EEM BusinessModelsEurope

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1.1                Business Model Implementation and Issues

1.1.1             Introduction

Technological innovation and business developments in online trade result in fast-evolving markets with the continuous emergence of new products and services. The European Commission has given priority to the creation of a Digital Single Market – that is a market for online trade covering all 28 EU States – as part of its Europe 2020 Strategy for growth.  E-commerce constitutes therefore, an important part of the Commission’s Digital Agenda and has as ambition to overcome fragmentation of the EU-market that exists today. This is somewhat a paradox due to the fact that the Internet and mobile broadband was expected to abolish distances and enables direct contact between potential suppliers and consumers and to support two-side platforms that provide links between content and services providers on one side of the market, and end-users on the other side of the other side. Further, while the focus is on a digital single market and how to stimulate the provision of products and goods within EU there are to our best knowledge, few reports that focus on how to remove barriers to deliver services online across borders and how actual barriers affect business models in a two-side market.

1.1.2             Aim

A platform for digital distribution of peer-to-peer services and the large amount of data as well as the rapid expansion of cloud computing services demands the identification of barriers for the sustainability of ecosystems business models. In this report we identify barriers affecting digital markets and e-commerce in the EU and provide an overview of issues that P4 all needs to consider when developing the ecosystem business models. The contribution of this complementary report is the identification of a series of issues that need to be discussed in order to be able to design a series of ecosystems business models special adapted to P4 all, and for the further analysis of their sustainability and generic nature.

1.1.3             Definitions

 E-commerceis the sale of goods and services over the internet.  In two-side markets e-commerce include both B2C trade and business-to-business (B2B) transactions, which is often handled via electronic data interchanges (EDI).


Two-sided platforms: Content and service providers transfer their content and service to the end-user via a broadband network. Hence, Internet service providers (ISPs) are in this report seen as two-sided platforms as they provide the link between content and service providers on one side of the market, and end-users on the other side.


Business ecosystems is defined as a network of buyers, suppliers and makers of related products or services” plus the socio-economic environment, including the institutional and regulatory framework.




Business ecosystem models


As noted above a business ecosystem can be defined as “a network of buyers, suppliers and makers of related products or services” plus the socio-economic environment, including the institutional and regulatory framework. Interacting organizations and individuals represent the organisms of the business world and form the foundation of the economic community delivering goods and services to customers — as well as the members of the business ecosystem (Moore 1996).


Besides the ecosystem core, which consists of the firms delivering the goods/services along with their customers, market intermediaries and suppliers, the business ecosystem also includes the owners and other stakeholders, as well as the regulatory bodies and competing organizations.  The firms in the business ecosystem are presupposed to co-evolve their capabilities around specific innovations by both competing and cooperating with each other. 






Figure1. Actors in a business ecosystem (Moore 1996)


Business ecosystems are assumed to be formed around a specific core. The core of the ecosystem can further be in forms of platforms as the ones developed for P4all, technologies, processes, standards or other assets comment to and used by the members of the ecosystem in their business.


The ecosystems may have either a hub-centered star structure or a flat structure. The star structure (often hierarchical) can be exemplified with the so-called keystone model matching the typical structures in the USA. This model, assumes that the ecosystem is dominated by a major hub firm interacting with a large number of small suppliers (Moore (1996) Iansiti and Levien (2004). The flat model of the business ecosystem, which is more typical of Europe, is, however, composed of mainly small and medium-sized firms, yet accommodating also large ones.


Keystone driven business ecosystems as networks of firms (Iansiti and Levien (2004) consider hubs as nodes that are interconnected with other nodes. The presence of the hubs makes the network robust to the removal of individual nodes, provided that the hubs are intact. Removal of a hub often results in a collapse of the whole network. In this kind of ecosystem model it is possible to identify some roles of importance for the sustainability of the system. They are: the keystone, the dominator, and the niche player.


A keystone is a hub player in the ecosystem that provides benefits such us stability, diversity and productivity for the whole ecosystem, thereby increasing the ecosystem’s chances of survival. In particular, by limiting and removing the number of players that would negatively affect the ecosystem, and by providing the remaining players with a foundation (software platforms, development tools etc.) to survive and succeed.


Dominators have the role to eliminate and absorb the functions of other players in their ecosystem (i.e., effectively occupy multiple nodes in the ecosystem network), and therefore decrease the ecosystem diversity. They are also significantly greater in size than the keystone players. The dominator-driven ecosystems are usually less stable, as there is insufficient diversity to tolerate external disruptions. Further, two subtypes of dominators are distinguished. The classic dominators, exemplified by Apple, integrate vertically or horizontally a large portion of their business network, and therefore are responsible for value creation and capture in the ecosystem, and the hub landlords, exemplified by Enron. A common denominator is that both of these subtypes give little opportunities to the other players in the ecosystem.


The niche player occupies a small portion of the network and focuses on developing a specialized/differentiated set of capabilities. While small individually, the niche players constitute the majority of the (keystone-driven) ecosystem mass. Due to their specialization, the presence of niche players reduces the duplication of efforts and increases the health of the ecosystem. Often, the niche player may participate in multiple ecosystems, increasing their leveraging power at the expense of the need to maintain multiple platforms.


