Last Friday, Elizabeth Warren, the U.S. senator from Massachusetts, unveiled her plan to regulate Big Tech — any tech-based company with global revenues of $25 billion or more, such as Facebook, Amazon, Google and Microsoft — as part of her 2020 presidential bid. She would create a new regulatory classification called Platform Utilities, which would make these companies subject to rules that would fundamentally change the way they do business.
“Today’s big tech companies have too much power — too much power over our economy, our society and our democracy,” she said. Warren’s plan rests on two pillars: Platform Utilities would be forbidden from owning a platform and participating in it; and second, undoing mergers that made these companies too powerful. She cited Amazon’s acquisition of Whole Foods, Facebook’s purchase of Instagram and Google’s purchase of Waze (a traffic gauging app that was added to Google Maps), among others. These “utilities” would also be banned from sharing user data with third parties, a reference to Facebook’s Cambridge Analytica scandal. As I wrote this, the targeted tech companies had not commented on the senator’s proposal.
I urge you not to get caught up in the cliche rhetoric: “We have these giant tech companies that think they rule the earth,” she said to a small crowd in Long Island City. “I don’t want a government that’s here to work for the giant tech companies. I want a government that’s here to work for the people.” But would breaking up Big Tech as she outlined help or ultimately hurt “the people” — you and me?
Is big bad?
Warren’s plan rests on the assumption that big is bad and ignores the fact that the services provided by Amazon, Google and Facebook are free. Do you pay a membership fee to shop Amazon like you do with Costco? Do you pay to use Google Drive for writing documents, creating spreadsheets and presentations, like you do with Microsoft Office? Do you pay for Google Maps? How about participating in social networking on Facebook and Instagram? No.
As we’ve talked about in previous columns, you don’t pay with cash, you pay directly or indirectly by viewing ads on the platform itself or on another service owned by a particular company. For instance, there are no ads in Google Drive, but plenty on Google’s search platform.
In a response to Warren’s plan, the Information Technology and Innovation Foundation, a think tank for science and technology policy, released a statement from ITIF President Rob Atkinson, who wrote, “Breaking up large Internet companies just because they are large won’t help consumers. It will hurt them by reducing convenience, reducing quality of service and innovation, and in some cases leading to the introduction of priced services. Consumers now benefit greatly from having one Amazon, one Google and one Facebook. The goal of competition policy should be to enhance consumer welfare, not penalize companies for earning market share and operating at scale — yet that is exactly what the Warren proposal would do.”
Warren also plans to undo Big Tech mergers and make similar acquisitions unlawful in the future to protect small businesses and entrepreneurs. But isn’t it often the dream for these small tech company founders to be discovered by the giants of their industry and make millions off the sale of their technology? Who wouldn’t want to become the next Kevin Systrom, co-founder of Instagram, who sold the photo-centric social media platform to Facebook for $1 billion just two years after its launch?
“It depends on your business model,” said Thomas Menlove, a student in the University of Utah’s Business Scholars program. “Some companies like Instagram had no revenue stream. Its goal was to sell to Facebook, and that’s an awesome goal — become a disruptor and be purchased. Taking that away would mean lost opportunity to entrepreneurs.”
If Platform Utilities were banned from sharing data with third-party companies, their advertising revenue streams would collapse. Without advertising, companies would be forced to charge for their services to stay in business, which would cut off a huge number of customers who could not afford to pay. A data sharing ban is not the answer. Instead, an enforceable policy on data transparency, along with other privacy options similar to the EU’s General Data Protection Regulation, makes sense.
While political rhetoric can hit the hot buttons for voters, it’s important to take a step back and think about the effects of a plan like Warren’s. Big isn’t necessarily bad, and every individual has the choice to use Big Tech platforms for free or pay for alternatives.