

In the second section, we study the development of regulation for the digital economy in the United States, the United Kingdom, Australia, Singapore, and Chile with the goal of providing international references for key regulatory and public policy initiatives that structure the pillars of the digital economy and the role of government agencies in each aspect. In addition, this stage analyzed the state of Colombian regulation in five sectors that are strategic for digital transformation: transport, tourism, media, postal services and logistics, and finance. 3. Regulatory roadmap for addressing the challenges and opportunities of the digital economy:

Lastly, from the challenges identified in the former stages, we propose projects and actions to be taken by various institutions as required for the modernization of the Colombian regulatory framework with the aim of facilitating new business models and technological innovation around the digital economy in Colombia. These projects are laid out in a roadmap over a timeframe of five (5) years. This stage also included the development of a methodology guide for other government institutions to use in defining regulation in response to new business models and technological innovation derived from the collaborative digital economy 1.

FIGURE 1. DOCUMENT STRUCTURE

1The collaborative digital economy shares physical, financial, and/or human capital assets between many parties—without

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transfer of ownership—through a digital platform, creating economic value for at least two of those parties (Dalberg, 2006).

As part of this study and as described in sections two and three of the document, representatives from thirty companies in the key sectors of the digital economy were interviewed in order to understand the perspectives of the private sector as to its development in Colombia.

5.Integration: Networks for creation and the growth of wealth.

This executive summary contains the main elements of the analysis that lead to the roadmap and methodology guide, but to delve deeper into the topic addressed and understand the state of the art, the reader is advised to refer to the documents that make up the study in which each of the elements cited in this document are addressed broadly and with extensive references.

7.Convergence:The industries of computing, communication, and content converge and become a dominant sector.

1. COMPETITIVE DYNAMICS OF THE DIGITAL ECONOMY 1.1 What is the digital economy?

6.Disintermediation:Elimination of middlemen between producers and consumers.

8.Innovation:Constant innovation through technology, imagination, and creativity are the main sources of value. 9.Immediacy: Immediacy becomes a fundamental driver of economic activity. 10.Globalization:Globalization driven by new technologies. This means that organizations are not only multinational but global.

This study took Don Tapscott’s (1996) definition of the digital economy that addresses the global network of economic activity enabled by information and communication tecnologies (ICTs)).

11.Discordance:The gap between the technologically “rich” and the “poor” who don’t have access to technologies grows and becomes a source of conflict.

From this view, the digital economy has 11 main features:

Currently, ICTs are transversal to the entire economy. However, there are five fundamental elements interacting with each other in the digital economy (Figure 2) 1) users [clients], 2) digital facilitators that provide infrastructure, communication, software, computing, and accessibility, 3) market disruptors [digital disruptors], 4) traditional companies undergoing a process of digital transformation [transformers], and 5) support for economic and social activities facilitated by digitalization [government, investors, academia].2

1. Knowledge: As the main engine behind the economy and source of power. 2. Digitalization: Information in a digital format and facilitated by digital equipment that allows for the free flow of large volumes of information in the least possible time between people in different locations. 3.Virtualization: Physical and tangible things become virtual things. 4.New organizational dynamics: Traditional organizational structures give way to a more fluid and flexible work environment.

2 In addition to the theoretical framework here presented, the following resources were fundamental to this study: 1) Digital

America: A Tale of the Haves and Have-Mores, McKinsey Global Institute, 2015; 2) A New Regulatory Framework for the Digital Ecosystem, NERA and GSMA Association, 2016; and 3) El Ecosistema y la Economía Digital en América Latina, Raúl Katz, 2015. For an in-depth treatment of the various references use in this analysis, the reader is invited to consult

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FIGURE 2. DEFINITION OF THE DIGITAL ECONOMY

Source: Arthur D. Little Analysis

•Clients: The user—the final consumer of digital products and services—is placed at the center of the ecosystem as the primary driver. Active part of the production process and the focal point of change. •Digital facilitators: Enablers of innovation and communication, typically positioned towards the end of the value chain close to the client. They provide infrastructure and access that ensure a healthy demand for digital services (the presence of facilitators strengthens the demand for digital services). These are communication, hardware, and software companies that are providing the digital economy with the capacity to develop, and as such are an essential portion of the digital economy value chain. •Digital market disruptors: Digital natives or market disruptors are the companies that are at the vanguard of innovation and development and have the potential to develop competitive advantages (Google, Amazon, Apple, Facebook, Spotify, etc.) in new markets through platforms that

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connect supply and demand. In this group we find new digital companies that are bringing value by developing: 1) new digital channels for interaction with clients, 2) new platforms with two or more sides with differential value for clients and users considering supply and demand, also known as multisided platforms, and 3) new business models with new products and services using digital technologies (i.e. Big Data, Artificial Intelligence, Blockchain, etc.). •Transformers: Traditional companies in the process of a digital transformation. Over time, the barriers between traditional companies and digital disruptors evaporate. There are traditional companies that are in the process of changing or adapting their business model to the digital environment and are seeking competitive advantage derived from the efficiencies of digitalization. In this sector we find businesses in transition towards digitalization that are nourished by the evolution of facilitators and the efforts of the digital disruptors.

•Support sectors: They nourish the digital economy by providing financial and human resources (investors and financial market, labor market, and academia), regulatory stability, and promotion policies (government and regulators).

approached from the perspective of supply and demand (for goods and services facilitated by ICTS) and the improvements to management and operations derived from the digital transformation.

Much like the traditional economy, the digital economy may be

FIGURE 3. KEY ASPECTS OF THE DIGITAL ECONOMY—DEMAND, SUPPLY, AND PRODUCTIVITY


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In general terms, the demand for digital services still exhibits enormous growth potential. It is global in nature and dynamic due to innovation and the high degree of competition that make client loyalty more difficult to cinch in the digital work. Following from this, to maximize the virtuous cycle that begins with digital demand, it is necessary to increase investment in ICT in order to guarantee access to infrastructure and innovation to increase general wellbeing. In terms of the supply

of digital goods and services, it is made up of technologies, communications services and information services that satisfy the demand for digital goods and services that in turn promote the transformation of production processes through the use of digital technologies. The reader interested in the details of the theoretical framework used for this study is reminded to refer to Chapter 2 of Document 1 1.2.1 Product as service

1.2 Competitive dynamics of the digital economy The theoretical framework we have described allows us to identify competitive dynamics driven by four elements: 1) the facilitating technology of this competitive dynamics, 2) digital trust, 3) human talent, and 4) the power of information.

