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How to stifle innovation by impeding competition among technologies, companies and business models (Analyst Angle)

The European Union has declared that USB Type-C standard connectors will be required for charging various devices sold from 2024. This seems to have grabbed as much media attention as the far more significant announcement of its new Digital Markets Act that will intervene to arrest the market power of the Big Tech platforms including Alphabet, Apple and Meta. Perhaps this is because charging various gadgets is something we can all more easily relate to in our everyday lives?

Fifteen categories of products will be covered by this mandatory charging connector standard, notably including Apple’s iPhones which currently use the firm’s own proprietary Lightning connectors. USB-C is the prevalent standard for electrically connecting and powering small devices. Android-based smartphones, Apple’s MacBooks and various other devices already use USB-C connectors.

According to Thierry Breton, the EU’s commissioner for the single market, the change will save consumers €250 million ($275) by having one charger for all their portable electronics, but touted benefits through saving electronic waste are exaggerated. The Economist notes that this saving is only €1 every two years per EU citizen; a mooted cut of 1,000 tonnes in binned electronics avoided per year sounds impressive, but represents only about 0.002% of the global figure; and life-cycle C02 emissions saved in Europe of 9000,000 tonnes are less than that spewed out by a single Boeing jet. 

The incompatibility is in the plugs and cables, not in the charging electronics. Many chargers including Apple’s have detachable and replaceable charging cables.

This proposed regulation will impede global market development and adoption of improved technical solutions. 

Mandatory standards, including those introduced with the best of intentions are likely to remain compulsory for rather longer than is beneficial.  For example, the French-initiated SCART standard and associated 21-pin connector for connecting TVs, VCRs and DVD players long outstayed its usefulness. The SCART connector first appeared in TVs in 1977. It became compulsory for new TVs sold in France from 1980, and since 1987 in eastern European nations including Poland. The requirement was not revoked until July 2015—35 years after its introduction. Use of the standard was always far less common outside Europe.

Explicit requirements for SCART sockets—or implicitly so that identical products could be sold across different nations—probably resulted in this connector being included but never used in tens or hundreds of millions of appliances. This resulted in unnecessary product design clutter and costs for many years given the widespread implementation and popular use of other standards including the proprietary HDMI standard with millions of devices shipping annually from the mid-2000s. I bought TVs in the UK in 2009 and 2012—each with two great big SCART sockets that I have never used given the prevalence of the HDMI standard by then.  The cost of electronic waste caused by incorporation of superfluous SCART sockets must have been substantial.

While royalty-free licensing with standards such as USB has self-evident appeal to implementers, it was introduction of Apple’s proprietary Lightning connector a decade ago that led the way in easy-of-use and utility in power charging connectors. With my less than perfect eyesight—particularly in poor lighting— it often took me several fumbling attempts to plug-in a micro-USB plug before I was sure I had gotten it the right way around. Thankfully, the USB-C standard plug, like the Lightning plug is also reversible. However, USB-C connectors are larger than Lightning connectors in a design environment where a small increase in size can be a significant constraint.

With wireless connections increasingly for charging as well as communications, the need for physical electrical connections is declining.

Where plugs and sockets are still required in small portable devices such as smartphones tablets and PCs, design issues such as size, weight, waterproofing, easy and safe attachment and detachment (e.g. using magnetic connections) are much more significant than on the back of a TV. Consequently, the ongoing need to replace—rather than merely supplement—obsolete standards with innovative improvements is more important and urgent. 

Competition among technologies, companies and business models generally brings out the best. Even though there are some obvious potential benefits in harmonization of power charging and that this appears to be a relatively minor place for the EU to intervene, the sclerosis that will likely ensue from this decision sets a troubling precedent in this otherwise dynamic marketplace. If other major nations do not adopt the EU’s chosen standardization, product market fragmentation may increase rather than decrease on a global basis.  

Subtle considerations in design and competition are important. A government mandate for one particular standard that is royalty-free over other standards, also including proprietary solutions that would generate fair, reasonable and non-discriminatory royalties for their creators, troublingly detracts from the sound principles of open innovation, customer choice, market competition and business model neutrality.

ABOUT AUTHOR

Keith Mallinson
Keith Mallinsonhttp://www.wiseharbor.com
Keith Mallinson is a leading industry analyst, commercial consultant and testifying expert witness. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007.

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