Can a Facebook be created in India?
There is a need for developing a vibrant national digital ecosystem
Can a Facebook-like platform be created in India? The answer is a sad NO. Even though it is not difficult to create a Facebook or an Alibaba as far as the technology or business expertise are concerned. The problem lies elsewhere.
Facebook allows free access to everyone including possible terrorists to interface with the world. But in India, if any unlawful chat happens at some local site, the website owner is sure to receive a police call. End of business.
If the US applied these laws, Facebook would be history. But Mr. Zuckerberg does not need to bother. You cannot screen a billion users. The US views Facebook or Google as national strategic assets. Are there lessons for India here?
In the past two decades, the digital business surged as more tasks are being transformed into digital operations. This should have led to the creation of millions of enterprises all over the world. But no. The online digital business led by Google, Facebook and Amazon is largely US-centric. This worries national governments no end.
Not only does a Google or Facebook earn significant revenue from the advertisers from various countries, but they are also in a position to mould public opinion, provide a free platform to terrorists or close eyes on pornography. National governments do not have any control over such activities even though many are harmful to its citizens.
The monopoly nature of the digital business worries the governments most. Monopolies exist in the physical world also. For example, just four automakers sell 70 per cent of all cars while three oil companies sell 80 per cent of all oil. There is a fundamental difference in the nature of monopolies in physical and digital space. An oil company may never produce shoes or trucks, yet a large online firm like Alphabet/Google has interest in the entire digital space. That leaves almost no space for new firms.
To retain the monopoly status, top firms use billions of dollars to buy competitors, sell cheap. For example, e-commerce firms sell products below cost to decimate competition. They hope to recover when competition disappears. Countries apply anti-dumping duty on cheap imported products. But there are no rules to check predatory pricing and everyday unfeasible discounts on domestic sales.
The early lead obtained through brilliant innovations allows many firms to gather immense strategic and commercial strength. However, the digital business has become a race to the top where only a few survive. But, if it results in the decimation of all other kinds of businesses and unethical behaviour, it needs to be regulated.
Way out
Three steps will help us to reclaim part of the lost digital space.
Make smart domestic regulation: Countries need to articulate a clear policy for each variant of the digital business. The major types are: Search engines (Google, Bing), social media (Facebook), selling goods and services online (Amazon, Flipkart, eBay), online banking and payment services (Paytm), online appbased aggregators (Uber, Ola, Airbnb) and digital products delivered online (Netflix). The path a country chooses would influence its business ecosystem, job creation and social fabric.
Formulation of national policy will rein in the global giants, and also ensure space for growth of a large number of new firms. The rules will also act as a deterrent against unreasonable firms and countries. For example, the US may become more sensitive to India’s concerns on H1-B issues if it understands that the US firms which earn considerable money from Indian data/operations may be dealt under the Indian law.
Simplify e-commerce export rules: Most e-commerce exports take place through courier mode where customs-DGFT-RBI rules need an overhaul.
Support growth of potential unicorns: We understand it is nearly impossible to predict who will become significant. We need to provide strategic and financial support to few firms in each type of digital business. China did not allow entry of Google or Facebook, and in the ensuing vacuum, Chinese firms grew to become globally competitive. We need not go to that extreme, but if it means giving a long rope to few companies considered strategic so be it.
Just seven decades ago, half the world was a British colony. Today, almost the entire world looks like one large digital colony of few American firms. Some quick changes needed.