In order to meet our goals of increasing the amount of sustainable energy and increasing energy efficiency, a transformation towards smart grids, including smart meters, is essential. It makes information on energy consumption available to the user in real time, which allows him to adapt his consumption patterns. Besides this, smart grids make large scale infusion of sustainable energy from various local renewable sources into the grids possible.

This transformation will necessitate smart investments in new technologies and changes in the value chain. Investments that will likely only render a sufficient return if they are monopolized and the costs for users are increased, or when there are sufficient possibilities of value added services. Value added services in particular could open up possibilities for new services and better deals for consumers and businesses. Consider for instance how domotica-services or the uptake of electric cars can be expanded in combination with smart metering systems.

In order for a broad array of services to be offered standardization is critical. It is up to the Energy and ICT industries to come up with these standards. And soon. In March of this year the European Commission mandated CEN/CENELEC and ETSI to come up with a standard for smart meters. It goes without saying that this standard should be open, needs to be as secure as possible, and sufficiently protect the privacy of consumers. We need to hurry because quite a large number of countries are already, or will soon be, investing in smart metering systems. Open standards for other parts of the smart grids infrastructure need to follow as soon as possible, but given the early stages of development, may need some more research.

Apart from the smart grids systems, it goes (almost) without saying that the ICT industry should lead by example and continue to develop ever more energy efficient applications, hardware and software. If needed regulation could help these developments along. Regulation in fact also needs open standards, although of a different kind. Standard methods for measuring and monitoring energy efficiency are needed in order to make claims of efficiency transparent.

Read Knut Blind’s article on modernizing EU standardization policy here: http://www.talkstandards.com/?p=1561).

Further comments and views are most welcome! Please visit http://www.talkstandards.com/?p=1387 and join the discussion.

Background information: http://www.talkstandards.com/?page_id=1373.

1) Standards in Government Procurement
2) Standards and Public Sector Research
3) Standards and Intellectual Property Rights
4) The Role of Consortia, Fora and Open Source Communities

I will offer a few brief comments on the first, third and fourth topics:

1) In procurement, there is a delicate balance between promoting novel solutions to technical problems, and using established standards to promote inter-operability and prevent vendor lock-in. While the White Paper acknowledges this tension, recommendations (b) and (c) lean towards allowing government agencies to mandate particular standards. The danger is that this would open the door to “legislating” relatively immature protocols. I would suggest that that any standards referenced in the government procurement process be subject to some type of market-based maturity test, such as the IETF requirement that specifications cannot advance to the status of “Draft Standard” unless there is evidence of multiple independent and inter-operable implementations.

2) The White Paper encourages SSOs to clarify their IPR policies. This is useful. It could even go one step further by indicating that standards should only be referenced in government procurement if they are developed by an SSO with clear policies regarding search, disclosure and IP licensing. While the White Paper acknowledges that different IP policies may be appropriate for different ICT sub-sectors, it does not take the logical next step to suggest that SSOs should abandon the idea of “fair and reasonable” licensing unless they can find a working definition of those principles. The alternative is an invitation to endless IP litigation.

3) Suggestions (h) and (i) are very sensible. Much important work now takes place within fora and consortia. The paper could also acknowledge that open source developers are doing important standards work. However, the White Paper does not provide a clear explanation of why these groups should want or need to collaborate with the ESOs?

As other commentators in this forum have already highlighted, the aim of the Commission’s white paper is to large extent unclear. Particularly the introduction and the listed “prominent areas for improvement” appear to reflect a mix of vague policy ambitions (p. 4). If Directive 98/34/EC should be read as constituting “the current EU standardisation policy”, as the Commission suggests (p. 2), the time for an update is probably quite ripe, but then these issues would have deserved a more elaborated treatment.

So what is the Commission nevertheless suggesting? The perhaps most important policy development is that the Commission aims to use standards that emerge from SDOs other than the “traditional” ESOs, and to endorse such standards in EU legislation and policies. Against this background, the Commission’s list of attributes to be observed by ICT standards “associated with EU legislation and policies” is hardly surprising. In fact, many of the listed attributes to be respected by the standardization processes (p. 4) and reflected by the standards themselves (p. 6) reflect competition law principles.

Both in the US and in Europe, standard-setting activities are generally permitted under the antitrust rules due to their efficiency and welfare enhancing properties, provided they fulfill certain requirements. According to the US Supreme Court “private standard-setting by associations comprising firms with horizontal and vertical business relations is permitted at all under the antitrust laws only on the understanding that it will be conducted in a nonpartisan manner offering procompetitive benefits” and subject to procedures that “prevent the standard-setting process from being biased by members with economic interests.”, Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 501, 506-507 (1988)

In the EU, the Commission’s guidelines on horizontal collaboration provide guidance on the competition law analysis of SDO activities. When assessing the competitive impact of a particular standardization project, it is relevant to consider, i.a., the extent to which:

• participation in standard setting is unrestricted and transparent;
• the SDO is based on non-discriminatory, open and transparent procedures;
• parties remain free to develop and commercialise alternative standards or products; and
• the standard is accessible to third parties.

