We live in an age of digital giants. Amazon has joined Apple as the world’s second trillion-dollar company. Jeff Bezos, its founder, has seen his net worth rise by $405 million a day in 2018, becoming the richest man in history. The value of the ‘Big 5’ – Alphabet (the parent company of Google), Apple, Amazon, Facebook, and Microsoft – is more than that of the UK’s 100 biggest companies combined. The evidence of their astonishing wealth and power goes on and on.
Though they provide different functions and services, this immense power resides in a shared business model: the extraction and analysis of data and the control of digital infrastructure – from mapping to cloud computing – that underpins all digital technology. And as a result of this control, they are also poised to dominate artificial intelligence markets, extending their power far into the future.
Profiting from data generates a circular, expansive dynamic: the more data that is captured, the greater the potential for revenue. As such, the impulse to accumulate more and more dominates the strategies of the tech giants, and dictates how they develop and deploy their technology. By instinct, they seek to move into more markets, buying out more competitors, driven by their voracious appetite for more data and infrastructure. Amazon, for example, has filed for 5,860 patents, while Alphabet has acquired over 190 businesses since its foundation.
These companies will counter, accurately, that in the process they provide many benefits. Consumers get useful services at low to no immediate cost, with greater convenience through coordination, and with more personalisation. Businesses get access to new markets and experience lower transaction costs. At a societal level, their platforms increase access to information, and enable social connections and greater efficiency.
But this business model is driving platforms to behave in ways that create serious economic, social and political problems. By acquiring innovative start-ups and limiting access to their large datasets, platforms are almost certainly limiting the innovation potential of the economy.
As the digital giants increasingly dominate their markets, their profits are soaring, and with relatively low levels of employment these labour-light digital firms are helping drive inequality. Their dominance in advertising markets has already eroded news media, while social network platforms have potentially been used to manipulate democratic proceedings. And as the power of the tech monopolies grows, these problems will grow with them.
In the face of such concentration, defenders of open and inclusive innovation must have a strategy for reining in the digital giants. So far, the development of the modern digital economy has largely been determined by powerful market actors, with little proactive response from government. Without action, the boundless ambition of the universal platforms threatens to undermine democracy, accelerate inequality and concentrate economic power.
The goal must be to move from conditions of ‘enclosure’, where data and infrastructure are dominated by a few tech giants, to an open and innovative digital ‘commons’, where they are organised as a collective resource. In the process, this can unlock a wave of more inclusive innovation and enterprise, supporting the revival of democracy.
There are, of course, limits to what the UK can achieve with domestic levers – the digital economy is international. Nonetheless, we are not powerless. Much more can be done with bolder policymaking, and IPPR’s new report, The Digital Commonwealth, sets out an ambitious reform strategy to build a ‘digital commonwealth’.
First, we should strengthen competition law to foster innovation. The Competition and Markets Authority should be reformed so that it is better able to regulate tech companies. This should include a new requirement for major digital companies to open up their data upon entry to new markets in which they have a major advantage as a result of their existing data.
Second, where platform giants provide vital infrastructure services such as searching, matching, or communicating, under monopolistic conditions, we should regulate those activities and companies as public utilities. This should be done through a new Office for Digital Platforms, which should include powers to open up the data of the digital giants in cases and markets that are deemed to be in the public interest.
Third, to better drive the curation and productive use of public data, a new public service corporation, Digital UK, should be created. This would establish a Digital Citizen Account and ‘public data stores’ through which useful insights from pooled, anonymised data could be shared. It could also oversee the creation of a national data portal, which would provide a single site linking to private- and public-sector data. Under appropriate privacy and security conditions this could provide an immense and shared resource for civil society, enterprise, and local communities to build better products and services.
Finally, we should learn from the cities at the cutting edge of digital governance, such as Barcelona, and get local authorities to set up Local Digital Commonwealth Strategies. These would aim to support the development and adoption of local platform services – from community decision-making apps to innovative businesses – leveraging public sector data sources and personal data from the opening-up of private sector data. This would ensure that value is retained and circulated among communities where the data is generated, to provide economic, social and environmental value.
Taken together, this is an ambitious agenda to rein in the power of the tech giants and foster inclusive innovation. The alternative – a status quo that will enable widening inequality and the growing concentration of economic and technological power – is the route to deepening democratic and social crisis. It is time we acted with an ambition fit for the machine age.