The Uncontested Trophies Through Regulations

The Uncontested Trophies Through Regulations

Be careful what you wish. The world of Internet would change because of the GDPR (General Data Protection Regulation). Companies like Facebook and Google would be affected. In short, these companies are smiling at the bureaucrats in Brussels. U.S. Congress may have a regulation as more revelations emerge on how Facebook data was compromised by Cambridge Analytica.

The General Data Protection Regulation (GDPR) (EU) 2016/679 is a regulation in EU law on data protection and privacy for all individuals within the European Union. It addresses the export of personal data outside the EU. The GDPR aims primarily to give control back to citizens and residents over their personal data and to simplify the regulatory environment for international business by unifying the regulation within the EU.

Yes, they are fighting for us – to save us from our data which we willingly share with reckless abandon from getting into the wrong hands! But saving us would make it practically impossible to have any challenger to Facebook, Google, Twitter, etc in coming years. And many startups that depend on these ICT utilities would die. I had noted this in a piece in Harvard Business Review few weeks ago. Say it another way, by toughening data sharing, the regulations would kill competition, handing over the trophies to the incumbents in perpetuity. Yes, the option to build upon their existing infrastructures would be heavily curtailed.

Google’s language translation services are the best available. Very soon, Google Swahili- and Google Igbo-enabled tech solutions could become the local standards. A good strategy could be to find ways to position startups to build on the existing infrastructure of these ICT utilities instead of directly competing with them. The promise of voice assistant technologies in local languages could be powered by Google, in this case.

This is the deal: While it makes sense to regulate Google and Facebook and toughen privacy, we would make it legally possible for these entities to NOT share. And if they do not have to share, they have built a competitive moat which no one can overcome. Facebook’s suppliers are its users. It has been doing the external planet a favor by sharing their data. Now, it can keep ALL under the law, claiming privacy protection.

We would have the best user privacy but we would kill competition. Yes, Google and Facebook would continue to mine and collect all the data they want. The world of web belongs to Google robots. It has access to it. But now what it gets, it can easily keep inside.  The implication is that everyone would have to converge in their worlds. Why? They have the best data and the network effects work in their favor.

The old web has been bidirectional system where Google and Facebook collect data and then share with others in their ecosystems. Today, that is gone. They have the rights to collect and keep. That is not going to make us better. I expect them to shutdown most APIs which many other entities have depended upon.

Comments from LinkedIn

Prof, this is an interesting perspective to the ongoing privacy debate. I believe it comes down to how much risk society and govt in general is willing to bear. It’s a delicate balance between between trying to engender the public’s trust in the use of these technologies and preventing over-regulation.

Leaving the dominant tech players “unchecked” could end disastrously as corporations are largely profit driven and will act in the best interest of their shareholders e.g deliver on quarterly earnings targets. While I do understand the concerns raised with respect to privacy, I fret over the possibility of greed driving decisions of these companies as society becomes overly dependent on the services they provide.

You noted “We would have the best user privacy but we would kill competition”. As it stands, these ICT utilities are near-monopolies enjoying dominant positions in their respective industry verticals. Like you rightly mentioned, “they have the best data and the network effects work in their favor”.

I do hope history (referring to Standard Oil, U.S Steel Corp. etc.) provides some guidance to regulators on how best to deal with regulation(s) for the tech giants. Regulation in itself is not bad but over-regulation is.

My Response: Because of Aggregation Construct, if you break Google and Facebook, another one will take over. It may not be Google or FB but another will. The near zero marginal cost makes them unique and what happened to Standard Oil, U.S Steel Corp. is irrelevant. The fact that the biggest gets better is the reason why you cannot easily regulate these ICT utilities. One will emerge and we would move to it.


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