Ecosystem has become a widely used metaphor for describing the environment and network of actors in which companies are operating. The concept is borrowing from biology and applied into the business discussion to illustrate how companies share some fundamental properties with natural ecosystems, i.e. interconnectedness, complexity, adaptation, and “coevolution” (Peltoniemi 2004). Just like biological organisms, companies are a part of an environment that is defined by the actions of other evolving organisms. In that environment, the success of individual firms is determined by the health of the ecosystem and by the capacity to “each member of a business ecosystem to ultimately shares the fate of the network as a whole, regardless of that member’s apparent strength” (Iansiti and Levien 2004).


In an effectively functioning ecosystem, all critical domains or roles involved in the product or service delivery have to be healthy, as they affect the performance of the whole ecosystem (Hearn and Pace 2006, Iansiti and Levien 2004).  There are, however, few tools for the analysis of firm strategies in ecosystems. A common model used to do this is the “Ecosystem mapping” used as a visual tool to understand the relationships and interdependencies between firms in an ecosystem and to identify the environment and conditions in which the following roles are adopted: Leadership, Contribution, Users and Environment (figure 2).



Figure 2 Ecosystem mapping, Couzineau et al., 2012


The leader, or "central contributor" (Moore, 1993), acts as a hub (Iansiti & Levien, 2004b). They set the vision for the other members of an ecosystem to follow (Moore, 2006) and while taking a regulatory position, encourage other members to follow its philosophy and standards (Torrès-Blay, 2010). Leaders build block of a business ecosystem and bring to an ecosystem tools and frameworks that assists them in driving innovation and improvement of their performance.


Contributors are normally numerous interdependent organizations and individuals that contribute to the evolution of a business ecosystem, each carrying out tasks related to various areas from design, to production, operations, distribution and delivery of products, solutions and services while all depending on each other to survive and to improve their performance (M. Iansiti & G. Richards, 2006). These organizations actively work on platforms that the ecosystem leader provides to improve their performance, while extending the capabilities of the platform itself at the same time (Iansiti & Levien, 2004; Moore, 1993).


Users, either individuals or businesses, are the ones who purchase the goods or service that business ecosystems are formed to produce or to deliver. Hence, without users, formation of an ecosystem could be meaningless (Zhu & Iansiti, 2007).An important issues related to ecosystems for platforms as P4 all, is that they need both contributors (developers) and users in order to survive because they two sides business nature. A challenge is that more customers results in more applications for the respective platform due to higher demand. Customer expectation is therefore an important factor for the success and sustainability of the platform. In this regard it is also important to analyze the environment surrounding leaders, contributors and users and the conditions in which the business ecosystem will evolve. Of special importance is to analyze the economic, technical environmental social and cultural as well as the policies, rules and laws that are of importance for the users and the interdependencies between them. 

1.1.4             Issues that affect the development of generic ecosystems business models.                Learning from the past: Restrictions that affected one-side markets and e-commerce


Traditional e-commerce, that is to say online sale of goods and services via a website, portal or platform, is an extension of the old-style mail order business. As such, it has for a long time been subject to the EU-countries national rules on distance sales. Gradually, the legislator (national and EU) has modernized the regulatory framework in order to take into account the technological developments of the market. This modernization has not been painless for the ecosystem of e-commerce and, still today, we find rules that are more suited for physical trade than for e-commerce.


Technically, it is feasible to sell online any product or service which are also available in “real life” in different countries. However, there some EU-states that restrict the online sales of goods and services that are otherwise legally available “in real life” and that have been reviewed by the European Court of Justice (the EU Court) which acknowledged that the distribution of some of these goods and services may, under certain conditions, be banned from the internet.


Some examples of such restrictions are:


·         Online sales of pharmaceuticals in Germany. In the EU, the sale of drugs has traditionally been reserved to pharmacies. The exclusive rights of licensed pharmacists were considered as pre-requisites to guarantee the safety of the consumers. However, the development of internet-based pharmacies and the possibility to sell online medicines cross-border forced most EU countries to adjust their legislation. The responses varied between EU States, with some countries banning all online sales while others adopted a more liberal approach. The disparities between different national rules resulted in a fragmented market and difficulties in the online cross-border sales of drugs. The EU Court held that EU States may impose a ban on the online sales of prescription drugs as long as this is motivated on the grounds of public health. Since a number of EU countries have legalized the online sales of OTC drugs, and in some cases also for prescription drugs, there is no clear evidence of EU –countries which ban the online sale of non-prescription drugs.


·         Contact lenses in Hungary .The restriction was implemented in Hungary in 2010 and has the aim to protect the health of the consumers. No evidence of that other country has the same restriction.


