While the initial hype surrounding the Metaverse may have given way to AI, development of its technological foundations continues. In light of the potential implications for policymakers, we've identified six areas where their attention should be focused
Ensuring a competitive market develops should be a top priority. There is a risk that firms could leverage existing advantages (e.g. in data or devices) to suppress competition in an emerging market, extending their influence into other areas of the internet value chain.
Limits on the ability of data to flow freely and efficiently, and a lack of common standards could result in fragmentation and closed systems. Putting these in place will be essential to enabling interoperability between platforms and technologies.
Telecoms networks will need to evolve at the pace required to support innovative use cases. Policymakers are largely already working towards lowering investment barriers, but may need to be mindful of how new services and partnerships interact with current net neutrality rules.
Those in underserved areas might not have the connectivity to access virtual worlds, while others face affordability, usability and skills barriers. Addressing these could accelerate adoption and engagement, helping to avoid the creation of a new digital divide.
There is a risk that inadequate protections over personally identifiable data generated via immersive technologies present opportunities for malicious actors. The Metaverse will provide a stress test for existing privacy and cybersecurity frameworks.
A lack of safeguards has the potential to impact trust and engagement. With particular risks for the exposure of children to harms, new online safety regimes will need to cover virtual worlds. How successfully they do this will ultimately depend on how they are implemented.
The role of operators in the Metaverse and the challenges facing regulators
Despite the term being coined in a 1992 novel, the past few years have seen interest (and investment) in the Metaverse spike. For some, it is just a fad – in fact, the hype has calmed in 2023 as AI has captured the attention of policymakers and the public. However, for its supporters, the Metaverse has the potential to seamlessly blend real and virtual worlds for an infinite number of users, revolutionising the way we work, learn and communicate. With multi-sensory real-time experiences, a decentralised economy, personal avatars, transferable assets and a single user identity, proponents consider that it will reflect the digitally-enhanced lives of the future. The early stages of the Metaverse are already evident in gaming, but opportunities are foreseen in other consumer-centric sectors such as retail and entertainment, as well as in the edtech, creative and manufacturing industries.
A host of public and private sector organisations have now made a play for the Metaverse, from the Latvian Government to the US military. Large tech firms are some of the heaviest spenders to date. Meta – which changed its name to reflect a strategic pivot – has invested heavily in its proprietary Horizon Worlds platform and augmented reality (AR) equipment, and has made a large number of new hires. While Google is reported to be building its own operating system for Metaverse headsets through Project Iris, Microsoft and Disney have closed their dedicated Metaverse divisions, resulting in job losses.
The telecoms sector is exploring the opportunities for new partnerships, business models and value creation that could emerge from future digital realities. Several operators are leading the industry, with e&, Deutsche Telekom, NTT Docomo and SK Telecom principal among them. Alongside interfaces, e.g. virtual reality (VR) headsets, and content, the infrastructure and services provided by operators are seen as integral to the Metaverse value chain. Ultrafast, low latency and high capacity connectivity will be key to supporting simultaneous immersive experiences, while mobile numbers may be used to link avatars back to individuals in the real world.
As with any new technology, regulators and policymakers will need to be mindful of the challenges it could pose. We’ve identified an initial set of six issues that will need to be addressed if a competitive, safe and inclusive Metaverse is to materialise, if indeed at all (See Figure 1).
1. Ensuring a competitive market should be a top priority
In light of the huge investment commitments of tech companies, which currently hold strong positions in social media, advertising and/or search, some regulators already expect the Metaverse may be the next digital market to warrant scrutiny (and safeguards). Margrethe Vestager, the former head of the EC’s competition unit, is one such figure, and has recommended authorities ask what healthy competition would look like in virtual worlds. While it is widely expected that there will be many different digital spaces, rather than a single dominant environment, there is also broad consensus around the need to pay close attention to the motivations of big tech. A handful of firms have already been considered to exert a disproportionate influence over the internet, with the Metaverse a potential opportunity to extend market power in one area into another.
