Free Minds & Free Markets

Silicon Valley May Rue the Day it Called for Government Intervention Against Microsoft

Facebook, Google, Apple, and others are now facing the sort of regulatory and antitrust animus once leveled at Bill Gates' company.

Wired, 1994Wired, 1994In a new Cato Policy Report, tech analyst Drew Clark lays out the ways in which government regulation often bites the ass that got it started in the first place. He notes that for much of the past several decades, "Silicon Valley"—that rough descriptor of tech and internet-based companies—was both the poster child for dynamic, forward-looking American capitalism, and largely unregulated by the federal government, especially compared to more traditional industries.

But all good things have got to end, and Clark documents how Washington started to take an interest in West Coast tech. Ironically, it was Silicon Valley who came a-calling first, "in the 1990s with the antitrust case against Microsoft, and again more recently in the battle with internet service providers over net neutrality." In each case, he notes, the alarm was sounded by other tech sector people and now, "they entangled the federal government in their industry in ways that are coming back to haunt them."

Clark writes that "net neutrality" rules were aimed at telecom firms (especially cable companies providing internet access) and promulgated and pushed by online bandwidth hogs including Netflix, Google, eBay, and Amazon. It was all good to start regulating the internet as long as it was the pipes being regulated and not what flowed through them (indeed, the rallying cry of net neutrality was that all data should be treated equally!). But that's not the way it played out. The Open Internet Order of 2015 has been rescinded (that's a good thing, incidentally) and now Washington is far more concerned with what's being transmitted rather than what ISP is transmitting it or at what speed it's being sent:

Silicon Valley's regulations-for-thee-but-not-for-me attitude has come back to bite them. They want the strictest form of regulation for telecommunications providers but no scrutiny of themselves, and now the tables have been turned.

[Federal Communications Chairman Ajit] Pai has not hesitated to point out the hypocrisy as he has moved to undo the net neutrality rules. In a November 29 speech in the lead-up to his net neutrality rollback, he said that the tech giants are "part of the problem" of viewpoint discrimination. "Indeed, despite all the talk about the fear that broadband providers could decide what internet content consumers can see, recent experience shows that so-called edge providers are in fact deciding what content they see. These providers routinely block or discriminate against content they don't like."

As examples, Pai cited Twitter's blocking Rep. Marsha Blackburn (R-TN) from advertising her Senate campaign with a message about partial-birth abortion, Apple's blocking an app for cigar aficionados, Google–YouTube's demonetizing videos from conservative commentator Dennis Prager and his "Prager University," plus "algorithms that decide what content you see (or don't), but aren't disclosed themselves" and "online platforms secretly editing certain users' comments." Others have termed the need for clarity about algorithms as a form of "search neutrality." The next day, for good measure, Pai blasted Facebook and Twitter for contributing to the rise of incivility in public discourse and "the breakdown in human interaction."

Pai is good on free speech and business freedom generally, so I wouldn't worry too much about the FCC going after tech. But many members of Congress, from both sides of the aisle, are spending a lot of time grilling the leaders of Google, Facebook, and Twitter about why their favorite personalities or preferred candidates don't seem to be as popular as the congressfolks think they should be.

In just the few short years since net neutrality went from being a concept to a policy to a repealed policy, the public debate has shifted tremendously. Especially in a world that is dominated by limitless mobile internet (which will be accelerated by the rollout of 5G networks), questions about an ISP such as Comcast controlling the "last mile" of access are irrelevant; the number of fixed and mobile connections continues to grow along with the speed of those connections. Nowadays, everyone is fixated on whether this or that point of view is being shadow-banned, squelched, or even completely deplatformed. Writes Clark:

If regulation returns, the tables have turned such that Google and Facebook would likely be subject to any such rules that get passed. As AT&T CEO Randall Stephenson argued in a full-page advertisement in January, legislation "would provide consistent rules of the road for all internet companies across all websites, content, devices and applications." In other words, no more free ride for tech companies at the expense of the telecom players: neutrality regulation either applies to everyone or to no one.

And then there's antitrust, arguably a bigger deal if only because the remedies—including the breaking up of firms—potentially have much greater impact on a given company. Clark recalls

Eric Schmidt, who would later become CEO of Google, played a crucial role in rallying Silicon Valley against Microsoft through his role as chief technology officer at Sun Microsystems, and then as CEO of networking company Novell. Apple also played a role. The Clinton Justice Department put forward a theory about how Microsoft improperly leveraged the monopoly it had earned in the market for computer operating systems into the market for so-called middleware software. Hence, Microsoft was the original example of a "platform monopoly."

These days, it's Google (or its parent company Alphabet) that's most likely to spend a decade in court. Google controls something like 90 percent of online search globally and managed to slip the legal noose in 2013 when a Federal Trade Commission (FTC) ruling found that the company "provided more benefits than harms to competition." But what goes around comes around, right?