·         Provision of gambling services in the Netherlands Although the gambling sector is highly profitable, with revenues of over €80 billion a year in the EU, it is still a fragmented market. The EU lacks a uniform view on the risks posed by the gambling industry. In countries where gambling activities are reserved to national monopolists or license-holders, a debated issue concerns the way to deal with competition from foreign online gambling operators. According to a study from the European Commission in 2012, one can now distinguish between different national approaches in respect of online gambling. First, a number of EU States have banned the online provision of certain gambling activities (such as Germany and the Netherlands). Meanwhile other countries that have imposed a monopoly on online gambling activities (such as Finland, Sweden and Portugal) where foreign operators are prohibited from offering their services. A third group opted for a licensing regime (e.g. Denmark, France, Italy and Spain) and in some cases recognizes licenses delivered in other EU States, hence allowing cross-border trade in gambling services. Few EU States still lack rules on online gambling (Lithuania).


One of the advantages of e-commerce is the ability for suppliers to directly reach out consumers independent where they are located.


The move from a traditional one-side e-commerce  to connecting two parties (an e-trader and its customer) to a two-sided market involving a third player (the marketplace operator) raises issues such as : the lack of clarity of the rules on intermediate liability and the lack of flexibility of the rules on product information.


In some countries establishment of requirements are imposed and imply to have a local physical presence in order to serve customers abroad. Those requirements affects SME or smaller business because the economic challenge of opening local offices for the market they want to offer products or series or plan to target. In general, the EU law prohibits all unjustified trade barriers, regardless of the severity of their impact on trade.There are , however, some examples of requirements that influence the effectiveness of e-commerce.


Some examples of them are:


·         Ireland obligation to acquire a local license for online provision of travel services to local consumers. For such license in existed (in 2011) an obligation to have a minimum capital of € 25,000 and to deposit funds into an Irish bank account. In 2013, the EU Commission found that these requirements were in breach of the EU rules on free movement. In 2014 the requisites were changed. Travel operators established in other countries are now authorized to offer travel packages to Irish customers, subject only to a pre-notification to the Irish authorities and the provision of evidence of”security in respect of packages offered for sale or sold by him or her in [Ireland]”(RFE 36). In 2014, the Commission acknowledged that establishment requirements may constitute obstacles but that “these requirements alone do not prevent online service providers from selling their goods or providing their services in another Member State, as their website would still be accessible outside of their home country”.


·         Obligation to register a top-level domain or   “country code top-level domains” i.e., “se” of “dk” to ensure the visibility of websites. Search machines rank websites with top-level domain normally first on a search result that other ones. Given the importance of the visibility of the producers or traders a country code top-level domain constitutes a comparative advantage and an opportunity to increase trust on the providers independent if it is a national or foreign trader.


·         Data storage requirements: Within the EU, the Data Protection Directive prohibits restrictions on the free flow of data. The Directive however restricts the transfer of personal data from the EU to third countries that do not have an equivalent level of data protection. There are, however, some local rules at the country level in areas such as health- care that prohibit the interchange of i.e. Exchange of electronic patient information between different organizations.



At a more general level, one of the most common issues is, however, the related to difficulties to know which rules are actual for cross-border transactions.  The fact that the providers or traders needs to identify which rules will be applied in respect of a variety of issues including consumer rights, marketing and presentation of an offer, licensing, requirements, VAT payments, data protection and so on is without any  doubt a constrain for a sustainable development of the electronic market and e-commerce. Another important issue in this regard is the absence of generic laws in the EU. This is because in some circumstances the law of the e-trader may apply for some aspects for a given transaction whereas the law of the consumer will apply for others and in some other cases the law of data protection for single individuals, which is different for different EU-countries, have to be applied regardless when and where data is transferred and processes.                Examples of regulations that influence cross-border transactions at EU: 


·         EU law provides that the laws of the state of establishment of the e-trader should apply in the case of online advertising .There are, however, situations where some EU States consider that their rules on advertisement may apply to foreign e-traders. This is particularly the case in France where rules on sales periods may apply to foreign e-traders targeting the French market.


·         EU law provides that the consumer rules of the EU State where the consumer is a resident apply in a cross-border transaction if the trader directs its activities to that state.


·         A  number of factors to be taken into account such as the language of the website, the currency offered for payment, whether a local customer helpdesk number is provided and/or the use of a local top-level domain name has however to be indicated by providers or traders. It seems rational to assume that this demand is a generic one and involve even third parties such as national consumer organizations.


·         The harmonization of national consumer is an important factor to remove significant barriers to cross-border supply of products and goods and as such an important factor to move towards the completion of a Digital Single Market. Differences in laws and national consumer rights, for instance in respect to the liability for faulty goods, suppliers or traders should need to evaluate the consequences to sell products and goods cross-border. If the suppliers or traders are not able to understand which rules would be applied to the presentation of its offer, it is rational to assume that the price of the products and good as well as the amount of sales should be influenced because the uncertainty and externalities that rise in such circumstances.


For instance, in an offline situation, the consumers have the opportunity to examine, touch, smell or try a product. In an on-line situation this is not yet possible, even when technology and devices (mobile phones, tables etc) allows today to simulate contexts and conditions in which the products will be used or implemented. The absence of tangible experiences has therefore to be compensated by rights and guarantees, especially in cases of withdrawal in cases when consumers decide to return a product bought online.


