July 19, 2018
Business

Big Tech must be tamed, for the sake of a fair society

Just as the competitive oil rush gave way to Rockefellers new monopoly in the form of Standard Oil, so the internets infrastructure is being built around a handful of companies of immense and growing power: Google, Apple, Facebook, and Amazon, along with their Chinese equivalents, Tencent, Alibaba, and Baidu.

There are real concerns that while the tech giants may have begun as innovative upstarts, they have by virtue of their sheer size become a barrier rather than a boon to entrepreneurship. And by amassing gigantic quantities of user data, the tech giants have acquired an impregnable position at a bargain basement price.

Optimists can take the view that innovative insurgents will break through eventually, eroding monopoly power. They might cite the example of Microsoft, which no longer has the worlds dominant operating system because it failed to make the jump from PCs to mobiles.

Read more: Its about time the regulators came for the tech behemoths

But the immense power and reach of a small number of companies does raise the issue of how to regulate them in the public interest.

There is much to be gained by all of us from the digital world, yet we stand at a crossroads.

One way leads to monopoly and abuse. The other way continues the journey towards individual empowerment and economic dynamism.

The most prominent regulatory approach is the anti-trust model. In Europe, each of the main technology companies has been or is being investigated. Apple was recently fined €13bn for tax avoidance, while Google was fined €2.4bn for market abuse involving competition between its search engine and price comparison sites.

Yet competition authorities have failed to spot the significance of dominant firms acquiring smaller businesses. Google, for example, has acquired 167 companies since its EU Commission inquiry commenced, and Facebook 69 over the same period.

By acquiring potential challengers before they pose a real threat, spending millions lobbying governments to defend their interests, and locking in users through platform exclusivity, the tech giants dominant position leaves many entrepreneurs feeling they must choose between selling out or closing shop. This is detrimental to both innovation and consumer choice – two things the tech giants once stood for.

We need a change in the way that competition authorities deal with mergers, challenging them where they are likely to reduce innovation, following the principle that competition is the mother of invention. The type and total amount of data a combined company would control should also come into consideration, as has been recently argued by Japans Fair Trade Commission and the European Commission.

But there may also need to be some aggressive trust-busting, as Barry Lyon of the Open Markets Institute in the US has argued. National governments and supranational bodies like the EU can and should look to break up enterprises where size is detrimental to the economic wellbeing of the countrys citizens and its capacity for innovation.

We must also look at the fundamental economic issue of whether companies should pay people for their data. A group of economists from Microsoft and the universities of Columbia and Stanford have convincingly argued that data should be seen as a form of labour and regarded solely as the property of those that generate it unless they explicitly agree to sell it.

Looked at in another way, it is astounding that people have been so happy to give up something so valuable for so little.

While users access Facebook and Twitter without charge, most believe they are getting something for “free” rather than handing over their data for a service in a transparent and quantifiable transaction. It is highly debatable whether the value of the services provided by the tech platforms is equal to the value of the data being given up.

If individuals were paid every time their data got used anywhere in the world, there would be a mechanism for redistributing the profits of those with most to gain from technological advances into the pockets of those who are most likely – in the short term at least – to lose.

If paying people on an individual basis for their data proved impractical, we could develop mechanisms for compensating them at a collective level. If collected directly by the state, the revenues could potentially be used to fund public services or invest in cutting-edge infrastructure of the future.

Finally, by taking data out of the tech giants hands and enabling anyone with the requisite permission to buy it, innovative insurgents could straightforwardly access the data they need.

The global technological data arms race is the issue which will define this century every bit as much as the Industrial Revolution defined the nineteenth century. We should embrace the opportunities it creates, but we must also develop a bold set of responses to the challenges it raises.

Not doing so risks undermining the public trust and healthy competition that are crucial to a fair society and a vibrant economy.

Read more: The Bootleggers and Baptists are fighting to regulate Facebook

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