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Interoperability - a key for co-ops to tackle big tech?

Weekly newsletter of Coop Exchange
Weekly newsletter of Coop Exchange
2004 Mazda RX-8 Cigarette Lighter and Ashtray Taken in Leamington Spa, from Wikipedia Commons, by user Vauxford
2004 Mazda RX-8 Cigarette Lighter and Ashtray Taken in Leamington Spa, from Wikipedia Commons, by user Vauxford
Three types of interoperability
In the 1920s, cars started to have cigarette lighters. They are still there, but few use them for smoking. Instead, they are commonly used to plug in a USB charger port or a GPS navigator but can also be used for a slow cooker, blanket warmer, or countless other 12 voltage accessories. This is an example of “interoperability” - the technical ability to plug one product or service into another product or service.
The author Cory Doctorow is perhaps the best-known advocate for using interoperability as a tool to fix the problems that plague the technology sector. He categorises it into three different types.
  • Indifferent interoperability: “I don’t care if you plug your thing into my product.”
A fridge manufacturer doesn’t care what magnet you plug to the fridge door to stick your to-do list or a shopping list.
  • Cooperative interoperability: “Please plug your thing into my product.”
Apple wants companies to make apps that can be operated with iPhones.
  • Adversarial interoperability or competitive compatibility: “Stop plugging your thing into my product!”
Lexmark printers used to be programmed to only accept their own ink cartridge brand, but other companies found ways to bypass the restrictions and started selling cheaper cartridges, which Lexmark tried to stop. 
Why adversarial interoperability is a key to tackling big tech monopolies
Rankings of the largest companies in the stock market are dominated by tech companies. These companies all won big in a big market where winners take it all, or at least a very big share of all of the market: such as Google with nearly 95% market share in search engines. 
This “winner takes it all” dynamic is often due to “network effects”, in which a service becomes more useful when more people use it. For example, if you are the only person in the world with a Facebook account, it’s useless. If all your friends use it, it can be the most useful way to stay in touch with them. 
This means competitors face a chicken-and-egg problem: to attract users to switch from Facebook to another social media platform, the platform needs to have users on it. Those joining first have the highest “switching costs”: the first person who switches from Facebook to the new platform gives up the possibility to communicate with all their friends on Facebook to join a platform where they have no friends in.
The third-party ink cartridges that were interoperable with Lexmark printers were based on lowering switching barriers for users to choose cheaper cartridges without having to buy a new printer. Similarly, one crucial reason why Facebook managed to replace MySpace was a tool called “MySpace scraper”, which enabled users to give Facebook access to their MySpace account and use their Facebook account to send messages to their friends on MySpace. This meant that switching to Facebook did not mean giving up messaging your friends on MySpace: in fact, every time you messaged them, it displayed a text along the lines of “this message was sent using Facebook, click here to register your account.” to your friend.
MySpace could try to block this sort of adversarial interoperability by changing its software: and Facebook could try to circumvent the block, launching a sort of a cat-and-mouse game of who can make better software. In this cat-and-mouse game, however, the new competitor is in a better position: they are trying to win over more users, and the incumbent is trying not to lose more users. The incumbent is like a goalkeeper trying to prevent the new competitor from scoring new goals. 
This is why tech companies that got on the top by using adversarial interoperability want to kick the ladder down by having lawyers, not software developers, stop their own weapons from being used against them. It is easier to win if you have the government ban other contestants rather than having to compete against them.
It is hard to overstate just how crucial force for change adversarial interoperability has been for tech companies. For example, in the early days of Apple, one of the measures Microsoft took to ensure people would not switch from Windows to Mac computers was making it impossible to open Windows documents on Mac. It used network effects to protect itself - because everyone was using Windows, even if Mac would offer what they considered better features, switching would be a big nuisance if you could not open your old documents or documents Windows users are sending you. However, despite Microsoft trying to stop them from doing so, Apple made Macs adversarially interoperable by enabling them to open Windows documents. This made switching more convenient and arguably helped Apple replace Microsoft as the most valuable company in the global stock market.
Interoperability gaining momentum
Lawmakers are increasingly keen to use interoperability to make the tech industry less susceptible to monopolistic behaviour and more open for competition. Just a few weeks ago, the EU required Apple to make their phones interoperable with standard USB cables. However, perhaps the most important instance of interoperability being used to open markets is the PSD2 directive. Introduced in 2019 across the EU, it requires banks to make some of their services interoperable with third party services, even if it is not in the interest of the bank. 