A challenge for suppliers and traders was in the pass the right of withdrawal differed within the EU. Cooling-off periods, during which consumers may change their mind and decide to return a product bought online, varied from 7 to 15 days depending on the country of residence of the buyer. This implies that suppliers or traders that are not familiar with each EU-country rule need to adjust their terms and conditions to the rules of each state.


Since 2014 exists The Consumer Rights Directive, which provides harmonization within the EU of certain consumer rights in the case of online transactions. In particular the right of withdrawal, the cooling-off period, which is set at 14 days, applies regardless of the country of residence of the consumers. Although this rule can diminish fragmentation of the market, suppliers and traders can experience an incensement of the transaction costs because the long period of time there the product or good is out of circulation and thus affect the suppliers’ profits. This is an especially sensitive situation if the product is sold during a sale period.


·         Another important rule is the obligation imposed on consumers to pay the cost for sending an item back to the supplier or trader when exercising the right of withdrawal apply in the same manner in all EU States. The Consumer Rights Directive also fully harmonizes the national rules on the passing of risk in the case of loss of, or damage to the goods dispatched by the e-trader. Asymmetry of information related to the product or good because the no possibility to examine the product before its reimbursement is another issue that affect sustainability of e-commerce and electronic markets.


Even other example is the rules on burden of proof or non-conformity of goods (faulty goods) for which EU law imposes a minimum period of two years. Although most EU States have opted for two years, Sweden and Ireland applied a period of three years .


·         Intellectual property rights are territorial in nature. In most cases these rights are regulated at national level and their geographical scope is limited to the territory of the EU State granting them However, it seems to be a fragmentation of the intellectual property landscape, in particular respect to digital distribution of i.e. as in the case of Scandinavian that secure. It is, however, possible to acquire license rights for the territory of EU which implies an additional cost for to access to some specific intangible goods as in this case music.



·         Barriers on payments: Some countries have still some restrictions on advance payment. In the Netherlands. For instance. A consumer may only be obliged to pay half the purchase price in advance (before the product or goods is delivered). Denmark allowed until 2011 merchants to put a surcharge on payments with credit cards (both Danish and foreign). Denmark demanded also to provide a Danish registration number (CVR) in order to be able to offer a Danish card as payment method. In practice, this implies that a foreign supplier/ trader need some kind of establishment in Denmark. Belgian has ban advance payment, until 2011.



·         VAT. Seems to be a complicated field when selling goods or services across borders. At EU level, the VAT Directive sets up a framework for VAT, but it does not set individual VAT-rates which are left to the competence of each EU State. As a result, VAT-rates for a transaction with a certain product or service may vary between the EU States. Furthermore, an e-trader established in one EU State may need to register in other EU States if its sales volumes in those countries exceed a certain amount. Further, VAT registration may be conducted online in certain countries, but not in others.                Challenges for selling goods and services in a two-side service market


The selling and buying of goods and services via online marketplaces constitutes a growing part of the two-side market. These marketplaces are platforms usually in the form of websites where multiple sellers (so-called “third party vendors”) may offer their goods or services to other businesses or consumers. Two side markets often act through a fixed interface in forms of platforms or portals. Large platforms offering different types of products or services have to offer product or service information.


There are, however, different types of marketplaces, such as app stores for mobile applications or peer-to-peer platforms. Some platforms are generalist and offer a wide range of goods (e.g. eBay, Amazon) whereas others specialize in certain products (such as Zalando for clothing).The common denominator is that the marketplace operator is responsible for processing the transaction, particularly the payment, whereas products and services are provided by the third party vendors.



Market operators have, however, limited knowledge about the products and services offered via a platform. The information their offer on behalf of their customers is defined as “hosting”. The platform, or the host, can be object of legal actions only if they obtain knowledge of illegal activity and do not remove or disable access to information. The paradox is that different EU-countries concern about the concept of hosting in different ways. In some cases online market are considered to have an inactive role towards third party content and in another cases the same marketplace plays an active role. The absence of uniform interpretation of these rules obliges marketplace operators to customize their services nationally, which in turn contributes to the fragmentation of the Digital Market. However, EU legislation has special demands that some specific information is displayed on the suppliers’ site for some specific products or services. In the case of one single market alternative it is much easier to fulfill such requirements, because the possibility to customize websites. It is more difficult to offer information in markets places that offer thousands of products or services categories.


Of special importance is the selection of the search engines to navigating the internet. They allow users to find information among all web pages available on the net and at the same time enable suppliers or traders to reach out potential customers. At the moment to search for a service or products search engines present the results with a link to the relevant webpage and a two-line summary called “snippet”.


Much discussion has been performed in the pass about if snippets infringed intellectual property rights in some manner as i.e. in the case of newspapers that have asked for to remove the links to their pages both in Belgian and in Sweden. From February 2014 the EU court decided that the copyright protection does not apply in the case of clickable links in so far as those refer to works freely available on another website. Both Spain and Germany have recently introduced snippet taxes which aim to compensate publishers for the use of their work. Further, In Germany, a law was passed in 2013 that allows publishers to charge search engines and news aggregators for linking to their stories and therefore using their content.  In Spain a law similar to the German one was adopted in October 2014.The Spanish law declares that publishers cannot refuse the use of non-significant fragments of their articles by third parties. Unlike the situation in Germany, the Spanish law declares this right to payment inalienable which makes it impossible for the news organizations quoted to waive it. This has led to Google shutting down its Spanish version of Google news.