FIGURE 4. COMPETITIVE DYNAMICS OF THE DIGITAL ECONOMY

Source: Analysis Arthur D. Little

Progress in digitalization has allowed physical products and services to be replaced by digital substitutes. This has meant that consumption is dematerialized into services that are used in a manner that is indifferent to time, place, or mode of access. Similarly, the emergence of platforms has gradually eliminated the need for intermediaries. Other developments, such as improvements in network infrastructure specifications

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and new capacity for network monitoring have also allowed and facilitated the development of this competitive dynamic. It must also be considered that this dynamic has generated important effects in terms of acces, adoption, and unlimited consumption of services and digital products, with positive impacts on the productivity and efficiency of transformed sectors. 1.2.2 Modularidad y desarrollo del ecosistema digital

FIGURE 5. TRENDS IN THE DIGITAL ECONOMY—PRODUCT AS A SERVICE


1.2.2 Modularity and development of the digital ecosystem The digital economy develops around modular value chains where certain actors depend on others in order to provide their services. This is one of the competitive dynamics that has the most potential for disruption since it favors the development of ecosystems that allow collaboration and monitoring of all kinds of interactions between users. The development of digital ecosystems poses clear challenges

to regulators since 1) it is difficult to separate the position of actors at the various levels of the ecosystem, 2) the ecosystem hosts a variety of companies that offer similar products, 3) the wellbeing of users must be considered holistically, and 4) self regulation is usually the norm in these ecosystems since this helps to encourage participation and trust in the system.

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FIGURE 6 VALUE CHAIN IN DIGITAL CONTENT PLATFORMS

Source: Raúl Katz, El Ecosistema y la Economía Digital en América Latina (2015)

1.2.3 Multisided platforms and network effects

Multisided platforms are the venues where two or more opposing market agents meet. The volume of transactions is affected by charging more on one side of the market while reducing the price paid on the other. One of the advantages of these platforms is the reduction of transaction costs between participants. Also, due thanks to network effects the value of the platform increases in proportion to the number of

users. Network effects, and economies of scale have allowed multisided platforms to become one of the main sources of wealth generation in the digital economy. Among the challenges faced by regulators regarding multisided platforms are: the eventual emergence of dominant positions, data protection, privacy and network security, price as a secondary factor, and the global reach of the services provided.

FIGURE 7. MULTISIDED PLATFORMS AND NETWORK EFFECTS


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1.2.4 Convergence between sectors

Due to the development of an ecosystem that is all the time more interconnected and symbiotic and to the progressive digitalization of various business processes, companies and sectors in the digital economy have developed beyond the traditional boundaries (Figure 8), which has given way to the integration of chains in different sectors. Multisector convergence has allowed the development of an economy

with highly diffused production boundaries, where innovation has become a source of competitive advantage allowing companies to adapt their business models to different areas of business. Therefore, regulators must pay special attention to the emergence of anticompetitive behavior and the design of intersectoral regulatory frameworks.

FIGURE 8. CONVERGENCE ALONG THE VALUE CHAIN AND BETWEEN SECTORS


1.2.5 Service everywhere

The digital economy has allowed the number of channels by which various products and services are accessed to multiply. Currently, these access channels include smartphones, computers, smart televisions, among others. Each one of them takes advantage in one way or another of ubiquitous cloud services. Among the challenges faced by regulators

addressing this dynamic are those of promoting the organic development of omnichannels4, reinforcing access conditions, and the dynamism of the market where users may be offered a single experience through various infrastructure developments and access channels.

4 The omnichannel experience is the integration of existing access channels for clients of a company. “Today our clients are omnichannel,

and in addition to communicating with a company or product in various ways and with various devices, they may initiate the relationship on one channel and complete it on another.” See BBVA, Cinco estrategias de omnicanalidad para la transformación digital (2016). Available at: https://www.bbva.com/es/noticias/economia/computacion/transformacion-digital/cinco-estrategiasomnicanalidad-la-transformacion-digital /

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FIGURE 9. TRENDS IN THE DIGITAL ECONOMY—SERVICE EVERYWHERE

OR

OR

Source: DANE, ECV (2016)

1.2.6 Personalization and active creation 1.2.6

Personalización y creación activa

The progress of technologies that track preferences and taste allow companies to develop solutions adapted to the particular needs of each user. As is shown in Figure 10, big data allows access to massive amounts of information on users. Companies use this data to improve their competitive position through personalization their of various products.

This dynamic of personalization has allowed users to play an active role in the production of goods and services since companies can now integrate them as an important part of product development and innovation. In terms of regulation, growing personalization poses challenges to the application of clear mechanisms for protecting data and the information already shared.

FIGURE 10. TRENDS IN THE DIGITAL ECONOMY—PERSONALIZATION

Source: NIKE, Arthur D. Little Analysis

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1.2.7 Competitive dynamics and continuous improvement

Under this dynamic, companies essentially compete through innovation and continuous improvement to their products and services, allowing them to capture and maintain market segments that are considerably volatile. This dynamism is beneficial to markets because it generates new products at lower costs and challenges the dominant positions of certain

players who may be displaced by companies with better technologies combined with new business models. From the point of view of the regulator, the biggest challenge is the need to build flexible standards that allow the market to evolve and compete naturally without hampering innovation. For this, ex post regulations are recommended, also with quicker responses to market evolution.

FIGURE 11. TRENDS IN THE DIGITAL ECONOMY—VIRTUOUS CYCLE—COMPETITIVE DYNAMICS Services, Coverage, and affordability Servicios, cobertura, asequibilidad

Investment and innovation

Inversión e innovación

profitability of business plan

Demanda

Rentabilidad de plan de negocios

Finally, the reader is reminded that Document 1 of this study delves deeply into the conceptual framework of the digital economy and each of the competitive dynamics 4 addressed, as well as the role that public policy plays in the development of the digital economy, a topic that has not been included in this summary5 but that was analyzed through international examples are, also taking into account the connectivity agendas for Colombia, Plan Vive Digital 1 and 2 6. These additional analyses also identified four aspects to be developed by authorities in order to promote the digital economy: 1) stimulating demand, 2) facilitating local supply, 3) promoting digitalization of companies, and 4) proper coordination between various regulators. These aspects are discussed in later sections. Finally, it is worth pointing out that this section introduced the seven competitive dynamics that have been identified from the theoretical analysis of the digital economy.

Demand

Source: GSMA/NERA, A new regulatory framework for the digital ecosystem (2016)

Each of these has different implications and poses different challenges to the regulator and other actors in the market. This must be taken into account in order to achieve progress in the digital transformation. 2. International benchmarking and diagnostic of Colombia

Having presented the theoretical approach for creating a regulatory framework that promotes the digital economy, Document 2 describes the progress made in terms of regulation for the digital economy, by analyzing experiences from the United States, the United Kingdom, Australia, Singapore, and Chile. These international references provide an overview of the regulatory and public policy initiatives which are key to structuring the pillars of the digital economy as well as the role played by government institutions in each case.

4 Documented in detail in Chapter 3 of Document 1 5 The curious reader may consult the details in chapter 4 of Docuement 1 6 For more information on Plan Vive Digital 2010-2014 y Vive Digital para la gente 2014-2018, disponible en: www.mintic.gov.co/portal/vivedigital

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In addition, we present the main regulatory framework trade-offs to consider when addressing the challenges and opportunities of the digital economy. This section and Document 2 address the state of Colombian regulation with regard to the regulatory challenges and tradeoffs 7 identified in the international overview. We also discuss the commitments Colombia has made on information and transnational services in multiple commercial agreements The last part of section 2 is dedicated to profiling the Colombian digital economy environment. In order to perform this analysis, comparative international case studies were carried out in transport, tourism, media, finance, and logistics and postal services. The goal of these analyses is to identify regulatory features in the international landscape that can facilitate new business models in the Colombian digital economy. Therefore, the conclusions in this section are a fundamental input for the roadmap presented in Document 3.

