Why is the policy debate about the tech titans so agonised? Governments regulate all kinds of activities, so it is surprising they have been unable to tackle the impenetrable terms and conditions, pervasive online monitoring, abuses of personal data and poisoning of the public sphere.
One plausible answer is that millions of citizens greatly value the (apparently) free services they get. Research by Erik Brynjolfsson at MIT suggests it would take surprisingly large sums of money to persuade people to give up their access to social media or online search. Politicians meddle with something so popular at their peril. So the debate is whether to use competition powers to break up Facebook and Google or instead regulate them like public utilities, as if either were likely. But regulation is complicated and forced break-up would take years.
Maybe there is a more direct approach: let us build public service digital corporations that offer better services to consumers. The need to sell advertising is at the heart of the toxic behaviour of many of the social media companies. The online ad market is dominated by Facebook and Google, and appears to be fraught with bots and fraudulent clicks. Hence France, Germany and Australia are all conducting inquiries into online advertising.
Creating a genuine alternative to the tech titans will have to involve a different model. A direct approach would be to set up a public service alternative. The big tech groups can hardly complain (at any rate openly) about new competition. They always claim they do not need to be regulated because they could be overturned by a newcomer at any time, just as Facebook powered past MySpace in 2009.
An alternative provider with a different business model would compete on the quality of its service rather than — as now — the number of clicks. The wholly commercial incumbents would still need to sell ads but would be forced to invest more in a better service by the comparison with that new rival.
The obvious question is how to pay for a public service Facebook or Google. There is an equally obvious model, the licence fee-funded BBC, which for a modest cost per UK household produces many popular and high-quality services, including one of the world’s most trusted news services. Its commercial arm generates additional income.
The idea of public provision is unpopular with commercial rivals, who see it as unfair competition. But big companies never like competition of any kind and there are stringent regulatory processes in place (including EU state aid rules) to keep the playing field level. The presence of the BBC, with a dominant imperative to innovate and serve licence fee payers, rather than sell advertising, ensures the UK television market competes over high-quality output. This has helped the UK’s creative sector as a whole, and has been a highly successful — if unintentional — industrial policy. The BBC also has a vital research and development function. Innovation to serve users would need to be equally at the heart of a public service digital corporation.
The economics of digital platforms means scale is essential: the more users there are, the better the service. We should use this market dynamic rather than try to resist it. If regulators were to break up Facebook, other digital groups with similar behaviours would replace it. Enforcing common standards and making it easier for consumers to switch to new services would encourage competition. But unless we introduce a different business model, we will end up with more of the same. It is time to try a mixed economy in those digital markets whose products are in fact classic public goods, such as search and social media. It is more likely to be effective than the other policy options we have.
The writer, a former vice-chair of the BBC Trust, is Bennett Professor of Public Policy at the University of Cambridge
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