The latest issue of The Economist focuses on taming the new ‘titans of tech’. Four of the world’s most valuable five companies are now tech companies, and three in particular have caught the eye of regulators in recent years: Amazon, Facebook and Google. They are accused of operating beyond the law, being anti-competitive, amongst other things.
What unites these companies, in my eyes, is that they have gone beyond the scale of a service or product provider and become the networks on which others do business. Their core businesses don’t sell anything, they give it away in return for that privileged position of controlling the conduits of modern commerce. If you don’t think that’s true for Amazon, consider this: last Christmas (2016) nearly half the products it sold came from 3rd parties. That figure is probably now much higher. Amazon’s app and site are as much a free search engine for products as they are a front end for its own business.
In some ways, each of these companies is a competitor to the original ideals of the open internet and web. They are private shopping malls carved out of a public space. I hold no animosity towards the companies or their founders for that. They set out with goals that were at worst, neutral and arguably even noble: for example, to index the world’s information. Stretching to reach such lofty goals, they have become enormous organisations and gained significant control of our social and commercial discourse along the way. Naturally, as they seek to serve their shareholders, sometimes the best interests of these companies have come into conflict with what might be best for the wider market and society.
The question now is whether such control of networks ought to sit in private hands. Should single companies be permitted to maintain such incredible levels of power, which have been argued to sway elections, cripple competitors and distort the free markets that so many hold dear? It’s not just those on the left who favour regulation of such entities: many on the economic right seem to fear that they stifle competition and innovation.
A space for innovation
The internet and web work because they are (largely) open. Operating to well-defined standards, anyone can connect their own network or make their presence felt — with sufficient investment. These closed networks make this harder. There’s no guarantee you can connect, or make your presence felt, and no amount of investment might displace the network’s services in favour of yours.
Is this right?
As a general principle, I think we ought to aim for open networks and private nodes. But precisely when a node on the network becomes sufficiently large to warrant being termed a network in its own right, is largely subjective. There’s also the question of how sustained its dominance needs to be before intervention is needed: will the market eventually topple those with dominant market positions, without political support?
Competition from the network
I still believe the most realistic solution to the network dominance of a few players is for the primary networks themselves to evolve. Would Facebook be so dominant if its core communications functions were part of a network-wide standard like email or SMS? Would Amazon if there were more open channels of digital commerce enabling discovery, payment, and logistics integration?
This just leaves Google, the index of the web. Could Google’s search capabilities be distributed across the web, maintained by a governing body rather than a corporation? I honestly don’t know if that is even feasible.
It seems likely that regulatory interventions will at most, limit the titans’ ability to keep hoovering up, or muscling out, potential competitors. But this will only provide a short-term solution. Only the creation and adoption of open alternatives to these closed networks will provide a long term restriction on the titans’ power.