2.1 Countries analyzed for international benchmarking

The five countries studied were selected following the digital transformation index published by Arthur D. Little 8, which takes into account variables such as price, internet use, and average speed of connection in each country. Working with this index (which scores countries from a minimum of 0 to a maximum of 1) and the per capita gross domestic product, countries were ranked by digital demand and facilitation. The next step involved categorizing countries as pioneers, advanced, developing, or incipient. Based on this, and taking into account the degree of development, five countries representing an heterogeneous sample of valuable experiences were selected in order to analyze their best practices. The countries selected were the United States, the United Kingdom, Australia, Singapore, and Chile.

FIGURE 12 E-CAPABILITIES INDEX BY ARTHUR D. LITTLE Specific countries selected for analysis


It is worth mentioning that these same countries were compared against the Colombian environment to profile the

following six sectors: 1) transport, 2) tourism, 3) media, 4) finance, 5) logistics and postal services, and 6) manufacturing.

7 A trade-off is a situation that implies a loss of quality, aspect, or quantity of one thing in order to obtain a gain in quality, aspect, or

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quantity of another thing. Regulatory decisions often imply an analysis of the trade-offs identified in variables such as quality, price, investment, and others. A Glossary of Political Economy Terms, Auburn University. 8 Digital Transformation Index (DTI), developed by ADL for the study Digital Transformation: How to Become Digital Leader (2015). Available at: http://www.adlittle.fr/uploads/tx_extthoughtleadership/ADL_HowtoBecomeDigitalLeader.pdf

FIGURE 13 SECTORS ANALYZED IN PROFILING THE COLOMBIAN ENVIRONMENT


2.2 International benchmarking of regulatory and public policy initiatives for structuring the pillars of the digital economy

Progress in regulatory and legal frameworks for the digital economy was analyzed for each country. For that purpose, a detailed analysis of the following topics was carried out: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Institutional framework Macroeconomic situation Net neutrality regulation Digital user protection regulation Intellectual property regulation Position or measures adopted for information services OTT and online platform regulation Ex ante and ex post measures for competition Coordination between competent authority and the regulator

At the end of the benchmarking, we present conclusions and recommendations in each of these topics. Detailed documentation is presented in Chapter 1 of Document 2. It contains valuable discussion of experiences that deserve the attention of the reader, such as the evolution of the Smart Nation agenda in Singapore, the United Kingdom’s experience in sandbox regulation, the role of the congressional Committee on Energy and Commerce in the United States, and many others. With the goal of communicating the main conclusions, the following table has been developed from the international benchmarking. It summarizes the position of each country on a list of issues.

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TABLE 1 SUMMARY OF INTERNATIONAL BENCHMARKING

EE. UU

AUSTRALIA SINGAPORE

CHILE

Existence of a specific legal framework for the digital economy

-

+

+

+

+

Existence of governing authority for the digital economy

-

-

+

+

+

Existence of regulation for net neutrality

+

+ -

-

+ -

+

Existence of regulation to guarantee online user protection

+

+

+

-

-

Existence of intellectual property regulation for the digital economy

+

+

+ -

+

+ -

Existence of regulationfree category for information services

+

+

-

+ -

+ -

Existence of regulation for OTT services

-

+

-

-

-

Existence of a sectorial regulatory body with power to regulate competition

-

-

-

+

-

Regulates by relevant markets

-

+

-

-

-

+ -

+

+ -

+

-

Existence of regulation for fintech

+

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UK

YES

-

NO

+ -


Regulation is on the way or is not rigid

The protection of users’ rights online is led by free competition and consumer protection agencies (FTC in the United States, CMA in the United Kingdom, and ACCC in Australia).

Despite OTT not having special regulation (the United Kingdom being the exception), they are subject to free competition regulation and consumer protection.

The United States and Australiaare reviewing and working on fintech platform regulation but have not yet issued definitive regulations.

The United Kingdom and Singapore have declarations on net neutrality (2011) there is not too much development on this topic

Traffic management and private agreements with users are openly allowed.

In Singapore, the telecommunications regulator (IMDA) also adopts competition regulation decisions in the sector.

Australia has no net neutrality regulation.

Chile includes “information services” in its FTA with the United States but as of yet has not implemented regulation.

In Australia, both ex ante regulation (for telecommunications) and ex post regulation (for competition) is issued by the competition authority (ACCC). Regulation in Singapore (as of October 2016) refers to “information and communications services” as a category separate from “telecommunications services.” The former, however, are not exempt from regulation. To the contrary, the regulator (Info-communications Media Development Authority) may regulate them “to promote the use of the internet and e-commerce,” although to date no regulation has been issued.

The benchmarking exercise also resulted in mapping similarities and differences among the countries analyzed across six topics (net neutrality, agency for regulating the digital economy, ex ante and ex post regulation, information services regulation, data regulation, regulatory abstention or intervention in nascent digital markets). The findings are summarized in the following table.

TABLE 2 MAIN FINDINGS FROM BENCHMARKING TOPIC

Net neutrality

FEATURES

Except for Chile, countries tend to be lax in this regard. The United States is expected to migrate towards a lenient model. The trend is towards allowing traffic management under the requirements for transparency in the information provided to users. None of the countries analyzed has created a regulatory agency expressly for the digital economy. However, there is a trend towards the adoption of legal frameworks that contains goals and objectives for the digital economy along with the creation of an institution responsible for promoting it.

Agency for regulating the digital economy

There we observe that the only country among those selected that modified its regulating authority to promote a digital ecosystem is Singapore (in October 2016), structuring it as a horizontal agency following a multi-stakeholder model. In the case of Australia, the active role granted to the competition and consumer protection regulator (the one with ex ante regulation powers for telecommunications), the ACCC, must be noted. It regulates aspects of the digital economy, online content, and e-commerce primarily.

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TOPIC

Ex ante and ex post regulation

Information services regulation

Data regulation

Regulatory abstention in emerging digital markets

FEATURES

In terms of traditional electronic communication or telecommunication, the trend observed is that of ex ante regulation of telecom operators for net neutrality. However, this regulation is unlikely to be applied (generally and a priori) to the digital economy, although there are isolated cases related to Europe’s Audiovisual Media Services Directive 2010/13/EU or to fintech services. In any event, and as a general principle, it is recommended that services that are part of this economy be subject to ex post regulation, typically by the competition authority.

The general trend in the countries analyzed has been to not regulate these services, much less to subject them to the norms that govern traditional electronic communications or telecommunications. Some of the services provided in the digital economy, such as e-commerce, have been catalogued as unregulated information services. However, there have been discussions surrounding regulation for new services in the European Union and the reclassification of the internet proposed by the FCC that makes it difficult to present an unequivocal conclusion on the matter.

