The Tech Giants’ Anti-regulation Fantasy

The Tech Giants’ Anti-regulation Fantasy

Today’s Big Five digital platforms aren’t the first tech giants to bristle at government scrutiny. Long before Amazon, Apple, Facebook, Google, and Microsoft began spending millions of dollars to fight antitrust rules and other measures that would challenge their business models, 20th-century behemoths such as AT&T and IBM were insisting that government interventions in their business would stifle innovation. In reality, one of the most important things the United States government has ever done to advance technology is regulate it. Microsoft was the beneficiary of antitrust litigation aimed at IBM, once the country’s dominant computer maker; Amazon, Google, and Facebook have flourished because a 1996 law granted them extraordinary protection from legal liability for the content they circulate; Apple is a beneficiary of a strong patent regime.

The advent of smartphones, one-click shopping, and an avalanche of digital stimuli doesn’t change the fact that, when any industry stands astride the economy and reaches into most Americans’ homes, lawmakers should assess whether the public interest is being protected. But the reality that the tech giants have long been entwined with government policy somehow got lost in the age of “Move fast and break things”—a mantra that the Facebook founder Mark Zuckerberg coined more than a decade ago—and public officials are only now returning to the question of how best to regulate the biggest platforms.

[Rob Reich, Mehran Sahami, and Jeremy M. Weinstein: Democracy is losing its race with disruption]

As tech platforms have come under growing scrutiny in recent years for their alleged antitrust violations, their data surveillance, and even their potential role in the deteriorating mental health of teenage girls, the Big Five have achieved the remarkable feat of antagonizing influential lawmakers in both major political parties. Senators Lindsey Graham and Elizabeth Warren make unlikely allies. Yet the Republican from South Carolina and the Democrat from Massachusetts stand together in criticizing the tech giants’ high-handedness and lack of accountability. “Nobody elected Big Tech executives to govern anything,” they declared in a July New York Times essay.

Graham and Warren follow the example of the lawmakers who, in 1887, established the Interstate Commerce Commission to prevent the railroads from defying the public interest. The two senators propose the establishment of a new regulatory agency—the Digital Consumer Protection Commission—to forestall online harms, protect free speech, foster competition, safeguard privacy, and protect national security.

In 2019, the policy insiders Karen Kornbluh and Ellen P. Goodman recommended the establishment of a Digital Democracy Agency to combat disinformation and support local journalism. In 2020, the former Federal Communications Commission chief Tom Wheeler, the former FCC senior counsel Philip Verveer, and the consumer-protection advocate Gene Kimmelman called for an expert-led Code Council that would establish digital norms akin to building and fire codes and work in conjunction with a legislatively mandated Digital Platform Agency, which would be “oriented towards risk management rather than micromanagement.” These proposals differ in their particulars—Wheeler, Verveer, and Kimmelman imply that their plan would allow regulators in the quickly evolving digital world to move faster and with greater sophistication than the lumbering FCC—but all of them envision oversight of digital platforms by institutions created via the democratic process and accountable to the public.

[Amba Kak and Sarah Myers West: The AI debate is happening in a cocoon]

The American tech industry has never been an entrepreneurial free-for-all. Much of the country’s information infrastructure was built atop a telephone system that depended on local, state, and federal regulation. When the first local telephone-operating company opened in New Haven, Connecticut, in 1878, it had a municipal franchise—a type of agreement that helped promote the build-out of lines and became a cornerstone in the regulatory framework of the Bell System, which was the dominant network provider from the 1900s until its court-ordered dismantling in 1984. Municipal-franchise law powerfully shaped the business strategy of telephone-network providers from day one—including the rates they charged, the markets they served, and even the equipment they used. Not the absence of regulation, but its pervasiveness, made the mid-20th-century U.S. telephone network the envy of the world.

For decades, though, Bell’s formidable public-relations machinery touted the phone company’s technical virtuosity and economic sophistication while downplaying the regulatory environment that structured the Bell System. Not until after the system’s dismantling would the full significance of Bell’s PR wizardry come to light, a topic that I explore in more detail in my 2010 book, Network Nation.

Government intervention has also shaped other essential communications networks dominated by private companies. U.S.-style broadcast regulation originated during World War I with the Navy’s commandeering of the formidable wireless-telegraph patent portfolio that the Italian inventor and entrepreneur Guglielmo Marconi had assembled. Today’s digital platforms did not spring fully formed from the brow of some geeky teenager holed away in his parents’ garage. Rather, they are a second-order overlay on a massive, decades-long Cold War government project to build an information infrastructure robust enough to enable the United States to prevail against the Soviet Union in a nuclear war. The vigorous regulation of Big Tech through antitrust prosecutions has almost always promoted the common good—indeed, the government breakup of the Bell System opened the way for our current digital platforms.

Today’s tech giants, like their 20th-century counterparts, seek to avoid outside scrutiny of their internal operations. Regulatory oversight generates useful information that companies can’t control. The commercialization of the transistor speaks to the benefits of transparency. Although the FCC mostly left the regulation of the Bell System to the states, it would, in the 1930s, authorize a large, unprecedented, and unusually well-funded investigation of the telephone industry that showed how the company was using its market power to block rival network providers and thwart outside equipment manufacturers. Following World War II, this knowledge jump-started an antitrust suit that opened up Bell’s jealously guarded patent vaults, forcing the company to license the transistor (Bell’s most valuable patent). That in turn fueled the rise of consumer electronics and computing, as well as the digitization of many sectors of the global economy. As the business historian Alfred D. Chandler Jr. contended in 2001, the “gods” who ushered in the “electronic century” were neither entrepreneurs nor elected officials; they were the unsung “middle-level bureaucrats” in the Justice Department’s antitrust division who forced tech giants such as Bell, RCA, and IBM to release vital inventions that they had tried to lock down.

The regulatory triumphs of an earlier era should provide clear inspiration to today’s lawmakers, many of whom have expressed frustration with the tech giants but struggled to articulate a rationale for their regulation. Goals could include demanding transparency about  how the major platforms operate, promoting competition by keeping the biggest platforms from buying up their potential rivals, and holding the platforms accountable for harms they caused—including data breaches and the sale of stolen goods.

The regulation of tech giants need not end at America’s shorelines. Amazon ships worldwide; Apple manufactures millions of iPhones in China; Google’s search algorithm crunches data wherever they can be found; Facebook boasts that, on any given day, 90 percent of its users are outside the United States; Microsoft leases its software to clients in dozens of countries.

[Evelyn Douek: The cold dose of reality awaiting Elon Musk]

Because digital platforms today are global in reach, some aspects of their regulation should be as well. In a variety of areas, the United States has accepted the benefits of international governance. As far back as the Civil War, President Abraham Lincoln supported the convening in Paris of the world’s first international postal conference. Following a brief hiatus, this U.S.-backed project would culminate in the establishment of one of the first international standard-setting bodies—which, in 1878, would proclaim itself the Universal Postal Union. Today, decisions by authorities in some big markets radiate outward to other markets. European Union rules requiring smartphone makers to use USB-C chargers nudged Apple to adopt that standard—rather than keep using an old proprietary plug—for the newest iPhones now being sold in the United States. American regulators may not agree on all matters with their counterparts in other major markets, but international standards can help guarantee that the tech giants abide by the global public’s desires, rather than the other way around.

Claims that government regulation of the tech giants will stifle innovation are simply wrong. As the historical record makes clear, past regulatory initiatives in the United States have promoted fair trade; fostered worthwhile innovation; checked irresponsible, dangerous, and illegal business behavior; and protected not only consumers but also the country from a multitude of harms.