That FTC decision not to sue Google is increasingly under fire, by conservatives as well as progressives. In late August, Sen. Orrin Hatch (R-UT) asked that FTC Chair Joseph Simmons revisit Google's role in search and digital advertising. That request came after three days in which Trump went on the warpath against Google, and also Facebook and Amazon, saying that the companies may be in a "very antitrust situation."

And Clark notes that even as Google has successfully argued in U.S. jurisdictions that no online company is a "natural monopoly," European courts have ruled differently and started handing out big penalties and tightening regulation.

Silicon Valley should take all this activity as a teachable moment. When the companies first went to the government in the 1990s to seek intervention against Microsoft, and when they pushed for FCC net neutrality rules more recently, they set a precedent that brought Washington into their industry. They took it for granted that regulators would never go after content platforms like their own, but now it is precisely those platforms that are squarely in the sights of many politicians.

Drew Clark's "Seeking Intervention Backfired on Silicon Valley" is a great resource about how calls to regulate Silicon Valley both originated within the tech sector and have come around now to hound some of the very people and firms who first called out the dogs. If there's one dimension it doesn't address, it's the public-choice economics angle, which would suggest that, similar to the railroads and other "trusts" back in the day, big businesses are often complicit in their own regulation. That is certainly part of what's going on today regarding Silicon Valley, where leaders of Facebook, Google, Twitter, and Apple (at the very least) have talked openly about the "inevitable" need for regulation while also happily volunteering to help legislators write it.

It's tough to stay at the top of your pyramid, after all, and most of the so-called FAANG companies (Facebook, Apple, Amazon, Netflix, Google) are getting a little long in the tooth. Why not sue for peace and get on with your early retirement as a philanthropist or wise man of the world? A little regulation that helps to lock in your current market position can make that even easier.

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  • Eddy||

    They may rue the day they begged to be thrown in the briar patch of regulation, but they'll be consoled by the sight of their would-be competitors being harmed by the regulations.

  • a ab abc abcd abcde abcdef ahf||

    They will follow the AT&T model. They will be deliriously happy at first, as they can relax and stop worrying about upstart startups coming out of nowhere to dethrone them. But just as AT&T was constrained, so will Facebook, Google, Twitter, and Apple be constrained, and the public will eventually see innovation being choked off, just as AT&T was caught blocking modems, faxes, and other upsetting technologies.

    The biggest difference from the AT&T example is that these giants will be constrained against competing with each other. Their fields overlap and they won't like the artificial government border setting. For that reason, I give this new net neutrality only 5-10 years before it falls apart.

  • A Lady of Reason||

    The Left has long been censoring conservatives online! We must hold them accountable and spread the uncensored truth!

  • Fist of Etiquette||

    Something about, right up until the time to dismount, the fun of riding a tiger.

  • JeffreyL||

    That is certainly part of what's going on today regarding Silicon Valley, where leaders of Facebook, Google, Twitter, and Apple (at the very least) have talked openly about the "inevitable" need for regulation while also happily volunteering to help legislators write it.

    First rule of business upon becoming big. Write the legislation that controls your industry to insure you thwart your competition.

  • Ken Shultz||

    I despise Google and Facebook, especially, in no small part because they treat people like shit. The way to get after these companies isn't to just speculate about how competitors are likely to emerge so long as the government doesn't put up artificial barriers to entry through regulation. The best way to hurt these companies for their misbehavior is to use competing products from other companies--which already exist.

    Don't use WhatsApp. It's owned by Facebook! Try Signal.

    "By design, Signal does not have a record of your contacts, social graph, conversation list, location, user avatar, user profile name, group memberships, group titles, or group avatars," Joshua Lund, a Signal developer wrote. "The end-to-end encrypted contents of every message and voice/video call are protected by keys that are entirely inaccessible to us. In most cases now we don't even have access to who is messaging whom."

    It's free of charge.

    DId you know that there is now an alternative to Google's Android?

    Everyone who calls for government action against Facebook, Google, et. al. on an antitrust basis--and refuses to try the free alternatives to those companies' products--should take a long hard look in the mirror, give themselves an uppercut, and stop acting so retarded.

  • DrZ||

    Don't forget DuckDuckGo as a search engine.

  • Still Curmudgeoned (Nunya)||

    And as a browser for your mobile device. Safari blows. Chrome tracks everything including bowel movements. Firefox is ok.

  • Alan Vanneman||

    The next day, for good measure, Pai blasted Facebook and Twitter for contributing to the rise of incivility in public discourse and "the breakdown in human interaction."

    What's the matter, Mr. Pai, you don't like the First Amendment? Beyond this, the tech companies are all "creations" of government, because they all trade in "intellectual property"--patents and the like--which a person or company can own because they government says they can. There is no "natural law" of either software or hardware. Before Microsoft was charged with being a monopolist, the company had brought suit against other companies charging them with unlawful, monopolistic practices. Microsoft has brought dozens of suits alleging patent infringement, as I'm sure any other large Silicon Valley player has done. The Valley relies on the federal government to force other nations to accept U.S. definitions of intellectual property, which naturally benefit established U.S. firms. In the 19th century, the U.S. did not recognize the patents and copyrights issued by other nations, principally Great Britain at the time, but the freedom we claimed for ourselves we don't allow for others. The notion that there was ever a time of "virgin competition" in Silicon Valley, or anywhere else, is a myth.