The general trend in the countries considered is to regulate personal data, both in telecom services, new categories of e-commerce services, and online services. The trend is towards strengthening this regulation across services. As for Big Data, its regulation has been under study, since data already gathered may or may not contain personal data that can affect competition in the innovationbased sector. Europe has been evaluating the effects the massive use of data have on competition, so Big Data regulation could be expected in the short-term.

For the moment, no interest in regulating digital markets is perceived. They are thought of as nascent and highly dynamic markets. More than regulations, we standards that promote these kinds of services as separate from traditional telecom services have been found. In some cases, special regulations (such as sandboxes) are promoted to foster these new services. These “controlled regulatory environments” facilitate experimentation and the introduction of new products based on technology applied to traditional businesses. Nevertheless, sector-specific regulation is also observed particularly in the transport (Uber) and tourism (Airbnb) sectors, led by the authorities that govern those sectors.

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Source: UT ADL - Telbroad

2.3 Profile of the Colombian digital economy environment

After analyzing international references, the Colombian environment was profiled in order to identify gaps and challenges Colombia faces in regulating the digital economy. We conducted a comparative analysis of 1) best practices that transverse the digital economy as identified in the international benchmarking exercise and 2) international case studies in the transport, tourism, media, finance, and logistics and postal services and logistics.9

2.3.1 Transversal challenges

The following situation is observed in Colombia with regard to the topics identified in the international benchmarking exercise. These are directly related to general or transversal challenges that must be resolved in order to progress with the digital economy.

FIGURE 14 TRANSVERSAL CHALLENGES FOR THE DIGITAL ECONOMY IN COLOMBIA


9 For a detailed analysis of each of these elements, refer to chapter 2 of Document 2 of this study.

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Considering the subjects addressed in the previous section, a more specific analysis of certain transversal challenges was conducted (looking at mass market, government, and business sectors). These challenges must be addressed in Colombia for the proper development of the digital economy, including supporting structures such as communication infrastructure and access to ICT services and devices. Several sources were consulted for this analysis and priority was given to those that evaluate all the countries with widely accepted methodologies. This allows the roadmap for Colombia to be easily compared to other countries and for best practices at the global level to be identified. The Global Information Technology Report 2016: Innovating in the Digital Economy by the World Economic Forum (WEF)

the National Planning Department (DNP) and the Private Competitiveness Council were surveyed. Following are the compared results of the Networked Readiness Index (NRI) for Colombia (the red triangle in Diagram 1). As a way to reference these results, the NRI for countries with similar per capita income throughout the world are mapped against their per capita gross domestic product at purchasing power parity. Colombia is below the average, outranked by Jordan, China, South Africa, Mongolia, Macedonia, Montenegro, and Costa Rica, all of which enjoy a better NRI while having a similar per capita GDP. (This is especially true for Costa Rica, which has a remarkably high NRI for its GDP.

DIAGRAM 1 NRI RESULTS VERSUS GDP (PPP) PER CAPITA

GDP/ cap PPP Fuente: ADL Telbroad based on GITR NRI

served as the point of departure, given the international attention it receives and the consistency of its results 10. Many of the indicators it includes are built from the Executive Opinion Survey, which means they reflect the positions of respondents in all the countries in the index. In Colombia,

As detailed in Document 3, it is possible to identify aspects of NRI in which Colombia exhibits the greatest potential for improvement and suggest actions to address them. They are: political environment, regulatory environment, innovation environment, business environment, and usage by citizens, businesses, and government.

10 Baller, S., Dutta, S. & Lanvin, B. (2016) The Global Information Technology Report 2016: Innovating in the Digital Economy Montreal, QC,

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CA: World Economic Forum. Available at: https://www.weforum.org/reports/the-global-information-technology-report-2016

DIAGRAM 2 POLITICAL-REGULATORY ENVIRONMENT VERSUS GDP (PPP) PER CAPITA

GDP/cap PPP Source : UT ADL - TelBroad based of the WEF GITR

Colombia must make progress in various aspects, primarily the application of the latest technology, the quality of business schools, and the lowering of taxes (ranked 134 out of 139 countries, without factoring in the recent tax reform). In terms of initiatives in the entrepreneurial ecosystem in Colombia, the government has promoted digital content development with over 900 ventures supported through training programs11, among which are iNNpulsa, Apps.co, 1DOC3, Rappi, Tappsi, and Ascendo.

Thanks to these developments, according to the BBVA Innovation Center and data from the World Economic Forum, “Colombia is the fourth country with the largest amount of innovative startups in the early stage, surpassed only by Chile, Denmark, and South Africa 12.” According to the IT observatory at the Ministry of ICTs of Colombia, the information technology industry has seen important growth in the number of companies, employees, and sales. It represents 1.19% of GDP with sales of 9.6 trillion pesos (approximately $3 billion dollars at the December 2015 exchange rate).

11 Available at: https://www.crcom.gov.co/recursos_user/2016/Informes/Cartilla_Economia_Digital_V4.pdf

BBVA. “10 datos sobre el emprendimiento digital en Colombia” (2015). Disponible en: http://www.centrodeinnovacionbbva.com/.

12 Available at: http://www.centrodeinnovacionbbva.com/noticias/10-datos-sobre-el-emprendimiento-digital-en-colombia

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DIAGRAM 3 BUSINESS-INNOVATION VERSUS GDP (PPP) PER CAPITA

GDP/cap PPP Source: UT ADL - TelBroad based on the WEF GITR

Entrepreneurship faces many challenges in Colombia. Despite the fact that the country has established a varied support ecosystem, there are still difficulties when it comes to attracting venture capital and private investment to innovation, establishing a system of quality control and statistics for startups, strengthening the culture of entrepreneurship and the image of the country as a place

for doing business, and sharing best practices with the most advanced countries in the world. This would optimize the current ecosystem and integrate the legal framework to facilitate the creation of new ventures in Colombia. The following diagram shows how Colombia compares relative to other countries with a GDP similar per capita in terms of ICT us age by citizens (Colombia is the red triangle.)

DIAGRAM 4 INDIVIDUAL ICT USE VERSUS GDP (PPP) PER CAPITA

GDP/cap PPP Fuente: ADL Telborad based on WEF GITR report

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Overall, Colombia shows strong results in ICT usage by citizens due to the growth in the use of internet, penetration is good, and there is a significant culture of use, especially in social media, music, games, and education. However, if we compare Colombia to leading countries with similar GDP per capita, we observe that there are areas for improvement such as the number of subscribers to mobile internet services, household internet access, and the speed of mobile broadband.

As for ICT usage in business, we observe that Colombia (red triangle in the diagram) falls below the average. As was already noted, Costa Rica and Chile are leaders in the business segment, showing good results in technology absorption and internet B2B and B2C. Colombia shows middle-range results in internet B2B and B2C but has big opportunities for improvement in technology absorption, especially in innovation capacity. (These conclusions are derived from the analysis, noting that all the aspects are evaluated based on the Executive Opinion Survey and not through direct quantitative measurement.)

DIAGRAM 5 ICT USE IN BUSINESS VERSUS GDP (PPP) PER CAPITA


As for ICT use in government, Colombia (red triangle in the diagram) is in a leading position, surpassed only by Malaysia, which has a higher per capita GDP.

