How Antitrust Could use Big Tech to Curb Monopolies
Antitrust is about to make our lives more complicated. It aims to give us more choice, which is usually a good thing.
In the case of Tech choices though, I don’t want to choose from a list of possible options I know little about. I need complete solutions that work for me.
When I set up my new phone, ask me a few questions that make sense to me (the fewer the better), then correctly default everything. It should all just work out of the box.
I need a single trustworthy company to pick the best options for me & test interoperability thoroughly. I want one number to call if anything goes wrong.
Calls for tech regulation are rising. The EU has already cracked down on tech with massive fines for violations. In Congress, there’s rare bipartisan support to move against big tech.
The troublesome side of regulation
The proposed regulation includes one key provision, called the “self-preferencing rule”. It’s aimed at preventing tech giants from “preferencing” their own related products over those of competitors.
The rule forbids large platforms like Google from giving higher visibility to their own shopping service over competing shopping services.
It also prevents them from installing their own products as defaults.
The intention is to require users to make an explicit choice — pick the browser they want, the mail service they want, the shopping service they really want, so the best solutions win out.
But what if I, the consumer, do not want a million discrete choices that take up my entire day to research.
What if I want “integrated choices” from one company that I can hold responsible?
What if I want this large tech company to also get better treatment for me from existing monopolies & oligopolies?
For example, make my phone plan choices better & easier.
A large company like Apple represents 56% of US phone users. They could require Telecoms to provide a level of service/quality at a negotiated price, in order to be listed as an option for iPhone users.
Help make Travel easier.
Right now airlines are gaming “price comparison” sites by presenting users with a price that isn’t a real price. Additional charges for basics are tacked on during the booking process.
Modifying or canceling a trip is made as expensive as they can make it. They have little incentive to standardize policies & cooperate to benefit consumers.
Let’s say a tech innovator breaks into the travel space and offers maps & geo-based services - they’re resoundingly successful & take over 90% of the travel market.
If they were correctly motivated, the tech innovator could pressure airlines, hotels & car companies towards reasonable cancelation/modification policies (in part also because the tech giant can improve “capacity utilization” due to their massive user base).
But how do we motivate our tech giants to do everything they can to benefit their users?
If we could find a way — there’s already a tech giant perfectly positioned to improve travel— Alphabet via Google Maps.
They could push for more customer-friendly policies, build easy one-click travel experiences & invest in the use of AI to predict user travel & preferences. However, if Congress is going to haul them over the coals for entering the travel space, they know to steer clear.
So instead they just direct the consumer toward existing middlemen. Innovation stays trapped in the travel quagmire.
How to turn a tech giant into a “good citizen”?
Antitrust hopes to create a network of regulations to force the giants into good behavior.
The problem with restrictive regulation is that it’s sort of like a fence. It motivates companies to waste energy trying to get past it.
In contrast, if regulation were used to create the right slopes, sloping towards consumer benefit, it could release the energy, creativity & innovation of competing companies in the direction of the slope.
Antitrust should create conditions where a company is free to grow large but has to be constantly on its toes because any drop in service quality immediately opens the floodgates to competitors.
To create such conditions, antitrust has to dramatically lower entry barriers.
In the internet economy “barrier to entry” is very different from that in other industries.
Access to a hardware device is monopolized by a few players. It’s extremely difficult for a newcomer to break in.
- Apple macOS & Microsoft Windows have a monopoly on laptops.
- Apple iPhone & Alphabet’s Android control all cell phones.
How could Antitrust regulation change this?
Pathway #1 to Good Citizenship: Open Source
After some years of “patent protection”, antitrust could require large companies to “open source” their software. Once that happens, competitors will be able to build on top of the open-sourced software to create better offerings for segments of the market.
An example of this is the Android OS, which was commercially sponsored as “open source” by Google in 2007. Samsung created a software overlay called “One UI” on top of Android and used this to create their very successful Galaxy ecosystem. Many of the “One UI” innovations were adopted into the standard Android platform and are now generally available.
Imagine if Microsoft were required to open source “Windows”? Apple to open source “iOS” or “Mac OS”?