  • Still Curmudgeoned (Nunya)||

    As all of these companies become large they place more and more emphasis on logging patents. IBM prides itself on patents successfully obtained. Then they turn around and use government to enforce half baked ideas.

  • Uncle Jay||

    The Big Tech giants should embrace regulation and control from our ruling elitists.
    After all, who knows more about running a website, bureaucrats, politicians and lawyers or someone who spent their lives building these tech sites?
    I think we all know the answer to that one.

  • lafe.long||

    No mention of PayPal and Patreon in all this?

  • Mesoman||

    It's ironic when libertarians stand up for gigantic monopolies, especially since they are run by people very hostile to a number of important freedoms.

  • Sevo||

    Mesoman|12.26.18 @ 6:41PM|#
    "It's ironic when libertarians stand up for gigantic monopolies,"

    It's idiotic that lefty dumbulbs claim monopolies where none exit.

  • Still Curmudgeoned (Nunya)||

    It isn't ironic at all. The issue is when those companies use government force to grow their share.

    It's funny how many people like you concede defeat once a company grows large. Everyone that hears how I am abandoning Google at it can't be done. Everyone that talks about how M$ is evil and doesn't deserve the money they have talked in do so from their iPad, iPhone, and MacBook. They don't sense the irony of doing so from the Microsoft of today, Apple.

  • Bubba Jones||

    Scott Adams has been complaining about shadow banning for years.

  • Still Curmudgeoned (Nunya)||

    But the PHB ordered more lights installed to remove the shadows.

  • Liberty Lover||

    Ah, that damned law of unintended consequences.

  • lovestatism1789||

    The lefty losers in Silicon Valley better count their chickens now that they're in the sights of right-minded Republicans. If giants like Google and Facebook think they can take away our freedom to use their platforms to do whatever we want without consequence they can rot in the same bed of sewage that modern universities and Hollywood celebrities laid for themselves. Serves them right for seeking to destroy American culture. Maybe the next set of corporate elites will have more respect for what it means to be an American. To those who think they can justify the existence of monopolies running our telecommunications, just remember why our Nation's Founders had the intellect to arm our Constitution with the Commerce Clause.

  • Sevo||

    "To those who think they can justify the existence of monopolies running our telecommunications, just remember why our Nation's Founders had the intellect to arm our Constitution with the Commerce Clause."

    Sarc, or abysmal stupidity?

  • ||

    The people calling for Net Neutrality and Microsoft anti-trust never think their principles will be applied against them.

    They won't like the new rules.

  • Sevo||

    There's plenty of good books on the idiocy of 'anti-trust' legislation and jurisprudence. I happen to be reading "The Incredible Bread Machine" which does a good job of demolishing the claims that any government 'anti-trust' efforts do nothing other than providing employment for the gov't thugs.
    That and every other recounts the alarums and scarums of 'monopolies' in times past, and how they were outrun by newer competitors absent any government action at all.
    To those whining about 'monopolies', STFU. The ONLY monopolies are gov't-enforced.

  • INTJ||

    Well, that's not true, but you are right that government-enforced monopolies are far, far worse.

  • Martiandawn||

    Nick Gillespie demonstrates yet again why a dogmatic adherence to laissez-faire economics does not always work. The dissemination of information on the internet is dominated by a handful of corporations that are run on the basis of ideology rather than profit. Not only are the Silicon Valley giants able to suppress would be competitors by preventing potential users from even knowing they exist, but they make irrational business decisions that exclude customers from their own services because those customers hold political opinions they find offensive. We can hope that these irrational practices will drive Silicon Valley to economic ruin over the long run, but in the meantime they may cause irreparable damage to political discourse in the U.S..

  • I am the 0.000000013%||

    We are at a point in history where more people have a louder voice than at any time in the past.

    Instead of a few small distribution outlets with very biased gatekeepers, we have dozens if not hundreds of ways to state our point of view. (Don't believe me? What are you reading right now?).

    Dissemination of information is oodles more pervasive and egalitarian than it has ever been before, and that trend is only going to continue as long as we keep the government from getting involved.

  • Still Curmudgeoned (Nunya)||

    Funny. Back in 2000 how did everyone rapidly communicate? How did anyone cross check information?

    Just because you want your Geocities site back doesn't mean everyone does. Now shout about how MySpace has an unfair advantage.

  • Still Curmudgeoned (Nunya)||

    Sent from my AOL account.

  • Liberty Lover||

    Do you speak English as a first language?

  • INTJ||

    The irony is some of these tech companies are more of a monopoly than Microsoft ever was. Hoist on their own petard....


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