The digital distribution of services and goods as for instance delivery or video, software games and music has been done since 2000 bringing effects for the business models applied for to formalize transactions. Some of the most common used has been the subscription-based streaming services (as opposed to download) that have changed the market for digital distribution in the last years.  The sustainability of the models is, however, questioned because the absence of generic models for the whole EU. Fragmentation regarding for instance copyright make the market fragmented and raise at the same time the need to acquire licenses for platforms and services providers. Due to the fact that licenses are granted by the right-holders för a specific territory, providers or traders that want to operate in all EU- need to acquire licenses from a number of licensers. Furthermore, film licenses are often limited in time and by type1 and it may be difficult to agree on long-term licenses.


As a consequence of this, it is not possible to develop a uniform catalogue of services and the costs for offering services can be costly and thus do not match the user’s preferences especially if the services can be offered at the national level.  The consequence is that platform customizes their offer nationally and customers across Europe do not have access to the same catalogue of services. For customers this implies that they are not able to buy services while travelling abroad. One good example of this situation is the e-books that are subject to higher taxations rates than paper books. This difference of treatment is motivated by the nature of the transaction involved in buying a paper book (a tangible good) and an e-book (service license).


Apart from this, for a two-side service market, one of the mayor challenges is the protection of “personal data” to deliver cross-border services. Processing personal data by a cloud provider means also that the terms and conditions for the collected data have to follow the national rules at each country. The use of what we today know with the name cloud computing has facilitated users to store data on external servers, hence reducing costs for building and maintaining an in-house infrastructure. The transfer and storage of data to a third party (the cloud provider) raises legal issues related to ownership and privacy of the data.


In this regard it is important to note that operators (or controllers) which collect and processes personal data have the obligation to seek consent from the persons to which the data relates (i.e. the customers) in order to collect and process data. The operators (controllers) shall also inform the subjects/customers about the purpose of the processing of the data in questions and possible recipients of the data. . The responsibility and obligation of the operators or controllers are the same even if the data is processed by a third party, for instance the cloud provider.   Operators are, however, not always in the position to control the data processed on their behalf. It is therefore needed to develop accurate contracts that ensure that the cloud provider will consider all the data protection rules. A challenge is how to regulate data protection when several servers located in different parts of the world are involved. This is because, in such circumstances it is not totally clear how and who process the data through subcontractors.


It is therefore necessary for the data controller to secure that personal data handled on its behalf by the cloud provider is in accordance with data protection rules. In practice, this is solved by means of a contract between the data controller and the cloud provider.


The problem for data controllers is that they are not always in a position to control that data processed on their behalf is in accordance with data protection rules. In particular it may be difficult to know where the data are processed as cloud computing can involve different servers located in several jurisdictions around the globe. Nor is it clear how and by whom the data are processed as a cloud provider may have passed the processing to. In the Nordic countries the data protection authorities has signaled the difficulties for data controllers to fulfill requirements in Scandinavian countries. This is of special importance for Norway, Denmark and Sweden which made generic contracts and agreements difficult to design.


Further, the transfer of personal data to third countries is in principle not allowed in Eu-countries. This is without any doubt a restriction for two-side markets, especially because most of the clouds providers today are larger ones and with a number of servers located outside the EU-community, this demand that servers have to be located in EU and adapted to EU customers and data protection rules. Even in this situations is still needed that the subject and the controller develop a contract in which they authorized the controlled to collect her/his personal data. 


Another important challenge for services in two-side markets is the difficulty to develop generic services. This is because in this case, it is necessary to review existing standards, regulations of consumer protection and consumer integrity. Further to be able to offer generic services it is necessary to study consumer behavior in order to customize the services and to develop effective marketing alternatives. Of extremely importance is the case of health care services that presupposed use of medical data, and the risks for open accessibility of the information to insurers, employers or public authorities.  Even when the individuals give their consent to controllers, it is not clear if this is enough. Especially if the consent is generally formulated and to not fulfill the data protection rules at each EU-country and how big data will be regulated it is for instance not yet clear.                Social security insurances and the many differences in the systems


Several issues such us cultural differences (languages, consumer preferences and payment methods) as well as market failures (price and ownership forms, existence of monopolistic situations, information asymmetry and transactions costs) and a lack of trust for cross-border online transaction as well as legal barriers are fundamental. (Kurt Hübner (ed.): The New Economy in Transatlantic Perspective. Spaces of Innovation, Routledge, London and New York, pp. 106-127).