A development like this could revolutionize the tech landscape & release trapped innovation. The result could be phones that are perfectly customized for who you are, a senior citizen, a teen, a soccer mom, or a wall street analyst.
Pathway #2 to Good Citizenship: Low Switching Costs
In other areas, having a superior product & partners is usually not quite enough to compete against the giants. High “switching costs” is the deadly obstacle, etched on the gravestone of many a promising young company.
Big tech knows “switching costs” are what keep the walls of their walled garden high. With no regulation in place, there’s no incentive for them to lower these walls.
I worked for 25 years in enterprise software. In the early years of my career, I was puzzled by why Oracle/SAP in enterprise financial apps & Microsoft in productivity apps, continued to dominate, despite their customers being quite unhappy with them.
As I worked with customers, I realized why: It’s hard to convert your data, very expensive to rebuild all your integrations, and extremely challenging to retrain your users.
In other words “switching costs” borne by the customer, raise the price of competing software to such a point, that breaking into the space becomes close to impossible. What these giants do here is completely legal — there is no regulation pushing these companies towards lower switching costs.
Although enterprise software is not the focus of this article, it’s the same dynamic that plays out in the internet economy.
Antitrust regulation could require tech giants to jointly agree on a set of principles aimed at minimizing “switching costs” for consumers.
Interestingly enough, the OECD has already identified this as a problem and is working on potential solutions. It’s just not linked to antitrust regulation & probably should be.
Principles include:
- Data portability — I should be able to easily move my data from one company to another & maintain my data history easily.
- Data Privacy + Rights — This goes along with #1, that both companies safeguard customer data.
- Interoperability between platforms — After a “patent-protected” period, content & functions that are available to me from inside a platform, must be made available to others via an open API. Additionally, I should be able to use a “single sign-on” across all my accounts. This would make multihoming easier by allowing consumers to use multiple competing or complementary services through a single access point. For all this to work in practice, companies would need to agree on open standards & common specifications for different types of data.
Antitrust could require companies to agree on and deliver such a framework, perhaps in cooperation with the OECD effort.
When a new service is launched by a company, they would have exclusive access to it for a “patent-protected” period of say 5–10 years. After that, they would need to ensure all functionality provided to users was available via APIs and the APIs were available publicly. Failure to do this would subject them to ongoing fines until remedied. However, completely new or substantially new features created by them would get their period of patent protection.
As a control mechanism, Antitrust could set up ways to crowdsource the constant “scoring” of participating Tech Giants on all the above pillars. If a tech giant’s public score falls too low — they open themselves up to be investigated.
Antitrust should continue to follow and add in any additional “principles” that might raise switching costs.
With access to the tech giants’ discrete services, competitors will be able to combine these with better add-on services & peel away segments of users.
The giant will need to continue to innovate, negotiate with providers or add other useful features. Or, they could take the approach of partnering with and supporting smaller companies building on their base.
In effect, instead of Antitrust creating rules to prevent “vertical integration” by the giants, antitrust would be encouraging “vertical integration” by both the giants & their partners/competitors.
In addition to benefitting consumers, this will also benefit service providers, as they will now have additional avenues to connect with consumers, beyond the tech giant.
TLDR [Summary]
Proposed regulations will force Tech choices on non-techy consumers, many of whom would much rather have “solutions” that just work.
In addition, Tech companies can and have pushed back against traditional monopolies — this should be leveraged.
The real issue for Antitrust is how to motivate Tech Companies to build really non-techy solutions & push back against traditional monopolies on our behalf.
Regulations must make them vulnerable to competition & accountable to users.
How?
By requiring tech giants to -
Path #1: Open source their software.
Path #2: Comply with open standards for data portability & interoperability — all functions available to a user inside their ecosystem, to be made available via open APIs to all competitors.
(after a patent protected period of 5–10 years)
What can you do to aid this happening?
If you agree that “open sourcing” or“interoperability” after a certain protected period, is a good idea, then talk about it, write about it on Reddit, on social media, on Medium, or to your Senator.
We have the world’s best technologists working at these great companies. These bright employees want to do the right thing. They need their companies incentivized to let them do it.
