The FAANG companies (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google), all U.S.-based, have become a global juggernaut. What will we do with our current dominant position -- squander it or leverage it? The answer will depend on whether Congress acts out of rote, or is willing to step back and look at this in the broader context of a global digital revolution.
The dimensions of U.S. dominance are overwhelming. Google search market share outside the U.S. (except China) are typically above 95%. Netflix, the nuclear weapon of cultural imperialism, is available in every country except Crimea, China, and North Korea. Two FAANG companies own 98% global share of phone OS’s. Apple has almost 1.5 billion global customers, and Amazon has global sales of almost half a trillion, of which 35% is outside the U.S. Facebook has a network effect exceeding that of any phone company (including the trust-busted AT&T) that ever existed.
It's over. We won. U.S. tech conquered the world (except China). Now what?
The social implications of American global platforms supporting most human activity (shopping, socializing, working, entertainment, etc.) are real, but still fuzzy. The geopolitical implications, however, are coming into focus. In some ways, platforms have more power than governments.
It’s important to grasp how it feels from outside the U.S. looking in. How would you feel if your advertising, friendships, online buying, computer hardware, phones, and entertainment were all provided by a foreign nation, say, Russia? (Nervous? Angry?)
Understandably then, governments want a way to control these platforms. However, tools for control are scarce. Governments do have the option to intercept data flows, as China has been doing for years. It’s called “The Great Firewall.” This option creates a number of issues, including lack of free speech, and privacy, but (some would argue) it’s almost required to control the virus, fraud, DOS attacks, infrastructure meddling, etc. This strategy could shut off access to FAANG companies if a government so desires.
Another option is to make laws FAANG are sure to break.
For example, to date, The European Union has fined Google about $9.5 billion for violations of anti-competition rules. For perspective, that is about equal to the annual administration costs of the EU. Threats of much larger fines are being leveled at Amazon and Facebook. That would be hundreds of billions.
This is the tip of the iceberg. Last month, in the shank of Brexit, the U.K. launched an agency specifically to protect it from FAANG, the Digital Markets Unit. From the announcement: “Tech giants will be subject to a new regime to give consumers more choice and control over their data, help small businesses thrive, and ensure news outlets are not forced out by their bigger rivals.” The new group will specify “acceptable behavior” for platforms regarding these issues.
Wow. The sixth largest country on the planet is making laws just to protect itself from five American companies.
The propagation of privacy laws from the U.S. and abroad (GDPR, CCPA etc.) already creates an unmanageable tangle of rules to follow. Add rules aimed at preserving fair competition, per country, and the complexity promises to be mind-boggling. Compliance is probably impossible.
Trade rules are difficult to enforce when there are ships and warehouses full of tangible goods, but when value is made from electrons, control gets much harder. The World Trade Organization, mired in bureaucracy, is mostly absent in the digital space.
The new Digital Markets Unit has goals to maintain “fair” competition, to strengthen innovation, and to maintain data privacy. These seem like great goals -- but angling for fairness is a signal of weakness. Who wants fairness? Certainly not FAANG shareholders!
A fight seems predictable, but is the U.S. government qualified to referee?
Rampant hacking, often from outside our boarders, is a strong indication that, as a nation, we are incompetent at controlling cyber-anything. The CIA was hacked. The election was hacked. Most agencies have been hacked. The U.S. power grid was hacked. Who can protect us?
The U.S. Government’s reaction is to regulate, but you can’t manage what you can’t control. One significant conversation in Congress revolves around making some of these companies into common carriers, a regulatory construct that started with horse-drawn vehicles but in the U.S. also refers to public utilities or telecommunications companies that can be used by anybody.
We need new thinking because this is a new situation. Have we ever encountered businesses that can shape public opinion anywhere, and have so much power that governments all over the planet regulate against them?
To start, we need a national strategy for governing in a digital world, taking into account our desired role globally, constitutional obligations, security, opportunities, threats, and the needs of American citizens and businesses.
If we do nothing, the destruction of truth will continue unabated as hacks accelerate, our tech industry will be shut down and fined by any country who wants to try it, the decisions of platforms will rival decisions of governments, and our trillion-dollar military won’t have anything to shoot at.