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DIAGRAM 6 ICT USE IN GOVERNMENT VERSUS GDP (PPP) PER CAPITA


Colombia, then, is a leader in ICT in government, which means that it may make further progress towards through a service provision as part of its the digital economy evolution. Having concluded the analysis of transversal issues and before moving on to international case studies in transport, tourism, media, postal services and logistics, and finance, the reader is reminded that chapter 2 of Document 2 contains an exhaustive discussion of each of the points identified as growth areas for Colombia and its reading is advised for detailed information on the challenges faced. This is complemented by the studies conducted by the OECD about entrepreneurship in Latin America. 2.3.2 Sector challenges Now we turn to the economic sectors analyzed at the international benchmark and describe how the digital economy has disrupted each of them and transformed business models or the industry itself. The goal of this

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analysis is to identify best international practices and challenges specific to each sector to support the national development of the digital economy. We also identify the criteria, risks, and potential dangers that exist in each sector. Colombian industries were examined as well, and platforms and models compared to the international references. 2.3.2.1 Transport Sector

For the comparative analysis, the experiences of California, London, Mexico City, and New York City with the arrival of collaborative economy platforms were documented. Their varied experiences point to different ways of approaching this turning point, which run from agreements with new actors to the identification of relevant differential markets with the application of consumer protection measures. The following figure presents the main challenges and gaps present in Colombia in the transport sector. These were identified by comparing the situation in the country with the

best practices identified in the international analysis, and also to the best practices of cities that have created incentives for new digital ways of providing services and adopted measures for guaranteeing the fulfilment of policy, whether that be to

drive competition or innovation, apply the proper tax measures, achieve regulatory balance between different markets, or enhance the security of vehicles, drivers, and passengers.

FIGURE 15 MAIN CHALLENGES FOR COLOMBIA IN THE TRANSPORT SECTOR


In the case of Colombia, transport services in the new economy have been classified as luxury services, with the taxi service system kept intact, including the method of quotas. Internationally, regulators have sought a balance between new services and traditional taxi services since they serve different markets. Colombian regulatory decisions do not make mention of traffic nor environmental considerations which have been factored into decisions in the international landscape. The only priority seems to maintain the current system of taxi licenses and the other elements that characterize that service. Extensive regulation of the digital platforms and their roles differs from international experience and may affect innovation, not only

in the transport sector but in other economic sectors where it may set a legal precedent. In terms of taxation, control, and monitoring, new digital economy services are subject to the same conditions as the traditional taxi service, primarily due to the fact that no distinction is made between services. Lastly, as far as the information that new players are required to provide, Bogotá is running tests with Tappsi and Waze with the purpose of improving knowledge of traffic and public policy, but no regulations have been developed in this regard. There are also no studies that evaluate the benefits to consumers of these new services.

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2.3.2.2 Tourism Sector As a way of establishing the challenges or sensitive issues that affect the development of the digital economy in this sector, the international analysis included the experiences of several relevant cities (New York, London, Amsterdam, Paris, San Francisco, and others)13 and identified decisions adopted in each. From this exercise, one of the main factors of innovation in this sector is the capacity to take advantage of network effects through the inclusion of third party assets, whether they be in the hands of individuals, businesses, or families. These are presented as an option for accommodation at prices that are attractive as compared to traditional hotels. Among the main challenges in this sector of the digital economy are: how to define the small-scale providers of accommodations that are typical of the collaborative economy as they enter the tourism market alongside traditional hotels; sharing market and tax information with authorities; global

taxation that seeks a balance between collaborative economy actors and traditional ones; how new actors are going to comply with the standards of quality and security that prevail in the traditional market; coordination with housing policy and the rules of residential compounds in neighborhoods and towns; and the discussion around what fees to apply to companies operating with the traditional model and those with the digital model, and what kind of competition to seek to stimulate in the digital tourism environment, among others. As to the challenges facing Colombia, we observe that players such as Airbnb are growing rapidly in the country. TripAdvisor and Booking, among others, offer hotels, apartments, and short stays in private residences on their platforms. Following is a summary of the main challenges facing Colombia when it comes to the development of the digital economy in the tourism sector.

FIGURE 16 MAIN CHALLENGES FOR COLOMBIA IN THE TOURISM SECTOR


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13 See Document 2, chapter 1, section 2.2 of the study.

In Colombia, short stay rentals of less than 30 days have been legally equated with hotel stays. Internationally, however, the distinction between the existing hotel sector (commercial operators) and the new business models (that use personal residential properties) has been maintained. There have also been efforts to enable private landlords to obtain complementary income. None of the objectives mentioned are pursued in Colombian policy, which indicates a considerable gap and corresponding challenge. In theory, traditional players and new players are subject to the same taxation, but compliance is difficult to ensure, since control mechanisms are once again far removed from international practice. Similarly, the control and monitoring functions assigned to residential property managers is different from international trends—not saying that their participation is unimportant—and this indicates another gap and an additional enormous challenge around auditing homeowners that participate in the new business model. As to controls for commercial actors operating on Online Travel Agent (OTA) platforms, there are no mechanisms equivalent to those that exist internationally, which again involve the OTAs. The gap and the challenge for Colombia is great. Finally, there are no discussions or special measures in Colombia around rate parity, which makes it highly likely that the large-scale platforms are applying it. Of course, this would nullify the efficacy of the minimum price guarantee and would affect free competition. The clearest reference on this issue is Europe and the United Kingdom case specifically.

advance of the digital economy. Given this, case analysis for this sector took international experiences and focused on local or regional decisions that have accelerated or slowed down the sector. The focus of this analysis is centered more on countries than cities since nations are a more relevant unit of analysis for this sector. The main challenges to the traditional media models were identified as: the impact of Big Data and vertical integration with the expected integration of virtual reality and augmented reality content; video subscriptions which allow consumers to enjoy content wherever they may find themselves; always-available content; the appearance of disruptive models in which the winner takes all, leaving little room for other players; net neutrality; and social security. Overall, there is a definite trend towards consolidation with the goal of achieving total vertical integration. To summarize the comparative analysis, we observe that the media sector has been radically transformed by the digital environment, with the United States and the United Kingdom leading the way in the production of content that is exported to the rest of the world. The presence of major global players that take advantage of the wide penetration of high-speed broadband internet and their capacity to invest in proprietary content has changed the face of media. However, the impact of these companies is greater in more advanced countries than in Latin America, where the offline segment has more potential to continue growing. The following figure summarizes the main challenges facing Colombia in the media sector:

2.3.2.3 Media Sector As with transport and tourism, the transformation of the media sector after the appearance of digital economy players has been strongly influenced by global trends. However, unlike these other sectors, local or municipal conditions have had a much smaller impact on the