As for many types of collaborations between industry participants, potential restrictions on competition depend on the likely impact in the affected markets. For example, when the most important companies in an industry agree on a standard, this may limit or end pre-existing competition between alternative technologies and prevent market access for products that do not comply with the standard in question. For such standards, compliance with the above-mentioned principles will be particularly important from a competition law perspective. In that context, it is probably fair to assume that standards endorsed by EU legislation normally will gain power (at least within the EU) at the expense of potentially competing standards. (See recital 12 of Directive 98/34/EC) The Commission’s suggestion that such standards should comply with competition law principles usually associated with important industry standards probably makes sense.
Furthermore, the Commission’s 1992 communication on intellectual property rights and standardisation provides that “the Commission must ensure that where compliance with a standard or part of a standard is referred to in Community legislation, either as a mandatory requirement or as one which confers a particular status under Community law, the contents of that standard are made available to all interested parties on a fair, reasonable and non-discriminatory basis.” (see footnote 1 below)

As regards IPRs and standards (p. 8f.), the Commission emphasizes that IPR policies should be clear, transparent and balanced, and that procedures for IPR disclosure should be effective. The Commission again emphasizes compliance with the competition rules, but otherwise appears to accept that SDOs will be free to form their own policies. Here, the Commission’s third suggestion under (g) is bit more controversial. While “ex ante” disclosure or negotiations of licensing terms potentially could overcome hold-up problems and improve predictability, it still remains to be seen to what extent the SDOs can make such procedures effective. As suggested antitrust enforcers both in the US and the EU, the idea would be to allow for competition between rival technologies both in terms of quality and price and to have the price “auctioned down to the competitive level before the standard is selected” (see footnote 2 below). Although theoretically attractive this may not always be practical. For example, standardization is often a complicated and on-going process, where technical specifications are developed and technical features added as the standard evolves. Moreover, complex standard may also involve a lot of IPR and patent applications mature into issued patents over time. This would tend to make informed ex ante negotiations difficult and unilateral declarations licensing terms ineffective. Therefore, while SDOs should be encouraged to take these issues seriously, the Commission could only suggest that the SDOs consider particular approaches.

In conclusion, it would have been welcome if the Commission took the opportunity to provide a more comprehensive evaluation of ICT standardization and current EU policies, and to explain in detail what its suggested changes imply and how they will be enforced. Nevertheless, it is difficult to get either excited or alarmed by what the Commission suggests.

Footnotes

1. October 27 1992, COM (1992) 445 final. para 6.3.2. For important industry standards, the availability of essential IPR on FRAND terms is a requirement under Article 81(3) EC:“To avoid elimination of competition in the relevant market(s), access to the standard must be possible for third parties on fair, reasonable and non-discriminatory terms.” EC 2001 Horizontal Collaboaration Guidelines, para 174. See also the EC 2003 Technology Transfer Guidelines, paras 152, 167, 226.
2. Ceilio Madero Villarejo and Nicholas Banasevic, European Commission, ”Standards and Market Power”, Global Competition Policy, May 2008, p. 5.

The purpose of this event is to exchange views and ideas about the Commission’s suggestions before the ending of the public consultation period by mid-September.

To post comments – please register.

The Commission´s White Paper is available here:
http://ec.europa.eu/enterprise/newsroom/cf/document.cfm?action=display&doc_id=3152&userservice_id=1&request.id=0

Optional reading:
http://www.talkstandards.com/?p=1237

At the talkstandards event(see previous blog), there was an interesting talk by Anne Lehouck, Principal Administrator, EC principal administrator at European Commission. I must confess that it took me a bit by surprise since I did not expect the openness and detail in the content. So, this talk was very useful.

Anne Lehouck talked of the European commission’s forthcoming white paper on ICT standardization.

The key points which I took from this talk are:

a) The commission is proposing a platform which will engage all stakeholders with the goal of facilitating coordination between the various bodies including vendors, users, SSOs. This is a policy platform, not a standards platform where the parties will come together to discuss the relationship between standards, industry and public needs.

b) IPR : FRAND will be the preference and compliance to Article 81 and Article 82 of European Competition Law will be important. Policies of standards bodies need to address the complex nature of the IP landscape. We need clear, transparent, flexible policies

c) An emphasis on Europe in light of the global scenario

d) Public procurement : Public agencies and government bodies should choose the best solution. The policy should be sufficiently flexible to allow procuring agencies to choose alternatives conforming to their existing systems.

My personal view is: The approach is pragmatic and its interesting to see what comes of it. In contrast, we have recent proposals like EC wants software makers held liable for code – which in my view are fundamentally unworkable and to make matters worse we are already seeing a mix of open source and non open source strategies. So, if we start making software makers liable for code – I am not clear how that fits in going forward

In any case, a discussion is needed and it’s a good thing

Hence, the whitepaper is a pragmatic approach forward but much remains to be seen

Originally published at OpenGardens and reproduced with the author’s permission

1. Can the official European use of informal ICT standards and standardization be improved?

2. How can the access to standardization for SMEs be improved?

3. What structures are needed to facilitate coordination between different stakeholders in ICT standardization (incl users, SMEs, gov’s, trading partners)?