In Europe, Commissioner Thierry Breton has stated that “no single private player should hold the key to the public square or set its terms and conditions”. The EC has so far pursued a non-legislative approach to the Metaverse, considering that the bloc already has the frameworks in place (e.g. through the Digital Markets Act, or DMA) to respond to issues presented by virtual worlds and ‘Web 4.0’. In contrast, China is likely to take a firmer stance – albeit due in part to possible national security concerns. In South Korea, the Ministry of Science and ICT (MSIT) intends to introduce regulation targeting the Metaverse, stating that new industries demand the development of new laws. At this juncture, regulators ought to consider how to mitigate the risk that tech firms could leverage advantages in data, AI, devices or scale to suppress competition in an emergent field.
2. Standards will be essential to interoperability between platforms and technologies
There is a lot yet to be agreed upon as to how the Metaverse can and should be brought to fruition, with challenges ranging from the technical to the societal. One that sits in the former grouping are the joint issues of data and interoperability. Firstly, data will need to flow seamlessly, securely and efficiently for firms and consumers to participate in all sorts of digital worlds, both locally and globally. This cross-border exchange of data will likely be key to experiencing the full potential of the immersive internet and will involve effective application of and compliance with national and international legislation. However, geopolitics and the desire for greater oversight and control by certain states could see regional Metaverses emerge, conflicting with more open and decentralised ideals.
Ensuring interoperability between different virtual worlds and equipment to allow end users to navigate platforms in a frictionless way and prevent use cases becoming fragmented is seen as another central challenge. While the underlying technologies are maturing, a standards-based foundation will be essential to integrate them so that the Metaverse reflects the way the internet functions today, enabling innovation – and competition – to thrive. Promoting interoperability may require close collaboration to safeguard against closed software and systems. The Metaverse Standards Forum provides an example of private sector cooperation, while the EU has launched the Virtual and Augmented Reality Industrial Coalition to facilitate structured dialogue between the European AR/VR ecosystem and policymakers. Initiatives such as these can help drive harmonisation and address concerns that dominant players will replicate the ‘walled gardens’ they use in their platforms to lock in users.
3. Supportive telecoms policy will incentivise investment in infrastructure capable of meeting rising demands
Running the Metaverse’s various platforms and technologies will be inherently tied to the availability of high-performance connectivity. Current telecoms networks are able to support the likes of Roblox and some AR/VR experiences, but more advanced capabilities will be required for new innovative applications, for example where there is a need to reduce the ‘motion to photon’ delay for full haptic feedback. In many countries, there are currently still trade-offs between coverage, quality and cost. Existing digital infrastructure therefore still has a way to go until it can create authentic, always-on immersive environments. With 5G and future 6G networks expected to underpin various Metaverse use cases, it is vital that regulation both enables a faster and more cost-efficient rollout of mobile infrastructure, and provides the necessary flow of spectrum that will incentivise continued industry investment.
Timely assignments of frequencies across different ranges would help operators meet the symmetrical bandwidth and latency requirements to ensure necessary quality of experience in various outdoor scenarios. There will also be many indoor use cases, presenting different network traffic profiles and demands. As such, full fibre will underpin the development of the Metaverse, while the offloading of traffic to Wi-Fi 6 – and later Wi-Fi 7 – will help overcome capacity challenges in specific locations.
In most countries, policymakers are already working towards lowering barriers to network investment (from cost to bureaucracy), and answering calls for more spectrum to be made available to industry. An issue that may warrant revisiting is net neutrality. For operators, the Metaverse is expected to increase demands on infrastructure considerably, as well as potentially presenting opportunities to offer different levels of quality based on a given application or scenario. The extent to which this is possible will depend on the open internet framework in place. As operators invest heavily in connectivity, regulators may therefore need to consider whether they have the flexibility to support the heightened demands of interconnected worlds, while ensuring that other use cases are not impacted, for example by the unreasonable blocking or throttling of traffic.
4. Addressing accessibility barriers will help prevent the emergence of a new digital divide
The full potential benefit will only materialise if virtual worlds are accessible to all. But ubiquitous connectivity, though capex-intensive, is just one challenge. Strong digital skills are needed to navigate new online environments, while enabling devices that provide the gateway to the Metaverse are yet to achieve mainstream levels of adoption, which is partly due to their cost remaining prohibitive for many. These challenges of course aren’t new, and so existing work here provides a good starting point.