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FIGURE 17 MAIN CHALLENGES FOR COLOMBIA IN THE MEDIA SECTOR

SOURCE: UT ADL - TELBROAD

2.3.2.4 FINANCE SECTOR The analysis of this sector was centered on regulatory developments in fintech. The regulation that has been issued and is currently under review in the United Kingdom, United States, Australia, and Singapore can be found in the chapter on international benchmarking. The experiences of the United Kingdom and Singapore are interesting for the way in which their regulations have become facilitators for companies that use digital technologies to provide innovative financial services. In the United Kingdom, the Financial Conduct Authority (FCA) regulation has been mostly open towards the digital economy

and has avoided using ex ante regulation to address digital disruption. Instead, it has increased monitoring of digital activities and acted when it detects harms to consumers. The United Kingdom has established fintech14, crowdfunding15, sandbox16, and payday loan regulation. The FCA has created an innovation hub that advises and supports financial innovators on regulatory issues with the goal of their projects being launched in accordance to financial regulation. The FCA has also been the first regulator to launch a regulatory sandbox program which brings together a set of innovative technology-based initiatives selected from a supply of public products that offer platforms for the transfer of money or financial resources. This initiative acts as a laboratory for trying out disruptive financial models based

14 Fintech refers to new business models that leverage technology to transform financial processes, products, and services. Taken from

Patrick Schueffel, Taming the beast: A Scientific Definition of Fintech (2017). Available at: http://www.open-jim.org/article/view/322/221

15 Crowdfunding or collective financing refers to the practice of collecting capital from a large number of individuals, typically gathered

through an electronic platform under one of the following modes: a) funding based on donations, b) funding based on rewards, c) funding based on loans, and d) funding based on equity. Taken from Monetary Authority of Singapore, Facilitating securities-based Crowdfunding (February 2015) Available at: http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/ Facilitating%20Securities%20Based%20Crowdfunding.pdf

16 Set of rules that allow innovators to try out their business models without having to heed all of the legal requirements that exist for

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the sector. The regulatory sandbox may place conditions on its operations such as: limitations on the number of clients or capital, test environments for limited time periods, predefined exemptions or direct supervision by a regulatory office. Taken from Monetary Authority of Singapore (MAS), FinTech Regulatory Sandbox 2016.

on technological innovation to determine the minimum necessary regulation that guarantees the success of the models and also the security of the users. Fintech companies that are willing to test their products under the control of the FCA are eligible for the regulatory sandbox. The FCA will define the regulation to be applied as results of the sandbox model are evaluated. The regulator began working with these companies (among them Billon, BitX, Blink Innovation, Bud, HSBC, and Lloyds Banking Group) last September. The results of this innovative regulatory project are yet to be published. The participating companies will have a regulatory framework within which they will be able to try out new products, services, and business models safely without having to abide by all the regulation that would apply under normal circumstances. The goal is to reduce the regulatory barriers for innovative business while still avoiding the transfer of risk to the consumer thanks to the continuous support of the FCA.

to develop strategies that would position the country as a growing and sustainable economy. The Monetary Authority of Singapore (MAS) is currently conducting a public consultation to define the regulatory guidelines to be developed for fintech and a pilot regulatory sandbox. On March 2, the MAS approved the first regulatory sandbox pilot with the company PolicyPal Pte Ltd. It was expected to conclude on August 31, 2017. PolicyPal sells insurance online, collaborating with its clients to manage the products they have acquired. Previously, in November 2016, MAS had issued Regulatory Sandbox Guidelines for FinTech Experiments in which it determined that any financial institution or technology company may petition for a sandbox pilot in order to experiment with innovative financial services for a limited time a place while abiding by appropriate safeguards to guarantee the security of the consumer and the financial system. In the following figure, created by MAS, the roadmap for access to the regulatory sandbox is outlined.

In Singapore, the Committee on the Future Economy, whose members are the Minister of Finance and the Minister of Trade and Industry, was created in January 2016 in order

FIGURE 18 MAS – SINGAPORE

Source: Fintech Regulatory Sandbox Guidelines

Colombia’s fintech sector was analyzed in the light of these international experiences. To date, the country does not have regulation for these kinds of services although fintech services are already being offered in the market. Therefore,

it is important to identify the main challenges and possible solutions from international best practices, as well as the gaps that exist in Colombia. The following figure summarizes them.

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FIGURE 19 MAIN CHALLENGES FOR COLOMBIA IN THE FINANCE SECTOR

SOURCE: UT ADL - TELBROAD

2.3.2.5 LOGISTICS AND POSTAL SERVICES SECTOR Various international experiences of the digital economy in the postal sector (which includes mail and courier services) and the logistics sector were reviewed for this analysis. The transformation of the postal sector has been highly influenced by the development of e-commerce and has produced innovators in the digital economy that provide services to e-commerce companies. As is widely known, the rise of internet has reduced the flow of physical documents, but e-commerce growth has fueled an increase in the postage of packages. This growth has been highly influenced by economic expansion in various countries. The international analysis included documentation of experiences in the United Kingdom, United States, Singapore, and Australia. A number of changes driven by the rise of e-commerce were observed in each country, and these create both opportunities and challenges for incumbents and entrepreneurs alike. There has been great innovation in the package delivery segment which has sought to satisfy the new demand from

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consumers and also to drastically decrease the time of delivery (down to one hour is some cases). This has led to a total revolution in package deliver logistics which has relied on the progress of mobile ICT, the availability of electronic means of payment, new technologies (IoT), and the trend towards local businesses (local stores and supermarkets), which have modified the entire supply chain. In Colombia, few disruptive actors (classified as digital aggregators) were found in the postal and package digital economy. They are platforms that act as intermediaries between buyers and sellers, so neither postal nor transport regulation apply. Generally speaking, all digital services require and electronic form of payment (at least for the initial sign-up), The low penetration of payment methods may be a limiting factor in the expansion of digital services in general, especially for the delivery of foodstuffs in Colombia. Following are the challenges identified internationally and the gaps that exist in Colombia.

FIGURE 20 MAIN CHALLENGES FOR COLOMBIA IN THE POSTAL SECTOR

Source: UT ADL – Telbroad

2.4 Holistic analysis of CRC regulation with regards to challenges and trade-offs identified in international experiences

Having examined the international experience relevant to structuring the pillars of the digital economy in terms of regulatory and public policy initiatives, the state of Colombian regulation connected to the identified challenges and trade-offs was analyzed, including commitments Colombia has made on the provision of information and transnational services. Special attention was paid to the general Colombian legal framework for telecommunications, regulation on transnational services and information services as stipulated in Colombia’s main international agreements, regulatory challenges and tradeoffs identified in the international benchmarking exercise, and the existing Colombian regulations issued by the CRC vis-à-vis the regulatory challenges identified.

b.Independence of agencies dedicated or related to the digital economy vs. an institution dedicated exclusively to the digital economy. c. Preference for ex ante regulation vs. preference for ex post regulation. d. Equal conditions for telecom services and information services vs. differentiation between telecom services and information services. e. Free use of personal data for commercial purposes vs. strict ownership of personal data in the hands of users.

For the CRC, the following regulatory challenges and trade-offs are particularly important: a. Strict net neutrality vs. lax net neutrality.

