In a sign of the times, investor George Soros devoted the bulk of his hour-long speech this year at the World Economic Forum in Davos, Switzerland, to excoriating Facebook and Google. In a blistering attack, Soros blasted the two internet giants, characterizing them as a “menace” to society and “obstacles to innovation.”
Facebook and Google may still be popular with the broad public, but a growing chorus of critics now charge these “platform monopolies” with a long bill of indictments. These range from compromising the integrity of elections by peddling “fake news,” to unfairly crowding out competitors and suppressing entrepreneurship by acquiring new start-ups, to fostering internet addiction. The threats all stem from these platforms having grown incredibly quickly from small start-ups to digital monopolies, in the near-total absence of government regulation.
Facebook, which now has two billion global users, is much more than a social network. It is a media platform that reaches an audience greater than any U.S. or European television network, any newspaper or magazine, and any other online news outlet. Facebook is fast replacing television as the most dominant news and entertainment medium and has become one of the most valued companies in the world.
This slow-dawning reality has led to a number of proposals to contain the growing power of these Frankenstein companies. Some critics have proposed regulating the platform monopolies as utilities. Others want to make them responsible for the truth or falsity of content posted by their users; Germany recently passed what is being called a “Facebook law,” which allows fines of large social-media platforms that don’t remove hate speech from their platform in a timely manner. Another camp wants governments to use antitrust prosecutions to bust up the monopolies into smaller, less threatening entities.
But here’s the rub. Yes, there’s a lot we can do to contain the power of platform monopolies, just as previous generations used political interventions to contain Standard Oil and other corporate giants of the Gilded Age. However, governments can’t regulate monopolies and other rogue actors unless they have the power to deny them access to their domestic markets. Car makers, whether headquartered domestically or abroad, could just ignore U.S. auto safety standards if we had no way to prevent them from selling unsafe cars within our borders. Airlines would have no reason to comply with Federal Aviation Administration regulations if the FAA lacked the power to bar them from serving U.S. airports.
When it comes to web-based platforms, enforcing that kind of sovereignty is much harder. As you fire up a Google map or search on your smartphone, it makes no difference if the server running the algorithm is physically within the borders of the U.S. or not. The Department of Justice might one day win an antitrust judgment against Google that commands the company to spin off its search engine and advertising businesses into separate entities. But if Google didn’t feel like complying, it could just move its headquarters to, say, Ireland, and its computer servers to Iceland, and continue doing business as usual in the U.S.
Similarly, if Facebook didn’t like being told by the U.S. to do a better job of regulating Russian bots or protecting users’ privacy, it could just relocate its facilities to another country, or even to an artificial island somewhere in international waters. A predatory social media or e-commerce platform based in China or North Korea has no reason to follow U.S. law if there’s no way to deny them access to our digital markets. That’s radically different from how traditional brick-and-mortar companies operate. They must obtain licenses and permits, and follow the associated conditions if they want to avoid fines and stay in business.
So here’s a proposal. Just as the U.S. has always required licenses and permits for traditional companies, regulators need to create “digital licenses” for internet-based companies. The digital license would make clear the rules and conditions required for market access. Companies above a certain size would have to follow certain regulations and provisions that support safety, transparency, competition, and democracy.
To make digital licenses work, governments will need the power to shut out companies that violate their terms. In other words, just as countries need to enforce physical borders to maintain control over their domestic markets, so too must they have the technological ability and legal framework to enforce their digital borders. That means the power to digitally evict a company that refuses to play by the rules.
Evict Google or Facebook? Is this even technically possible? Internet gurus once promised that governments would be powerless to control digital information flowing across their borders. In 1993, computer scientist John Gilmore told Time magazine something that would become conventional wisdom among the first generation of digital natives: “The Net interprets censorship as damage and routes around it.”
But times have changed. Many countries use technology to effectively control access to their online populations. China and Iran, for example, guard their digital frontiers using a number of interventions, such as IP address blocking, packet filtering, and domain name system redirection to block websites like Google, Facebook, and Twitter. Even countries that are not all that technologically advanced, such as Eritrea, Tajikistan, and Pakistan, have deployed such techniques. The UK also has blocked a number of websites.
Civil libertarians and open-internet proponents will understandably raise red flags, saying that most of these countries are repressive regimes deploying these tactics for reasons of censorship and political persecution. But that doesn’t mean that democratically accountable governments can’t use these same tools for better reasons.
Liberal democracies like the U.S., Germany, or Canada have different values than China, Iran, or Pakistan. Democracies can block access as a means of enforcing legitimate laws and regulations that uphold democratic values. The U.S. government already constrains access to communication infrastructure, and structures communication markets in all sorts of ways without anyone confusing that with censorship. For example, we don’t let any entities, domestic or foreign, operate television and radio stations without a license, and we don’t allow printed material to be imported into the country without clearing customs.
Some may worry that digitally evicting a company like Facebook or Google wouldn’t be worth the loss of the company’s services. But actual eviction would be unlikely; even a credible threat of it would be sufficient to motivate companies to reform their processes. And, if not, ending their monopoly status would allow for the quick emergence of scrappy new replacements. That’s what happened in Austin, Texas, when Uber and Lyft withdrew in protest of a local law requiring stronger background checks for its drivers. In that vacuum, four new ridesharing companies launched. In China, the eviction of companies like Google and Facebook has led to homegrown versions like Baidu and Tencent.
Moreover, platform monopolies already threaten democracy and free speech by distorting the marketplace of ideas with fake news and “engagement algorithms” that steer users into hyper-partisan information ghettos. They also erode the economic foundation of an independent press: Facebook and Google account for 61 percent of all global online advertising revenue, and 84 percent outside of China, according to recent estimates. This dominance starves other media outlets of the advertising revenue they rely on to survive.
Ultimately, no government can tell Facebook, Google, or any other platform monopoly what to do unless it can credibly enforce a digital license by threatening to deny access to its markets. So what criteria should we use to decide whom to exclude from our digital borders?
An overall framework already exists. It’s the same one sovereign nations use to manage global trade. International free trade agreements negotiate various rules and regulations in return for lowering trade barriers between nations. Break the rules, and the barriers go back up. In effect, these massive online companies—the biggest of which have market capitalizations the size of some national economies—would be treated as if they were nations themselves.
We already accept that nations should have the right to dictate the terms by which companies operate within their physical borders. So if a digital goliath refuses to follow the law, or facilitates lawbreaking by others (as Airbnb does for thousands of illegal hosts), or even creates products that threaten our way of life, why shouldn’t we be able to deny that company the privilege of doing business within our digital borders? We are at the outset of figuring out how to monitor and regulate these platform monopolies. Issuing digital licenses and enforcing digital borders would be important steps toward taming the technological forces that threaten to undermine democratic values and the rule of law.