By Maria Paz


How have tech giants like Facebook and Google built their empires?
Why is it so tough for smaller, local platforms to compete against them?
How can we regulate digital monopolies and support the growth of smaller players? 

Maria Paz breaks down the nuances of how digital platforms function, analyzing how Big Tech manages to continuously dominate markets the world over.She exposes the fault lines of the current digital paradigm, and why smaller players do not succeed here.

She examines how the consolidation of data has facilitated the growth of digital monopolies and posits data portability as a key regulation in tackling Big Techs anticompetitive behaviour.

 

If I tell you that over 90% of your interaction with the internet is dominated by a handful of global big tech corporations, you are unlikely to be surprised. If I tell you these corporations are mostly American, including, Facebook, Google, WhatsApp, Instagram, Twitter, Telegram, Amazon, Airbnb and Uber; you’re still unlikely to be surprised.

But if I ask you to help decentralize the Internet by giving up some or all of these platforms and instead, sign up for new alternatives provided by innovative local entrepreneurs, not only will you be surprised, but probably also unwilling to consider this proposition.

Setting aside the human attachment to familiarity, along with any reasonable doubts about the reliability or functionality of these new local platforms, the reason you are likely to reject my proposal is linked to the very model of digital platforms, which derive their success from the phenomenon of ‘network effects’.

Network effects are produced “if one agent’s adoption of a good (a) benefits other adopters of the good (a total effect) and (b) increases others’ incentives to adopt it (a marginal effect).

Network effect is at play when you reject my proposition of giving up the use of large platforms like Facebook, where all your friends, family and colleagues interact, exchanging social news, political views, pictures, social causes, employment opportunities, and so on.

The consequence of this is that the winner takes all. Whoever is able to capture the market first, with a platform that is attractive enough to engage a large number of users, has a competitive advantage over other players (if you’re a gamer, you’ve probably experienced this). After a brief period of competition for the floor, the early innovators, i.e global platforms backed by big money, have engaged us in ways so that we can’t easily give them up without giving up substantial amounts of our valuable, digitally mediated social interactions.

Over the years of engagement with these platforms, we have provided them with huge amounts of data about ourselves that helps them understand and ‘serve’ us better. We are locked in their enchanting gardens, so much so that we never want to leave , convinced as we are that there can never be better alternatives.

After a brief period of competition for the floor, the early innovators, i.e, global platforms backed by big money, have engaged us in ways so that we can’t easily give them up without giving up substantial amounts of our valuable, digitally mediated social interactions.

The years of data collected by these platforms has allowed them to maintain their dominance. They are best positioned to understand the needs, fears and desires of their users. This allows them to effectively direct their innovation and develop their business model better than any newcomer , and even expand that power to other services.

How can we escape this sweet state of captivity? Should we even want to? How does all this even relate to issues of competitiveness and regulatory frameworks for digital platforms? What if any entrepreneur could have access to all this hoarded data?

Data portability deals precisely with this issue: how regulation can shape innovation and competition.The provisions in article 24 of the EU General Data Protection Regulation (GDPR) provide the data subject with the right to transfer their data to another controller/provider.

However, to effectively utilize these provisions, data portability regulations need to be framed in a way in which the moving around of data can be easily facilitated by standardization and interoperability of data sets. This would free the user from the burden of intermediating this flux by allowing the two providers to seamlessly transfer data, under the express consent of the user.

Data portability by itself does not solve the issue of network effects. Rather, it provides an avenue to mitigate the consequence of data lock-ins.

 

Data portability by itself does not solve the issue of network effects. Rather, it provides an avenue to mitigate the consequence of data lock-ins. In doing so, data portability affords users the opportunity to critically examine the design, practices and services offered by dominant platform companies. These include: privacy protections, content moderation, transparency around data collection, processing and monetization, reparation and redressal mechanisms and so forth.

Comparing different platforms based on these aspects makes it easier for users to leave an exploitative/ unsatisfying platform. It allows her to shift to a new provider with all her necessary information in a relatively short period of time, without needing to start from scratch or giving up on any services.

The second recommendation of the Furman report delivered by a UK digital competition expert panel was made precisely to pursue personal data mobility and systems with open standards where these will deliver greater competition and innovation. The report recognizes the central importance of data as a barrier to competition in digital markets. In its view, the “opening up some of the data held by digital businesses and providing access on reasonable terms is the essential and justified step needed to unlock competition”.

Developing countries are also starting to explore this regulatory approach. For instance, amendments are currently being discussed in Argentina and Chile to update the data protection law to include such portability rights.

But portability is not the only regulatory approach to unleash the value of data for competition. There is increasing interest in exploring regulatory approaches that look at the collective value of data, as opposed to the individual focus that is addressed by portability.

As the Furman report points out, Datasets are non-rivalrous, meaning that opening them up to additional users does not deplete the volume of data available for the original users or owners. Unlike a physical asset, data are easily duplicated so it/they can be accessible and useful to multiple users simultaneously”.

From an international cooperation perspective, this approach is examined by the recent report of the High Level Panel in Digital Cooperation (HLPDC), convened by the UN Secretary General last year. Talking about the creation of digital commons, the HLPDC refers to the potential pooling of data in areas such as health, agriculture and the environment to enable scientists and thought leaders to use data and Artificial Intelligence to better understand issues and find new ways to make progress on the SDGs”.

There is a need to further explore such new regulatory approaches to facilitate the equitable distribution of the value of data. Aside from the flaws of current business models based on the exploitation of personal data, it is becoming clear that there are other- individual and collective issues associated with the accumulation and use of larger data sets.                         

Access to data in this digital world is not only key for competition, but also for personal autonomy, including the exercise of civil, political, economic and social human rights. Portability can be the first step towards unleashing the value of data through a more human centred perspective.

Access to data in this digital world is not only key for competition, but also for personal autonomy, including the exercise of civil, political, economic and social human rights. Portability can be the first step towards unleashing the value of data through a more human centred perspective.

 


This article is part of our Competition in the Digital Economy Series.