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Having identified these six (6) regulatory challenges for the development of the digital economy (as a result of the trade-offs), the state of Colombian regulation on each point was examined: 1.Net neutrality regulation: the state of affairs was identified and the recommendation is that its principles be enforced, without this strangling new business models. 2.Legal nature of the CRC and related institutions: the authority of the CRC granted by law was analyzed and several legal paths for the creation of an independent regulator for the digital economy or an intersectoral coordinating committee were sketched out. 3.Regulation of relevant ex ante and ex post regulation markets: the CRC’s authority to review markets was examined in depth. The regulatory implications of the development of the digital economy were also addressed along with the benefits that ex ante regulation could provide. 4.Regulation for telecommunication services and information services: we explained why we recommend deregulation or a reduction of regulatory loads for telecom services over the regulation of new (OTT-style) services. 5.Regulation of personal data: the existing regulation and transfers of data were explored along with the trade-offs for each position. 6.Regulatory abstention in dynamic markets (digital economy): the regulatory powers of the CRC in terms of services (particularly OTT services) were reviewed. lFinally, Document 2 concludes with an analysis of the elements for and against each of the regulatory trade-offs identified. The trade-offs are critical decision-making junctures in a specific context. Understanding them involved analyzing advantages and disadvantages, which may be taken up again during the implementation of the proposed roadmap. 3.REGULATORY ROADMAP FOR ADDRESSING THE CHALLENGES AND OPPORTUNITIES OF THE DIGITAL ECONOMY Having presented the theoretical approach for the creation of a regulatory framework that promotes the digital economy, identified and categorized the competitive dynamics, determined the methodological approach for studying the digital economy (Section 1), conducted the international benchmarking and case studies by sector, and examined the Colombian regulation covering the identified trade-offs (Section 2), this section will

focus on the study’s conclusions which may be consulted in detail in Document 3. These conclusions are structured in the form of a roadmap with a five (5) year time horizon that considers the projects and actions necessary to address the challenges previously identified. Each project of the roadmap is described by listing the objectives, the expected scope, the estimated time to execution, and the main stakeholders. As a complement to this study, the CRC has decided to publish the Methodology guide and recommendations for the development of regulatory policies in a collaborative economy environment. This guide seeks to be an instrument that supports other government agencies in addressing the concerns and uncertainty around the conditions under which new participants in the collaborative economy should operate. The guide will serve as a reference for updating sector regulation in the face of new business models and technological innovations within the digital collaborative economy 17. The roadmap has been laid out depending on the responsibilities of each governmental institution in terms of promoting digital economy, according to the following criteria: 1.Projects: regulatory activities undertaken by the CRC to promote the digital economy. 2.Sector actions: activities led by the ICT Ministry18 to promote and lead the development of the digital economy. 3.Multisector actions: activities undertaken by other institutions of the executive branch to promote the development of the digital economy. 3.1 SUMMARY OF PROJECTS AND ACTIONS TO PROMOTE THE DIGITAL ECONOMY IN COLOMBIA economy In order to determine the kind of regulation required to drive new business models and technological innovation related to the digital economy, the main challenges identified in sections 2 and 3 are addressed once again. These challenges are derived from the international benchmarking exercise, the profiling of the Colombian environment, and the analysis of international case studies across the six (6) selected sectors. The challenges are listed in the next figure in order of importance.

17 The collaborative digital economy shares physical, financial, and/or human capital assets between many parties—without transfer of

ownership—through a digital platform, creating economic value for at least two of those parties (Dalberg, 2006).

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18 Colombian Ministry of Information and Communication Technologies (MinTIC).

FIGURE 21 CHALLENGES FOR DEVELOPING COLOMBIA’S DIGITAL ECONOMY

Source: UT Arthur D.Little – TelBroad

As indicated, the challenges lie in various areas and must be addressed with specific actions and projects, as detailed below.

TABLE 3 SPECIFIC CHALLENGES AND ACTIONS TO IMPLEMENT

Comprehensive and coordinated state vision for the digital economy

Coordination among stakeholders in the digital economy

•Structure national policy for the digital economy in Colombia. •Insert and promote the digital economy in Colombia for personal and corporate adoption. •The Ministry of ICTs must develop their legal competences in order to evaluate and define guidelines for the well functioning of markets, services, contents and digital apps •Strengthen trust in the digital environment to drive the use of the digital economy. •Close the digital talent gap in the country. •Promote and drive digital transformation in business, including the digitalization and adoption of technologies (i.e. Industry 4.0). •Develop an ecosystem of investors and entrepreneurs to foster digital innovation. •Coordination among various state agencies and stakeholders in the private sector, civil society, industry associations, and academia for decision-making that appropriately favors the digital economy. •Establish rules and criteria for the analysis of markets in different economic sectors. •Determine criteria for defining ICT-supported services (Uber, Airbnb, etc.). •Create a technical institution specialized in resolving conflicts in the digital economy.

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Classification criteria for digital economy services

•Determine criteria for defining and/or classifying information services vs. telecom services. •Define rules and criteria for analyzing markets associated with information and telecom services. •Seek a regulatory balance between traditional services and new services (i.e. telecom/media vs. OTT retail vs. digital commerce).

Criteria for determining regulatory action or abstention in dynamic markets

•Conduct monitoring and analysis of platforms on multisided markets, including evaluation of competition and ex post/ex ante regulation. •Create incentives for a digital copyright hub. •Review current tax regime and the benefits and disadvantages it presents for the digital economy. •Review and analyze de labor code (rules of employment) for the digital economy.

Rules for the sale of digital consumers’ personal data

•Ensure the privacy of personal data in digital markets. •Establish the possibility for users to digitally sell their personal data. •Create a digital consumer protection scheme for transnational services (i.e. e-commerce).

Criteria for foreseeing the dominant role of data in new markets

•Understand the role that Big Data plays in competition and regulation of dynamic markets. •Facilitate businesses’ access to data without creating competitive advantages that favor certain companies over others. •Ensure consumer protection in the use and application of Big Data.

Criteria to ensure that neutrality and network management support new businesses

•Ensure that net neutrality rules do not constitute a barrier for the development of new business models, investments, and innovation, without harming consumer and private companies’ rights. •Generate incentives for to promote investments on high quality broadband connections

Mechanisms for promoting and following up on new technologies in the digital economy

•Guarantee that Colombia is on the technological frontier by monitoring and fostering new technologies (i.e. IoT, Blockchain, APIs, robotics, etc.). •Foster new business models and promote then, especially in financial services (i.e. Fintech).

Source: UT Arthur D.Little – TelBroad

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3.2 ACTIONS AND PROJECTS THAT CONSTITUTE THE ROADMAP

Following are the main actions and projects recommended to address each challenge in the process of strengthening the digital economy in Colombia. Projects refer to initiatives of the

CRC, while actions are initiatives are to be led by the Ministry of ICTs and other institutions of the national executive branch20 .

