The tragedy of tech companies: Getting the regulation they want

Twitter CEO Jack Dorsey is seated prior to testifying before a Senate Intelligence Committee hearing on foreign influence operations on social media platforms on Capitol Hill in Washington, U.S., September 5, 2018. REUTERS/Joshua Roberts - RC1F1C782B50

American technology companies today find themselves in a conundrum Oscar Wilde identified: “There are only two tragedies in life: one is not getting what one wants, and the other is getting it.” The tech companies—both networks and the platform services that ride on them—have run the table in Washington as multiple government agencies and Congress repeatedly walked away from regulatory oversight. The result has been the digital companies’ discovery of Wilde’s second tragedy.

For over a decade, tech companies have spread the fiction that “digital is different,” and would be hampered by public interest regulation. A digital network is different, companies like AT&T and Comcast argued, and does not need the kind of net neutrality rules other communications networks had lived under since the Pacific Telegraph Act of 1860. Digital platforms are different, companies like Google and Facebook argued, because they deliver “free” services to consumers in exchange for “consent” to collect and hoard consumers’ private information.

The result was to shift the consumer protection burden onto the backs of the consumers themselves while limiting their available tools. Internet service providers are typically local monopolies that gave consumers a “take it or leave it” option. The wondrous services delivered over those pathways coerced consent to collect personal information before they would provide service. And for both networks and platforms, disclosure of what is being done with the private information of individuals is nonexistent, inadequate, or deceptive. Instead of protecting consumers and competition, the government—especially in the Trump era—has been aggressively deregulatory.

The consequences of the success of the companies’ anti-regulation efforts are now becoming obvious: the cartelization of what should be competitive markets. Having successfully lobbied to kill net neutrality, the monopoly networks are once again able to discriminate in the services they deliver on traditional internet connections, as well as alter the trajectory of new fifth generation networks (5G) to benefit themselves at the expense of consumers. At the same time, both the networks and the platform companies practice a kind of digital alchemy in which a consumer’s private information is transformed into a corporate asset.

Congress has allowed both the network and platform companies to make their own rules for the internet era. The companies successfully sold the idea that what they were doing was digital magic and that regulatory oversight could break that wizardry. Possessing both the economic incentive and technological ability to engage in activities that benefited themselves over consumers, the companies are free to act in their own unconstrained self-interest.

Having achieved their goal of keeping government oversight away, the digital companies are discovering that winning everything can be a curse, just like Wilde warned. As a result, the very same companies that championed a no-regulation agenda are now asking Congress for federal rules—albeit rules on the companies’ terms.

The reason: The decision of the Founding Fathers in the Tenth Amendment to reserve to the states powers not exercised by the federal government. The digital companies have had such a total victory at the federal level as to leave a policy void in protecting consumers and competition. That void is being filled by the states as the Founders intended. The companies, however, have come to fear state regulation, both in its scope and its potential to vary from state-to-state.

When the Trump Federal Communications Commission (FCC) voided the net neutrality rules of the previous administration, the states stepped in. Today, 36 states—led by California—have proposed to fill that void with action ranging from legislation to executive orders. In response, the network companies and their allies in Congress have rolled out federal legislation to preempt the states with watered down federal policy falsely described as “net neutrality.”

Shortly after the start of the Trump Administration, when the Republican-controlled Congress bowed to the requests of the digital companies and repealed the FCC’s network privacy rules and the Federal Trade Commission (FTC) dithered over the platform companies’ abuse of consumer privacy, it triggered states—again led by California—to step in with their own legislation. The response of the digital companies was once again to run to Congress for preemptive legislation—but to oppose meaningful protections in that legislation.

Historically, the pioneers of new activities have decided how to conduct those activities. History is also clear that such self-interested actions ultimately need public interest oversight. When a company possesses both the economic incentive and technological capability to manipulate markets to its advantage over the interests of consumers and a competitive market, Congress has traditionally stepped in.

We are now at such an historical moment. The realization that the complete absence of rules could actually not be in the best interest of the digital companies has moved them from a “do not touch us” position to one of “we need uniform rules.” Now that the companies have abandoned the spin that regulation hurts innovation, the opportunity arises to explore meaningful regulation.

Wilde was right—sometimes getting what you want can be a tragedy.