Social security is an integral part of the public, family, economic and labor market structures of developed countries. The social security systems of the countries of the European Union (EU) are coordinated. However, social benefits and the conditions under which they are granted are determined at national level, depending on the traditions and culture of each country. The European law lays done, however, rules and principles to guarantee the right of free movement of persons in the EU and as a consequence of this in the area of social security, guaranteed the principle of the aggregation of all the periods of insurance, employment, self-employment or residence in the different Member States and by the principle of the export of benefits in all of the Member States where the beneficiary or the members of his or her family reside. The provisions of this Regulation apply to all the traditional branches of social security:

·         sickness,

·         maternity,

·         accidents at work,

·         occupational diseases,

·         old-age pensions,

·         survivors' benefits,

·         invalidity benefits,

·         unemployment benefits,

·         family benefits,

·         pre-retirement benefits,

·         death grants.



There are, however, differences in national social benefits and in the amount of social protection per capita among the EU countries. Social health insurance has for instance, two distinct variants in Europe: the established systems of social health insurance in Western Europe following the Bismarck tradition, and the systems in the CEE countries newly established.


The mature systems of Western Europe have developed over a long time, and many of the organizational features and regulatory relationships are the result of a process of adaptation to changing circumstances. Social health insurances create a larger risk pool than do private health insurances. Individuals are required to contribute part of the costs of social insurances which in some cases results in higher labor costs. In CEE countries, the process of change has been more recent, radical and rapid. The predominant attraction of social health insurance for CEE countries was the independence of the insurer from government and perceived greater responsiveness to the patient or consumer.


Regional or local taxes are the main source of revenue for health care in Bulgaria, Denmark, Finland, Norway, and Sweden and, since 2000, in Italy. National taxes are the main source of revenue in Albania, Greece, Poland, Portugal, Spain and the United Kingdom. Some countries base also the support for the healthcare system from direct taxation or on earmarked income taxes for health contribute in France and Italy.  Other countries use at least part of the tax revenue from the sale of cigarettes (indirect taxes) for health care as i.e. in Belgium and the United Kingdom.  Other countries, such as Estonia and Poland, have taken a more cautious approach and have only recently made their insurance fund independent of government.



The domination of health care spending in local budgets is also different in different countries. In Sweden up to 70 per cent of the most county council budgets go to support the healthcare system.   National taxation allows, however, trade-offs to be made between health and other public policies. Decisions about how much should be spent on the health sector in relation to other areas of public spending are made explicitly under tax-financed systems. Social insurance systems, thus, differ in Europe.  A single national health insurance fund (such as in Croatia, Estonia, Hungary and Slovakia) or a single social insurance fund (Belgium), independent funds (France) local branches of a national fund (Romania), individual health insurance funds, either occupationally or geographically defined (Austria, Czech Republic, Germany, Lithuania and Switzerland), or an association of insurance funds (Luxembourg).


Health reform proposals in the late 1980s and 1990s in Germany and the Netherlands sought to introduce competition between insurers in social health insurance systems. The motivations behind attempts to introduce insurer competition in Germany and the Netherlands were specifically financial, including increasing the efficiency of insurers, reducing variation in contribution rates and reducing the level of contribution rates or at least reducing any increases.


During the last years it has been possible to see an incensement of the number of private health insurances across Europe.  In some cases the insurances are substitutive and are an alternative to the public ones. In Germany and the Netherlands, individuals with high incomes may purchase substitutive health insurance. Supplementary insurances are supported to allow quicker access to services or increase the quality of the facilities in the public sector. This results in differential access between those with and those without private insurance.  Another alternative is complementary health insurance offers that full or partial cover for services that are excluded or not fully cover specific services.  A third alternative is “premia”, usually a group rated system based on a calculation of the average risk of the employees in a specific firm. Private health insurance may be subsidized in part by the state using tax credits or tax relief (in Austria, Ireland and Portugal). Germany and the Netherlands have limited tax relief that does not offer an incentive to purchase policies because relief is capped for all social security. Belgium, Denmark, Finland, France, Spain, Sweden and the United Kingdom do not offer tax relief on private health insurance.


Specific for Sweden, the social health insurance is developed in a manner that gives the non-employed population prevention from fragmentation of coverage and the same entitlements as the working population. All individuals can access to the same providers and maintain solidarity across the population. The social security insurance offices offers both a  disability allowance and an attendance allowance to individual that have a substantial and durable disability and need personal assistance to cope with their daily life. Individuals at the age of 19 or over (and at the moment when entitlement to childcare allowance ceases), can receive this support. The attendance is directly linked to the disability and it must be assistance with things that the individuals cannot manage by him/her due to the disability. The individual do not have to have any particular illness or disability to receive disability allowance or attendance. However, it is necessary to have a doctor certificate that shows that the disability affect the possibility to cope with the daily work life, work or studies.


If the individual is blind or lack locomotor vision, if the individual is deaf or have seriously impaired hearing or if the individual require assistance and additional costs, it is possible to receive a higher allowance if you need particularly great need of assistance and /or assistance some hours/day. In 2011, the Swedish Government launched a new strategy to guide its disability policy for the period leading up to 2016. The aim is to give people with disabilities a greater chance of participating in society on the same terms as others. Ten priority areas have been identified, three of which are given special attention: the justice system, transportation and IT.  New IT tools may give people with disabilities a greater degree of independence. Special emphasis is therefore being placed on digital inclusion in Sweden’s national IT strategy.