FIGURE 22 ACTIONS ADDRESS FOR CHALLENGE 1 – COMPREHENSIVE AND COORDINATED STATE VISION FOR THE DIGITAL ECONOMY

Source: UT Arthur D. Little – TelBroad

FIGURE 23 ACTIONS TO ADDRESS CHALLENGE 2 – COORDINATION BETWEEN STAKEHOLDERS IN THE DIGITAL ECONOMY

Source: UT Arthur D. Little – TelBroad 19 The institutions tasked with particular actions in this roadmap are: Colombian Presidency, Information and Communication Technology

Ministry (MinTIC), National Planning Department (DNP), Ministry of Justice and Law, Superintendence of Industry and Commerce (SIC), National Office of Copyright (DNDA), National Television Authority, National Tax and Customs Office (DIAN), Colombian Congress, Superintendence of Finance, Ministry of Finance and Public Credit (MHCP), IT Observatory, at MinTIC.

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FIGURE 24 ACTIONS TO ADDRESS CHALLENGE 3 – CLASSIFICATION CRITERIA FOR DIGITAL ECONOMY SERVICES


FIGURE 25 ACTIONS TO ADDRESS CHALLENGE 4 – CRITERIA FOR DETERMING REGULATORY ACTION OR ABSTENTION IN DYNAMIC MARKETS


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FIGURE 26. ACTIONS TO ADDRESS CHALLENGE 5 - RULES FOR THE SALE OF DIGITAL CONSUMERS’ PERSONAL DATA


FIGURE 27 ACTIONS TO ADDRESS CHALLENGE 6 – CRITERIA FOR FORESEEING THE DOMINANT ROLE OF DATA IN NEW MARKETS


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FIGURE 28 ACTIONS TO ADDRESS CHALLENGE 7 - CRITERIA TO ENSURE THAT NEUTRALITY AND NETWORK MANAGEMENT SUPPORT NEW BUSINESSES


FIGURE 29 ACTIONS TO ADDRESS CHALLENGE 8 – MECHANISMS FOR PROMOTING AND FOLLOWING UP ON NEW LEADING TECHNOLOGIES


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In indicated above, the implementation of these regulations requires the participation not only of ICT authorities but the government as a whole. It must be a priority to develop a state policy for the digital economy that can serve as a stepping stone to coordinate the actions of each government

institution under a set of clearly established principles. The CRC and the Vice Ministry for the Digital Economy at the Ministry of ICTs will work hand in hand to drive and coordinate the actions here proposed at each of the institutions named as responsible parties and stakeholders in this roadmap.

Promotion and development of the Digital Economy

FIGURE 30 SUMMARY OF RECOMMENDED PROJECTS AND ACTIONS


Following is a tentative timetable for the projects and actions recommended that shows which ones involve public policy or regulatory policy, as well as the responsible institutions according to the legal authority of each. The reader is

reminded that the projects and actions described briefly in this summary are laid out with details as to their objectives, actions, stakeholders, and proposed timetables in Document 3 of this study.

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FIGURE 31. PROPOSED TIMETABLE FOR RECOMMENDED PROJECTS AND ACTIONS

In the pipeline

AC T ION S AN D P R OJ E C T S 1T S E C T OR AC T IONS

R

PP

1 - Strengthening the competence of MINTIC

X

2 - Criteria for defining information services

X

3 - Creation of a multisector monitoring system

X

Institution Responsible

MINTIC MINTIC MINTIC

C R C PR OJ E C T S 1 - Regulatory framework for promoting broadband deployment

X

2 - Analysis of telecom and informations services in competition

X

3 - Market analysis of online audiovisual services and TV

X

4 - Net neutrality and business models

X

5 - Tools for analysing multisided platforms

X

6 - Updating the regulatory framework for the postal sector

X

X X

X

CRC CRC CRC CRC CRC CRC

AC T IO NS B Y O T HE R INS T IT UT IO NS 1 - Creation of a Public Policy for the Digital Economy

X

2 - Creation of a inter-sector committee 3 - Analysis of contributions by online audiovisual services and subscription TV 4 - Mechanisms for resolving conflicts in the digital economy 5 - Digital user protection in transnational services 6 - Regulatory regime for the data transfer digital market 7 - Creation of a digital hub for intellectual property rights 8 - Tax regime for the digital economy 9 - Labor regime for the digital economy 10 - Competitive analysis and promotion of the Big Data market

X

11 - Promotion of sandbox-style schemes for business models in the finance sector that leverage technology R: Regulation

X X X X X

CRC Projects


X X X X

X X

P: Public Policy

Sector actions

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X

Inter-sector actions

X

Presidency, DNP MINTIC ANTV MINTIC SIC SIC DNDA DIAN Ministry of Labor SIC, CRC, DNP Ministry of Finance, SUPERFINANCIER A

2018 2T 3T

Coordinate Strengthen 2019 4T 1T 2T 3T

4T

1T

Multisector 2020 2T 3T 4T 1T

2T

2021 3T

4T

4. CONCLUSIONS The appropiate adoption of the digital economy is a decisive factor for growth and economic development. It can provide a boost to competition throughout the sectors that make up the economy of a country, creating new opportunities for companies and business activity and new ways of accessing international markets and global production chains. However, this new environment also presents challenges to policymakers, including the need to bridge the digital gap, minimize the harmful effects on development, and address certain issues around internet governance. The benefits of the digital economy are clear. It can generate new business, increase competition, improve services available to citizens, and create new incomes for those who are not in the traditional labor market. The digital economy, then, presents an opportunity for modernization not only for the private sector but also for government authorities, allowing them to achieve more efficient operations and a better understanding of markets. Given this, the opportunities and challenges associated to the digital economy are particularly important to developing countries such as Colombia. Regulators, including the CRC, face great challenges ahead. It is clear that innovation develops more quickly than regulation, and regulators ought not to be an obstacle. To the contrary, regulators should become enablers of the digital economy, for which they must understand this new world and its dynamics in order to act accordingly. As international experience shows, it is possible for government authorities to adopt decisions that facilitate the development of the digital economy, keeping the consumer’s interests in mind and creating a clear regulatory landscape that mitigates the risks of illegal services, ensures that

taxes are paid when necessary, and defines the conditions to ensure consumer security and service quality. To achieve this, it is essential to adequately measure the digital economy in all of its dimensions in order to take evidencebased decisions around policy and regulation. Should public policy, regulation, and government institutions fail to adapt to changing markets, they may introduce distortions that affect competition, diminish innovation, and ultimately deprive consumers of the benefits of the digital economy. The main policy challenge is to design mechanisms of action that allow the regulatory framework to be independent. This connects to several important issues identified in this document, including net neutrality, ex post versus ex ante regulation, and multisided markets. The analysis of competitive dynamics in the digital economy along with the study of international experience has allowed us to identify fundamental challenges that Colombia must face as a country in order to foster the digital economy. However, because these challenges involve every sector of society, the effort must be led by the highest levels of government in order to effectively coordinate public policy and regulation under a state vision that seeks to take full advantage of the digital economy. This state vision must take into account that the country faces a unique opportunity. It can seize emerging technologies to leverage a new economy that does not depend on the extractive hydrocarbon and mining industries. The use of these technologies could even shift the structure of the Colombian economy towards higher levels of competition, but this will require new skills. That is the reason why it is essential to create awareness and knowledge about the benefits of the digital economy.

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