On November 1, 2022, the European Union's Digital Markets Act (DMA) took effect. This law instigates significant changes for big tech or more specifically, big US tech. It’s presented as a form of regulation intended to foster fair competition.
The DMA is designed to regulate the operations of digital platforms to ensure vendors do not attain a position that could stifle competition. It fits into a broader trend where Europe is taking a leadership role in managing big tech. Other initiatives include the right to be forgotten, GDPR, and data sovereignty rules. At best, Europe is attempting to reign in the abuses of big tech, at worse, it’s Europe’s attempt to reign in US tech companies in lieu of viable competition from European tech companies.
The law aims to ensure fair competition among big tech companies by designating certain large online companies as "gatekeepers." Last Fall, the commission identified 22 core platform services provided by six “gatekeepers,” Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. There’s been some additional reviews, but the 22 services still stand, and gatekeepers must meet strict requirements this Spring that facilitate competition.
Several vendors have already made changes to address the DMA. For example, Google announced EU users will be able to choose which Google services can access their data. And Meta is allowing users to unlink Messenger, WhatsApp, and Instagram.
WHAT THE EU IS DOING TO CURB BIG TECH
The DMA is the latest progressive step in how the EU reins in big tech. The "right to be forgotten" was first established in 2014 as the result of a ruling by a European court. GDPR turned up pressure on privacy in 2016, and that right to privacy was further bolstered with strict data sovereignty laws in several European markets.
It was also in Europe where Slack filed its 2020 complaint against Microsoft for unfair competition. That recently led to Microsoft unbundling Teams from its Microsoft 365 subscriptions. Also, the EU pressured Apple to move from its lightning standard to USB-C to reduce e-waste. Regulation and antitrust concerns are increasing in the US too. In a prior post, I explained how iMessage, RCS, and interoperability erupted late last year.
While I fully support Europe (and others) pressuring Apple to support RCS and USB-C, the DMA dances around the blurry boundary between regulation and product design. It’s a very complex piece of well-intended legislation that has the potential to make things much worse.
For example, Apple recently announced that it will allow third-party browsers to be fully installed on iOS in Europe. Although other browsers can be installed on iOS today, they must use the Safari Webkit engine, which creates inconsistencies across versions. Apple’s announcement sounds like a win for the third-party browser makers, but not according to them. Some complain that the decision increases their burden by requiring them to build and support European and non-European iOS apps, a burden Apple itself avoids. Apple also concluded that multiple browsers break its security model for progressive web apps, so is disabling that capability for EU users.
Right now, there’s tremendous DMA pressure on Apple with regards to the App Store. This is a core component of the iOS value proposition. Something Apple has put tremendous effort into designing. Certainly by most measures, the App Store works pretty well. It’s not something easily changed, and this highlights just how much the DMA is unlike anything we have seen in the US.
In the US, regulatory authority usually involves litigation and trials to determine if a company holds a monopoly and whether it has stifled competition. The DMA is designed to prevent abuses before they have occurred. In the case of Apple, the company does not currently hold a monopolistic position, nor are its customers complaining about the App Store. The complaints are coming from vendors that have benefited significantly from the App Store.
HOW THE DMA COULD IMPACT THE ENTERPRISE
I will leave it to others to explore the App Store issue. Here, I would like to focus on enterprise messaging. Does the DMA apply to enterprise communications? The answer seems yes, but so far it has only targeted consumer-oriented apps. Microsoft was designated as a gatekeeper, but not for Teams. The services the DMA expressed concern over are Bing, Edge and Microsoft Advertising.
There’s a strong argument that the DMA will expand into enterprise communications, and if so, Teams would be a likely target. The DMA targets large vendors and uses both revenue and monthly active users to define “large,” but manages to exclude all European companies. The DMA is not specifically limited to consumer apps. The DMA requires “gatekeepers” to provide individuals and enterprise users with effective data portability.
Microsoft Teams holds a dominant position in Europe. I think meetings and telephony are reasonably open and interoperable, but messaging is not. Teams has no native interoperability with external messaging apps. Of course, that’s also one of its features. A key element of Teams messaging is an improved signal-to-noise ratio as no interoperability keeps out externally generated SPAM.
Teams has seen spectacular growth and has overtaken Webex, Slack, and Zoom. The platform had some 20 million users in 2019, 75 millions in April 2020. Microsoft reported that it surpassed 270 million monthly active Teams users as of its second quarter in fiscal 2022. That was up from 250 million monthly active Teams users in July 2021. Statista estimates that Microsoft ended 2023 with 300 million daily active users.
For interoperability, Microsoft offers developers the Graph API. For security and compliance use cases, the Graph API is free, but for backup and migration of Teams messages there is a per message fee. This gives Microsoft an advantage over third parties regarding Teams add-on services.
For comparison, Apple recently agreed to give third-party mobile wallet and payment providers access to the iPhone’s NFC capabilities. This was in response to EU antitrust regulators expressing concern that the restricted access to NFC gave Apple an unfair advantage with Apple Pay.
HOW MICROSOFT MIGHT MEET INTEROPERABILITY REQUIREMENTS
If Europe imposes interoperability requirements on Microsoft Teams messaging, Microsoft could respond by enabling APIs for federation or by building interoperability into the protocol. Both of these options exist today: Mio and Matrix.
Mio offers a gateway service to several messaging platforms including Teams, G Chat, Slack, Webex and Zoom. Zoom and Cisco led Mio's Series A financing in 2021, and Mio announced a partnership with Google last summer. Mio cites several familiar brands as customers, including Broadcom, Under Armor, and AMC Theatres.
Microsoft administrators can install the Mio app on their Microsoft tenant. Doing so grants API permissions to Mio, which allows us to enable Google Chat (for example) users to send direct messages to Microsoft users on that tenant, and/or enables them to join Microsoft Teams channels on that tenant. A key advantage of Mio is that users can use their preferred messaging app, yet interoperate (find and interact with) users on different apps.
Matrix is a protocol. At this time, Microsoft Teams does not support the Matrix protocol, but there is a bridge service available. Element has a chat app that supports the Matrix protocol and provides Teams interoperability via the Matrix bridge. Today, this approach is limited because the major messaging apps don’t support Matrix natively, but the IETF Mimi group is evaluating Matrix (and other solutions) to standardize messaging interoperability.
Either approach requires Microsoft to build and maintain interoperability into Teams, either a protocol or APIs. Mio is doing API federation, and Matrix is taking an open protocol approach. Both have their advantages and limitations. IETF leader Jonathan Rosenberg believes that “the federation as a service model [such as Mio] is quicker to implement, but another big factor is how the platform vendors manage end-to-end security and control SPAM since intermediaries obfuscate the end provider.”
Certainly, security is a big issue, but few solutions support end-to-end encryption. That’s unlikely to change as new generative AI can leverage these conversations so effectively. Just last week Slack announced a new set of AI-powered insights derived from conversations within Slack. It’s a similar story across most of the messaging providers including Teams, RingCentral, Webex, and Zoom.
The unanswered question is if users or the DMA will drive enterprise messaging providers to prioritize interoperability. In the meantime, interoperability is the customer's responsibility, and solutions do exist. Or, perhaps enterprise messaging will inherently be used for internal communications, and we turn to various text apps (as opposed to channel-based communications) for inter-company messaging.
Dave Michels is a contributing editor and analyst at TalkingPointz.
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This article continues the discussion begun in Beeper about RCS on the Apple iPhone and, more generally, about enterprise messaging and the current climate, particularly in Europe, around competition and regulations.
