Big Tech – the contrarian view

There’s a torrent of material to read about competition (lack of) in digital markets, which of course goes much wider than economics and law. Indeed, I’ve contributed to the many pages written, including in the form of being a member of the Furman Review team. The general theme is that Big Tech does indeed pose a challenge for competition policy, with the individual conclusions running from ‘some adjustment within current framework is needed’, all the way to ‘destroy them’.

What makes Big Tech and the Digital Economy by legal scholar Nicolas Petit so refreshing is its absolutely contrarian perspective. He has coined the phrase ‘moligopoly’ to describe Big Tech, and argues that while there has certainly been increasing competition in digital markets, there is also vigorous competition unremarked by all the commentators. I’d describe what he calls competition as oligopolistic rivalry, but the book does document the ways in which the GAFA and others compete with each other.

Some of the emprical evidence is rather interesting. For example, the book looks at what the big companies describe as the major risks facing them in their SEC filings and all but Facebook claim competition is their 1st or 2nd biggest threat – they would say that of course, but it intrigues me that Facebook doesn’t bother (number 4 or 5 in its ranking). The others do all see each other as their main rivals. Among the book’s other evidence is their high rate of spending on R&D – but I’d like to know about what it is they’re researching, though.

The ultimate question is not about current competitors, however, but about potential competitors. If you believe digital markets tend to winner-takes-all because of network effects, and you can live with concentration because of the large consumer benefits, then what matters is whether new rivals with great technology and products can take the current Big Tech markets. In that case, moligopolistic rivalry along various dimensions is not only fine but anyway inevitable.

The book didn’t win me over in the sense that I concluded there is no reason to be concerned about digital competition. Without intervention, it’s hard to see anybody rivalling Google in search, or Apple and Android in mobile operating systems. To be fair, the author doesn’t argue that there’s no cause for concern, quite. He is issuing a useful warning that we should think carefully and in detail about what harms we believe Big Tech is causing. This book is a distinctive corrective against the current tendency toward groupthink on this subject. As we said right at the start of the Furman Review, Big Tech has brought many benefits, and there is growing evidence about how much people value its products. Anyone certain they know Big Tech needs fixing should read this more nuanced argument with an open mind.

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The digital Faustian pact

James Ball’s The System: who owns the internet and how it owns us is pretty sobering reading, not least as 2020 has turned online access into even more of a necessity than it already was. (Though I can’t be the only person in despair at the prospect of yet another Zoom/Teams/Hangout etc, & mystified as to why some people are so sure we’ll all want to stick with working from home forever now. )

Anyway, the book. It’s a nice overview of all of the dysfunctions of the modern internet – corporate and state surveillance, monopolies, hackers and fraud, and the belated beginning of tougher regulation. It’s particularly good at explaining enough of the origins and technologies to make it clear how things have turned out the way they have. For instance, the reminder that key innovations were funded by the US government so none of the pioneers thought about business models – in contrast to the older communications networks, where billing was an important engineering requirement. A fateful oversight. For hence the toxic reliance on advertising – and there’s a great chapter on this – with its constant need to get people to click.

This book is far, far better on the potential for, and drivers of, surveillance than the over-rated rhetorical doorstop of Shoshana Zuboff’s Surveillance Capitalism book. I also really enjoyed learning from The System about some new things about the physical internet infrastructure – the Border Gateway Protocol was new to me – how packets make their way through the physical network. It’s frankly terrifying, the reliance on a short-term fix that started life scribbled on a couple of napkins decades ago and hasn’t changed too much since.

All in all, although some of the material is fairly familiar now, a very well-informed book and also really well written. For me, worth it for the chapter on advertising alone, which explains the origins of the online ad market and horrifying extent of the tracking targeted ads requires. We have a systemic Faustian pact – great free services in exchange for our souls. If I were in charge of regulating the online world, advertising and the business models would be my number one target. Regulators are supposed to be agnostic about business models – but there needs to be a mixed economy of models for that rule to apply.

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Digital government – not a contradiction in terms

It’s always exciting when a new ‘Perspective’ arrives at Enlightenment Towers, and the latest arrival is Digital transformation at scale by the Public Digital team. As many will know, they were the pioneers of the UK’s Government Digital Service, and the book draws on their experiences of achieving some significant changes in government practice, and citizens’ experience of contact with government.

It is not just about digital transformation in the public sector, however.The lessons apply to any established, large, complicated organisations whose processes have accreted in overlapping or inconsistent ways over time. There are plenty of those in the private sector. Maybe the executives at TSB should have read the book before embarking on their disastrous IT project.

The advance praise couldn’t be more stellar – Martha Lane Fox and Tim O’Reilly call it “essential reading” and “THE invaluable guide to bringing legacy institutions into the 21st century” respectively. There’s early coverage here and an excerpt here.

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