Differences in national requirements often lead to additional costs for the ecosystem of e-commerce and influence the objectives of transparency needed to a sustainable development of electronic two –side markets. The two-side service market has to face problems in their contact with the public authorities or private organization in charge of offering services to disable individuals. Barriers to consider when offering services at the EU-level in a two-side service markets are: e-signatures, e-invoices, e-reporting and e-registration procedures. These issues are of special significance because the systems adopted by the public authorities in one country do not recognize technical solutions in place in other EU-countries. This has a consequence an incensement of the transactions costs for the supplier or trader that offer a service at the EU-level.


Another important barrier is the accessibility to data from public authorities. An electronic interchange of information or data concern rules on handling, storage and transfer data as well as on data protection rules and laws. What is included on the concept of “personal data” is different between different countries. For instance, IP- addresses are handled different in different EU-countries. In Irish IP-addresses do not constitute personal data; the opposite view can be finding in Sweden. In France and Germany, IP- addresses constitute personal data in some cases in other not.


The same differences can be identified in the case of protection to private persons which implies also differences of consent to the use of personal data. In Germany, is it necessary to have the consent given in written forms, Ireland, for instance, does not specify the form in which consent must be given. Sweden has a series of laws and regulations related to patient data and the transfer or interchange of it between different organizations. 


Another important issue is cross-border parcel delivery and the lack of information, transparency on available services and prices and price structure, high costs for cross-border deliveries, and lack of mechanisms and return procedures not adapted to cross-border deliveries.



In the last 20 years, a number of rules have been adopted at EU level to regulate the digital economy. Notably those concern the EU rules on data protection (1995), e-commerce (2000) or consumer protection in the case of distance sales (2011). The absence of concrete regulation for cross-border trade and the special the consumer protection rules will demand innovative solutions for the service market. Platforms should need to develop “ licentiate protectors or broker” in order to guarantee risk of abuse by market players, protection of individual data that are in charge of to review information as well as knowledge about territorial demands  documentation and guidelines, copyrights etc. and not less comparison of prices and alternative business models that allow alternatives. It will be also needed to have a system that allows comparison between services offered at the platform and services offered by domestic organizations.


Even more important is the case of peer- to peer services providers. P 4 all is based on the principles that people will be able to swap, barter, trade, rent or share services with each other. Even when the provision of ridesharing services is common in many countries today, there is some inefficiency that is difficult to solve.


One example is the absence of quality control of the providers, the absence of adequate insurance for the customers, and the absence of license for the peers that offer the service.  Further it is not either possible to identify the work conditions, social security and risk of tax evasion of the providers making the situation not enough safe for the consumers. A number of obligations are therefore needed to be implemented such as registration or license, pricing, authorization of being active in the market, fiscal supervision etc.


Even in the case of sharing services can these inefficiencies to be important. To avoid these, it can be possible that the platform will need to clearly inform about the sustainability of the services, the length of the offering, authorization for delivering services etc. It is not possible to more exact know which legal issues should appear in the future. However, it is rational to argue that liability, conformity and safety issues as well as transparency, guarantee of quality, standards of minimum requirements as well as payment forms should be of relevance for the sustainability of the market.  Even when the use of mobile payments has increased during the last years there are still some issues that need to be improved. Despite the fact that the costs of transactions are lower when using m-payments, there are national rules for identification systems (proof of identification, demand for an ID number for foreign citizens as in the case of Sweden, use of key in personal identification number etc). The use of virtual currencies seems not being optimal in this case either duet to the fact that they are only representation of a value and as such are not issued by a bank or authority and not either regulated at the EU-level. In some countries outside EU this is, further prohibited.


In general, and even when the dominating view management philosophy in the public administration at the EU-level has been to reform the sector with a wave of reforms known as New Public Management (NPM). A systems characterized as a move away from the standardized bureaucratic system towards greater flexibility, performance measurement, cost cutting (e.g. Hood, 1991; Boston, 1996), and more focus on results than on procedures (Minouge et al., 1998), there are even other issues related to the rules adopted by each country related to social security insurance issues and to the possibility to facilitate the free movements of services and the willingness to pay for such services in different countries that P4 all will need to handle.  Such issues will much depend on the nature of the services, on the constrains for the involvement of the private sector for provide services and if the services are considered as elementary services, complementary services, out-of pockets services or cost-sharing services as well and on consumer preferences and behavior.





Elementary services are services provided by public organizations, with no rivalry in consumption, individuals cannot be excluded, the price is subject to regulations and with standards characteristics. i.e., the interpreter that follow non-Swedish speaking individuals to health care centers and hospitals and facilitate the meeting between the patient and the physician. Clean services offered by the municipalities for elderly peer week. Support for students with dyslexia at the Swedish universities.


Complementary services are services that even when they are provided by the public sector, can need some complementary information to avoid inefficiencies. i.e.  Public swimming pools that cannot offer real time information about the characteristics and support offered and can exclude individuals with some disabilities from the possibility to choice an alternative way.


Out-of-pocket services are services there all costs are paid directly by the consumer and not covered by any form of insurance. They are purely private purchase of uncovered services.