4. Which actions can improve the transfer of knowledge from research to standardization?

5. Can IPRs and standards be used jointly in a more effective way to promote innovation?

All of which are challenging. Please offer thoughts and comments!

Let me summarize some of the key messages that I picked up from Mme Lehouk’s presentation.

First, I noted that the Commission has identified a need to reform European standardization policy for several reasons, including the fact that the policy should be adjusted to accommodate to the particular characteristics of standardization in the ICT sector. It was also mentioned that European standardization has been taken over by international standardization. Presumably Europe therefore needs to take action to regain the initiative.

Second, a major policy objective of the European Commission is to facilitate coordination and engagement of all stakeholders in ICT standardization. Tentatively the Commission is proposing a platform with vendors, users, SSOs and other stakeholders where priorities and standardization work can be discussed (based on the experiences from a previous, less ambitious forum for discussion). In my opinion this sounds like a significant practical challenge and it remains to be seen how this forum will work in practice. It could also be added that coordination at the international level will still be an issue.

Third, a major theme of the Commission’s approach to ICT standardization has to do with the benefits of combining the advantages of formal European standardization and the technical competences of informal fora and consortia.  According to the current thinking at the Commission, the tentative proposal is to keep three formally recognized European Standardization Organizations (ESOs) but in addition permit governments and public authorities to recognize specific standards from informal consortia and fora, when no European standard exist. More generally, the Commission is interested in extending the possibility to use global standards that are important but, nevertheless, not easily referenced within the current European standard policy. The Commission is also insisting that the cooperation between formal and informal standardization organizations must be improved.

Fourth, the Commission is committed to recognizing the principle that the policy governing licensing of IPR is an issue that is best dealt with by standard setting organizations and ultimately IPR holders. FRAND is the natural starting point. Maintaining some licensing flexibility for the holders of IPR is recommended. The Commission is not ruling the possibility that disclosure of IPR can be improved, e.g. through better cooperation with various patent offices.

Fifth, public procurement will be based on the principle that public agencies and government bodies should choose the best solution. The policy should be sufficiently flexible to allow procuring agencies to choose the alternative that has a perfect fit with their existing systems.

Finally, the Commission will not impose any restrictions on the use of innovations and know-how developed by private companies. Firms have to decide how to best use their technology and whether to bring innovations to standards or not.

My general assessment is that the Commission is taking a pragmatic and flexible view on ICT standardization. The value of the current system with multiple formal and informal standardization organizations is explicitly recognized. So are the benefits of a system of IPR licensing based on FRAND. I think we can look forward to an interesting discussion when the White Paper is eventually published and the period of public consultation begins.

Let me summarize some of the key messages that I picked up from Mme Lehouk’s presentation.

First, I noted that the Commission has identified a need to reform European standardization policy for several reasons, including the fact that the policy should be adjusted to accommodate to the particular characteristics of standardization in the ICT sector. It was also mentioned that European standardization has been taken over by international standardization. Presumably Europe therefore needs to take action to regain the initiative.

Second, a major policy objective of the European Commission is to facilitate coordination and engagement of all stakeholders in ICT standardization. Tentatively the Commission is proposing a platform with vendors, users, SSOs and other stakeholders where priorities and standardization work can be discussed (based on the experiences from a previous, less ambitious forum for discussion). In my opinion this sounds like a significant practical challenge and it remains to be seen how this forum will work in practice. It could also be added that coordination at the international level will still be an issue.

Third, a major theme of the Commission’s approach to ICT standardization has to do with the benefits of combining the advantages of formal European standardization and the technical competences of informal fora and consortia.  According to the current thinking at the Commission, the tentative proposal is to keep three formally recognized European Standardization Organizations (ESOs) but in addition permit governments and public authorities to recognize specific standards from informal consortia and fora, when no European standard exist. More generally, the Commission is interested in extending the possibility to use global standards that are important but, nevertheless, not easily referenced within the current European standard policy. The Commission is also insisting that the cooperation between formal and informal standardization organizations must be improved.

Fourth, the Commission is committed to recognizing the principle that the policy governing licensing of IPR is an issue that is best dealt with by standard setting organizations and ultimately IPR holders. FRAND is the natural starting point. Maintaining some licensing flexibility for the holders of IPR is recommended. The Commission is not ruling the possibility that disclosure of IPR can be improved, e.g. through better cooperation with various patent offices.

Fifth, public procurement will be based on the principle that public agencies and government bodies should choose the best solution. The policy should be sufficiently flexible to allow procuring agencies to choose the alternative that has a perfect fit with their existing systems.

Finally, the Commission will not impose any restrictions on the use of innovations and know-how developed by private companies. Firms have to decide how to best use their technology and whether to bring innovations to standards or not.

My general assessment is that the Commission is taking a pragmatic and flexible view on ICT standardization. The value of the current system with multiple formal and informal standardization organizations is explicitly recognized. So are the benefits of a system of IPR licensing based on FRAND. I think we can look forward to an interesting discussion when the White Paper is eventually published and the period of public consultation begins.