Data economy

Regulating the new data economy

Should Internet giants be forced to open their data?

There is an increasingly popular debate about the need of establishing new antitrust and anti-monopoly rules within the Internet market. We all know it: companies such as Google, Facebook, Amazon or Microsoft might be amassing an excessive power on the Internet and, eventually, this might have negative effects on consumers and companies hampering innovation and competition. These companies are not only dominating current market segments but are also acquiring new entrants in new segments when they pose a threat. Recent examples such as Instagram or Whatsapp illustrate this practice.

In the past, regulating bodies have always tried to avoid monopolies controlling the access to critical resources (e.g. oil) or infrastructures (e.g. telecom networks). Today, the same bodies should be looking into different critical assets in order to avoid dangerous dominant positions. The article “The world’s most valuable resource is no longer oil, but data” published by the Economist, explores the possibility of future necessary actions to regulate the access to data, a precious emerging and increasingly ubiquitous asset.

Personally, I witness with some concern the increasing power of these Internet giants. There is a hot debate on the power that Facebook and Google might have had on recent elections in the US. The article “Building a global community” written by Mark Zuckerberg in which he expresses a sort of political view on the world values invites us to reflect. With almost 2 billion active users, could Facebook promote a set of political values instead of others? Do we want a private company to have such a power?

More on the economic side, these Internet giants are often copying products from new entrants and, by leveraging their customer base (and social graph), are being able to expel these startups by making competition impossible for them. Therefore, for the sake of not only democracy but also fair competition, we should investigate how to control the enormous power that these companies have gathered over the last years.

But, if we agree to establish some rules on limiting their power, what kind of rules and actions would be preferable? Some experts point out that regulators might analyse M&A operations from a different optic. Today, not only market size could be relevant but the control over data should also be investigated. This would be something especially sensible as the value of data depends not only on its size but also on its nature. Take for instance the “social graph” that Facebook controls. This data is probably one of the most valuable resources ever. Facebook knows who you are, who your friends and family are and what your likes and dislikes are. This data allows Facebook to copycat products and services and distribute them -with zero distribution costs and within a very short lapse – displacing new entrants when challenged. Furthermore, Facebook’s social graph create impressive possibilities in terms of media distribution and social impact, which is now specially controversial when talking about the diffusion of fake news.

In my humble opinion, I see this type of sensible data, specially the “social graph”, as a critical resource that should be shared and opened to a broader community. The social graph that today Facebook controls is a key and non-replicable resource such as cable networks were in the past. When liberalising the Telecom market, regulators enforced a public access to cable networks and obliged traditional Telco operators to “open their infrastructures”. It was not feasible for competitors to build these new infrastructures from scratch. The same principle could be applied to the social graph. It is not going to be feasible, or extremely difficult, for new entrants to build a new social graph such as the one Facebook controls. And that’s why, Facebook should share this social graph with other companies and bodies.

Sharing the access to the social graph would spur innovation and foster the creation of new businesses and would ease competition at equal terms. Otherwise, we will end up with an Internet controlled by a new type of monopolies, which enjoy the unique right of exploiting the most critical asset today: our own data. Many questions remain open as how to enforce this openness or how to delimit it.

Some important progress has been done within the EU. The General Data Protection Regulation (GDPR) that will be enforced next year is an important step ahead. This regulation, although focused on the data protection and privacy may also have an important impact on the “data economy” as users will be the data owners instead of companies. We need to compel our politicians to act faster and smarter with regards to data, on the one hand protecting users but also facilitating fair competition.

This article was first published by David Arias on LinkedIn on May 13, 2017

Image by Roman Grac from Pixabay

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