Cost-Sharing services are for services included in the benefit package but not fully covered (e.g. formal cost-sharing) or for services that should be fully funded from pooled revenue but additional payment are demanded services not covered by the public system of insurance or to which access is limited.


Further, the  sustainability of the two side market and the possibility to develop generic services and business ecosystems, will  depends on the type of contract  can be signed with the public sector in the case public services can be total or partially offered by private individuals, organizations or companies.



Short term service contracts can for instance be used for specific tasks, usually everyday simple services that complement services provided by the public sector. The remuneration for the services can be based on performance and on a fee directly stated in the agreement.


Management contracts can be used in cases when contracts are used in cases when private companies are contracted to deliver services on behalf of the public entity and where the payment forms is based on a fee to private company.


Concession contractsin the case a concession a public entity owns the assets, but it contracts with the private sector for operations, maintenance and investment.


In some cases it will be, however, necessary to have some guarantees for regulation of competition between different providers of services to avoid private monopolies, enable fair competition between the new entrants, regulating prices and access provision and securing certain national strategic guarantees. In general it will be necessary to be able to show that it is possible to maximize economic efficiency, avoid fraud and corruption and that the national rules are fulfilled.


To do that it is necessary for every service provides at the P4 all platform to consider the following pros and cons in every specific case:



·         The service reduce costs for the same level of quality

·         Fill the “capabilities gap”

·         Stimulate economic efficiency

·         They can be offered directly to individuals or through specific contracts at specific countries

·         Transnational  services that can stimulate national collaboration





·         Private providers can respond to the population’s willingness to pay for public services. As a result, they will serve those groups in the population who are most willing to pay.

·         Private providers can also take advantage of clients by providing low-quality services, which may result in welfare losses.

·         Conflict of interest within companies can exists

·         Lack of consistent legislation regarding end-of life phase of products



Finally, t'he development of sustainable ecosystems business models will demand a shift in consumer behavior.


Classical economic theory argues for consumers being “homo economicus”, purely motivated by rational monetary considerations.  However, different areas of technological and service advancements have shown that reasonable innovations take longer than expected to reach wide-spread acceptance, despite their proven usefulness. This paradox is generally explained by consumer resistance to change learned purchasing behavior. Habits and attitudes  toward existing services can increase the resistance to change and may prevent consumers from being open to innovations i.e., to demand the services offered by P4 all if they believe that they have right to get them for free from the government.  It will be therefore necessary to even influence moral norms to shift a whole society towards new scenarios and to the idea of co-operation and/or self management.


An analytical model to use to capture the whole business ecosystem model for each of the services offered at P4 all can be the following:




Figure 3 –Ecosystem business models (Adapted from Dewulf, 2010)




1.1.6             Future work

In previous and complementary reports we have discussed the need to solve markets failures in the service sector in order to offer more alternatives to individuals with some kind of disabilities. At the next step we will develop scenarios for the business ecosystem for the services offered at P4 all. The analysis will contribute to design sustainable and generic business models and at the same time identify conditions for join production and for optimation of the P 4 all two side market both form the supply and demand side.   


1.1.7             Questions of key importance for the effective design a series of ecosystems business models special adapted to P4 all and to analyze their potential sustainability and generic nature.

Question 1: which types of ecosystem will P4 all dominated by:

A hub-centered star structure, or

A flat structure

Question 2: A business ecosystem model needs to capture the essence of the business for the whole network, bridge the gap between strategy and practical processes thus enabling transformation of strategies into profitable business (Osterwalder & Pigneur 2002). Similarly to single markets, a two side market demand the identifications of challenges and scenarios in which the ecosystem business model will be developed. To do that it is necessary to analyze the scenario for the ecosystem, but also key actors that will participate. And to perform an analysis of the issues and values that will affect the ecosystem and thus the business models according to the following steps:


Step 1: Recognizing the Key actors in the Business ecosystem





Service operator

Network operator

TV, Speech, SMS, Radio, Video, Advertisements, Location Data

New network

Balancing capacity

Extensive and faster services

Cooperation and saving costs


Developing and maintaining own systems

Reliability and flexibility

Costs saving

Affordable services

Sufficient services



Step 2: identified ecosystem theirs drivers, limitations and challenges



DRIVERS                                 CHALLENGES                         LIMITATIONS

Rising price of services       Budgets limits                       Big expenses for authorities

Frequency of services        Regulations                                           Financial recession

                                                                No new investments                            No long run budgets           

No space for new players                  End-users no see the values of new or alternative services


Rules and laws                       Data security

Guarantee for good quality

No earning models                               Trust in the providers

Slow renewal of services


Step 3: Creating the ecosystem business models


Identifying what is generic what is specific for every country regarding: 










Question 4:   Which country specific regulation influence cross-border transactions of P4 all services?  (Country specific boundaries for P4 all services).


Question 5: Which services will be subject for some kind of regulation?


Question 6: Which kind of contracts will be needed to develop?


Question 7: Do we have some situation in which the individuals can claim “the right to be forgotten?


Question 8:  How will be handle issues related to data privacy for specific services?


Question 9: How different are the business ecosystems maps for the different services? Are the models different for some EU-countries?



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