Are the Big Tech com­pa­nies, such as Face­book and Al­pha­bet, get­ting too pow­er­ful?

Tech­nol­ogy gi­ants such as Face­book and Al­pha­bet dom­i­nate the econ­omy. Can lim­its be placed on that dom­i­nance?

Investment Executive - - FRONT PAGE - BY GORD MCIN­TOSH

all of us have been fix­ated on how much in­flu­ence the tech­nol­ogy sec­tor may have over our elec­tions — as we should be. With data now con­sid­ered “the new oil,” in­creased reg­u­la­tion for the tech sec­tor is a safe bet, par­tic­u­larly re­gard­ing rights to pri­vacy.

But Big Tech should be pre­par­ing for a pol­icy cli­mate that goes well be­yond the rules of fair elec­tions and rights to pri­vacy. Al­pha­bet Inc. (Google’s par­ent com­pany), Ama­ Inc., Ap­ple Inc., Face­book Inc. and oth­ers should be look­ing at the pos­si­bil­ity of be­com­ing the new Stan­dard Oil Co. Inc., which was bro­ken up in 1911 as an il­le­gal mo­nop­oly.

You don’t have to be Thomas Piketty to re­al­ize we live in a sec­ond Gilded Age. As the Bank of Canada (BoC) re­cently noted, 1% of the world pop­u­la­tion has re­ceived 20% of all wealth pro­duced by the econ­omy since 1980, thanks to tech­no­log­i­cal in­no­va­tion.

Al­pha­bet and Face­book may be less than 20 years old, but both dom­i­nate the econ­omy — just as Stan­dard Oil did in 1890, 20 years af­ter it was founded. Work­ers ev­ery­where are work­ing harder to­day for wages that re­main stag­nant, ac­count­ing for the cur­rent waves of populism and na­tivism spread­ing through in­dus­tri­al­ized coun­tries.

Be­cause the Big Tech com­pa­nies are key eco­nomic driv­ers, they en­joy the sta­tus in gov­ern­ment pol­icy that the phone com­pa­nies and rail­ways once did — and the en­ergy sec­tor did un­til very re­cently.

But gov­ern­ments re­spond to pres­sure from key in­flu­encers in the me­dia and pub­lic opin­ion. And in­flu­en­tial voices in­creas­ingly are point­ing to the sheer eco­nomic dom­i­nance of Big Tech and call­ing for anti-trust ac­tion.

An ar­ti­cle i n the March is­sue of Esquire ar­gued that now is the time to break up Ama­zon, Ap­ple, Face­book and Al­pha­bet, as the four com­pa­nies dom­i­nate our daily lives un­like any other in his­tory.

“We love our nifty phones, and just-a-click-away ser­vices, but these be­he­moths en­joy un­fet­tered eco­nomic dom­i­na­tion and hoard riches on a scale not seen since the mo­nop­o­lies of the Gilded Age,” the Esquire ar­ti­cle stated. “We must bust up Big Tech.”

Ap­ple may hold only 20% of the smart­phone mar­ket, but it re­ceives 94% of the prof­its gen­er­ated in that mar­ket. Face­book hosts 77% of mo­bile so­cial me­dia traf­fic. Al­pha­bet has 88% of search ad­ver­tis­ing. Ama­zon has 78% of the ebook mar­ket.

All four are in mo­nop­oly ter­ri­tory — by ev­ery­one’s def­i­ni­tion.

In­flam­ma­tory lan­guage in a lead­ing con­sumer mag­a­zine such as Esquire is bound to af­fect the pub­lic pol­icy nar­ra­tive in the com­ing months. A less volatile — but more in­flu­en­tial — call for pol­icy change came from the staid old BoC this past win­ter.

Us­ing sur­pris­ingly frank lan­guage for a cen­tral banker, Carolyn Wilkins, se­nior deputy gover­nor of the BoC, said on Feb. 8 that al­though Big Tech has given us huge eco­nomic growth, there should be lim­its on its eco­nomic dom­i­nance.

And Wilkins thinks lim­it­ing the eco­nomic dom­i­nance of Big Tech while still hav­ing eco­nomic growth is pos­si­ble.

The BoC is tak­ing a hard look at Big Tech and call­ing on the fed­eral gov­ern­ment to pri­or­i­tize the up­dat­ing of Cana­dian com­pe­ti­tion and anti-trust pol­icy.

Be­cause cen­tral bankers choose their words care­fully and use eu­phemisms in tele­graph­ing mes­sages to gov­ern­ments, that last state­ment should prob­a­bly be read as a call for break­ing up some of the larger dig­i­tal play­ers.

“The size and mar­ket dom­i­nance of some of the tech firms raise many of the usual con­cerns about the po­ten­tial ef­fects of mo­nop­oly power on prices and com­pe­ti­tion,” Wilkins said in her speech. “[These com­pa­nies] can easily drive out com­pe­ti­tion by com­bin­ing their scale with in­no­va­tive use of data to an­tic­i­pate and meet evolv­ing cus­tomer needs at a lower price, and some­times for free.”

It’s im­por­tant to note that this speech, the Esquire ar­ti­cle and other voices be­gan talk­ing this way be­fore the me­dia was filled with sto­ries about po­lit­i­cal con­sult­ing firm Cam­bridge An­a­lyt­ica har­vest­ing Face­book data to ma­nip­u­late U.S. vot­ers in the 2016 pres­i­den­tial elec­tion.

The cur­rent scan­dal sur­round­ing Face­book and Cam­bridge An­a­lyt­ica prob­a­bly will be the tip­ping point that will force gov­ern­ments to stop ig­nor­ing the dom­i­nance of Big Tech.

Gov­ern­ments re­spond to the me­dia and pub­lic opin­ion

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