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The Metaverse: Regulatory Trends

The Metaverse will make digital media experiences more immersive, inclusive and accessible than today. However, it will raise social concerns ranging from data privacy to other forms of online harm.

Below are the top regulatory trends impacting the metaverse theme, as identified by GlobalData.

Net Neutrality

Net neutrality refers to the concept that a telecommunications network should be a neutral gateway to the Internet rather than a gatekeeper with the power to decide what content is available or how fast that content is transmitted. The vast majority of data flowing through the world’s telecommunications channels comes from large-scale data centers owned and operated by Big Tech’s Internet ecosystems.

Under net neutrality rules, telcos and cable companies in many countries are not allowed to charge commercial prices to companies such as Netflix, Google, Amazon, Meta, Microsoft, Alibaba and Tencent for internet. significant Internet bandwidth they consume. The effect of these rules over the past two decades has been a massive shift in the balance of power in the tech industry, from telcos to Big Tech.

The metaverse’s Internet bandwidth demand will increase by several orders of magnitude from current Internet traffic levels. This will almost certainly overload telecommunications networks unless they embark on major broadband infrastructure investment programs. Yet that is unlikely if they continue to subsidize Big Tech’s use of their networks.

Metaverse and Data Privacy

The use of augmented reality (AR), virtual reality (VR) and advertisements will be an integral part of the metaverses, which, in turn, will highlight data privacy issues. Regulators will push metaverse companies to address known privacy issues associated with underlying technologies. Although platform developers will embrace privacy by design to appease regulators, data privacy issues will increasingly surface as these platforms mature in the coming years.

Several metaverses, focused on consumer or business use, are in development. Metaverse developers will have their own data protection policies and prefer to self-regulate in the early days of the commercialization of their platforms. Although there are no metaverse regulations today, existing legislation can be applied to the metaverse, which will give rise to issues that companies need to consider. The European Union (EU) General Data Protection Regulation (GDPR) is the best example of this, as it contemplates the protection of personal data, including biometric data.

AR and VR devices will generate and process significant amounts of personal data, including biometric data from eye and body tracking technology. In the past, EU watchdogs have levied data privacy-related fines on companies, especially Big Techs. Therefore, it is expected that the metaverse will come under scrutiny.

Regulators around the world will require metaverse platform developers to address existing or known privacy issues associated with the underlying technologies that power metaverses. That said, data privacy regulations are geographically fragmented, so platform developers must ensure compliance with local laws wherever they operate.

Chinese tech regulators

China is a potentially lucrative market for the Metaverse due to its massive and increasingly affluent user base. China’s big tech and leading start-ups have enabling technologies, established consumer bases, and notable global partnerships that can help build metaverse platforms and experiences. For example, Tencent owns 40% of Epic Games, which is at the forefront of metaverse development.

Gaming, social media and e-commerce are probably the metaverse applications that are attracting the most interest from Chinese businesses and consumers. Going forward, live events and business collaboration will also grow in popularity as the theme grows and the underlying technologies mature.

Companies will mainly compete on the basis of experiences. For example, Tencent should challenge NetEase’s gaming-specific metaverse while challenging Alibaba’s e-commerce offering. ByteDance, an increasingly influential disruptor, will challenge Tencent and Alibaba through experiences such as social media, enterprise collaboration and games.

Chinese regulators pose a major threat to China’s tech sector and its metaverse ambitions. They are the reason why Chinese metaverse platforms will be different from those in other parts of the world. Strict guidelines on user-generated content have limited the progress of platforms like Roblox that allow users to create experiences. Companies will likely use existing intellectual property, such as movies and games, already approved by the government.

China’s ban on cryptocurrencies reflects its disapproval of decentralized currencies. This forces consumers to invest in fiat currencies to exchange non-fungible tokens (NFTs), allowing the government to oversee transactions. Finally, China protects the mental health of minors and the traditions of the country. This resulted in regulations that impacted China’s gaming and “virtual idol” industry. As new experiences emerge on metaverse platforms, regulators will take steps to prevent any inherent risk to young people and society.

This is an edited excerpt from Metaverse – Thematic research report produced by GlobalData Thematic Research.

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