The public, private and third sectors should continue to work together to develop initiatives that guarantee that everyone, regardless of socioeconomic background, has the capabilities to take part in the Metaverse. To further encourage inclusion, policymakers should consider how they prioritise the needs of those marginalised groups that may not be able to use conventional AR/VR devices, for instance as a result of physical or cognitive challenges. Overcoming barriers relating to affordability, usability and literacy would accelerate adoption and engagement, helping the Metaverse potentially establish itself as the next iteration of the internet without leaving anyone behind.
5. As vast amounts of critical data are generated and processed, privacy and security must be front of mind
While some consumers may be optimistic about the promise of the Metaverse, many are increasingly aware of their own digital footprint and often cite concerns relating to privacy and security. Fully interoperable connected worlds will depend on a number of factors, such as the portability of data, avatars and virtual assets, as well as a single digital identity (for individuals and businesses). The volume and granularity of behavioural and physiological data that is set to become available is a major motivation for many companies to engage in this space. However, this makes privacy of paramount importance. While the General Data Protection Regulation (GDPR) should in theory cover the Metaverse, the type and amount of sensitive data generated through immersive technologies raises unique challenges, threatening to expose shortcomings of the EU’s flagship legislation – which in many instances has been exported to other countries. Regulators must ensure users remain in control of their data and that it remains protected, with clear rules for how data should be collected (including how and when consent is granted), stored and processed outlined in law and implemented in practice.
Current challenges, including scams, ransom/malware and hacking, will persist and could expose vulnerabilities of interconnected equipment or avatars, or enable the theft of personally identifiable information (from name and location to facial biometrics) or cryptocurrencies that underpin financial transactions but do not have government-backed fraud protection. Integrating security measures, e.g. identity authentication and management, can help prevent opportunities for impersonation, which in turn attracts and retains users that are comfortable and empowered to engage without concern.
6. A safety-first approach that preserves consumers’ rights and protects them from harm
Despite uncertainties about what the Metaverse will actually be, there is understanding around the need for guardrails to protect users and not to expose consumers to the same online harms seen today. Consumer-focused regulation is another means of building acceptance and trust, and protecting rights, which in turn drives take-up and active participation in new digital economies. Importantly, people will need to feel as safe in virtual worlds as they do in the real one. The Metaverse has the scope to exacerbate existing issues such as abuse, bullying, harassment and exploitation, as well as hate speech and fake news, which social media platforms have proven incapable of limiting. Specific controls may be needed to ensure that mis/disinformation does not find a new channel for growth. Encouragingly, it appears that major internet safety regimes, including the EU’s Digital Services Act (DSA) and the UK’s Online Safety Act (OSA), will apply to the Metaverse, although their effectiveness may boil down to how well they are implemented and enforced.
With the challenges identified arguably becoming most acute in the context of children, it is imperative that young people can engage in online environments without suffering harm. A safety-first approach that prioritises the wellbeing of users will encourage them to embrace Metaverse-related services, while shaping virtual worlds that reflect and embed the right values and behaviours from the outset.
Collaboration between regulators will help answer the questions posed by virtual worlds
Amid the scepticism, there is consensus about the potential ethical, societal and competitive implications of the Metaverse, and the need to determine proactive regulatory responses – perhaps more so than for other technologies in the past. The challenges outlined above relating to interoperability, cybersecurity and data protection will require dedicated attention, while there must be a focus on delivering the connectivity necessary to enable access to new digital realities for all. Striking the right balance between stimulating innovation and investment and protecting end user rights and vulnerable groups from harm will be a further, likely evolving, challenge.
As we are currently witnessing with regulating AI, it is critical that governments, industry and civil society around the world work together to manage risk and drive adoption, all while recognising the irreverence of emerging technologies to national borders. The Metaverse will be a significant undertaking that will similarly require a global effort and ecosystem-wide collaboration to ensure openness, safety and inclusivity. Initiatives like the Digital Regulation Cooperation Forum (DRCF) in the UK offer an example of the inter-authority cooperation that could help in this regard. Policymakers will also need to take stock of the legislative landscape, considering whether existing rules are sufficiently robust and far-reaching to span the Metaverse. Future-proof regulatory tools – alongside standards – will give the Metaverse the best chance of reaching its potential, while ensuring a new digital Wild West does not emerge.