For example, banks have to open their customers’ data to licensed third-party service providers at the customer’s request. Someone with two bank accounts can now connect them to a third-party app and get an overview of their spending to manage their finances better. These apps can also enable new features: such as tracking subscription payments across the users’ bank accounts and sending them an alert if they have a “first month free” trial for a newspaper subscription that is about to expire.
The managing director of Barclays has called PSD2 as “the biggest regulatory change in (their) career”, and despite the industry built around it still being in its infancy, over 4 million people are already using services enabled by the increased interoperability.
There are also signs that similar reforms will be implemented across more industries. For example, Doctorow describes the yet-to-be-introduced Access Act in the US and the Digital Services ACT in the EU as follows:
 “lawmakers in the US and Europe are working on legislation that would force Facebook to allow third parties to “federate” new services with it. That would mean that you could quit Facebook and join an upstart rival – say, one by a privacy-respecting nonprofit or even a user-owned co-op – and still exchange messages with the communities, customers and family you left behind on Facebook’s sinking ship.
One specific industry where new interoperability legislation could be particularly useful for existing user-owned cooperatives is platforms like Patreon that enable individuals and groups to collect monthly donations or other payments from patrons.
For example, a true crime podcast called Redhanded has a Patreon account where listeners can make a regular donation to access benefits such as exclusive content. They collect a monthly contribution from over 11,000 patrons.
However, the podcast creators cannot switch their provider to an alternative platform that charges lower fees than Patreon, which is exactly the type of problem that new interoperability legislation could be a good solution for. 
It could work like email lists: if a content creator has an email newsletter and finds a service provider who charges a lower price than their current provider for sending emails, they can move the email list to the new provider with a few clicks. Similarly, content creators and others who use Patreon to collect payments could be given the ability to move their patrons to another platform.
Patreon is used especially by those in the creative industries, such as musicians, and has been especially important for them during the pandemic that has devastated their already often modest livelihoods, such as by banning concerts. This sort of interoperability could be a way for lawmakers to help them keep more of their fans’ contributions without requiring any additional spending from the taxpayers. 
In addition, it is an industry where cooperative alternatives to the big incumbent already exist. For example, Ampled is a platform providing similar services as Patreon, tailored to the needs of musicians who democratically own the platform as a cooperative together with listeners. Currently, it is used by 327 artists to collect a total of $109,000 in earnings. Comradery is another cooperative in the industry, used by 24 projects ranging from a co-op of board game makers to science fiction authors. 
Then there is Open Collective, whose model is slightly distinct from Patreon, Ampled and Comradery: in addition to creating an account (called a “collective”) to raise funds, one can also become a “fiscal host” for such accounts. Hosts can set their own commission fees and are responsible for administrative duties such as accounting tasks. The collectives can also switch hosts.
This means that any co-op can effectively set up its own Patreon-like platform by becoming an Open Collective host. And many already have: for example, Platform6 is a development cooperative that acts as a fiscal host for other cooperatives. Currently, it hosts an Open Collective account for 22 cooperatives, with the largest one having over 400 regular contributors.
Open Collective itself is planning to do an “Exit To Community” by transferring the ownership to its users and converting it into a cooperative or something akin to one. The user community already involves 15,000 different projects raising over $35 million a year, and is growing rapidly. With interoperability legislation that would enable projects in Patreon to switch to Open Collective, Ampled and Comradery, these platforms could potentially attain magnitudes higher levels of growth.
Whereas this would be an example of new interoperability legislation that could be utilised by existing cooperatives, the already existing legislation could also be utilised to form new cooperatives.
While interoperability provides unprecedented and exciting opportunities for the cooperative movement, increased interoperability does not automatically lead to an increased number of tech cooperatives.  Such a shift won’t happen by itself: the cooperative movement must be active and spearhead this development rather than wait until we are forced to catch up with our investor-owned competitors or realise the missed opportunities after it’s too late to grasp them. 
The movement does not need to wait until new legislation is introduced: it should use the existing possibilities for interoperability at its disposal as creatively and effectively to build tech cooperatives as possible and as soon as possible. As a result, the cooperative movement will be in a better position to immediately utilise windows of opportunities opened by future interoperability legislation.
The next newsletters will describe ideas for new cooperatives that would utilise interoperability and could be launched immediately.
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