Janet and the Goliaths

February 21, 2020

What to do about the Data Giants?

 

It’s hardly news that data giants Facebook and Google are destroying the viability of Canadian media while their platforms pump out fake news and misinformation. What if anything can Canada do about it?

 

Over in Europe, the authorities are not amused and have resorted to blunt force.

In 2018 the EU fined Facebook $122 million (US) for misleading the world over its acquisition of WhatsApp. https://www.cnbc.com/2019/11/09/facebooks-antitrust-investigations-a-timeline-of-events.html

 

Google got a hiding as well. In three whopping fines totalling $10 billion (US), the EU whacked Google for market power abuses in online advertising, search engine results, and its Android operating system.

 

Seems the idea caught on across the pond. In 2019 the US Federal Telecommunications Commission fined Facebook $5 billion for its complicity in the Cambridge Analytica scandal. Anti-trust suits filed by the FTC and 48 American state governments against Google and Facebook are currently backed up like jets on an ice-coated runway.

 

https://www.cbsnews.com/news/google-antitrust-probe-48-u-s-states-launch-antitrust-investigation-of-google-dominance-in-search-ads-and-data/

 

Enter Canada.

 

Serendipity being one of those beautiful things that keeps life interesting, this January the independent industry committee headed by Janet Yale released its Broadcasting and Telecommunications Legislation Review (BTLR) Report.

 

Yale’s inaugural mandate in 2018 was to recommend first drafts of Broadcasting and Telecommunications legislation revamped for the digital age. In addition to answering important questions about broadband infrastructure and mobile phone plans, the Committee’s big task was how to deal with Netflix and a growing crowd of American movie channels that have invaded the long-protected Canadian TV market and could care less about Canadian stories or sensibilities.

 

But to keep up with the evolving world of digital communications, Yale and her Committee embraced the question of Canada’s response to the Data Giants, Google and Facebook. (The Canadian Competition Bureau has been poking its nose around too).

 

Just three years ago, this kind of regulatory intervention into data platforms seemed politically impossible. What happened?

 

In two words, Cambridge Analytica. In a scandal as sinister as a Hollywood thriller, Facebook acknowledged its complicity in allowing the online data belonging to 87 million Americans to be hacked and exploited by political actors targeting voters in the 2016 election.

 

https://www.nytimes.com/2018/03/19/technology/facebook-cambridge-analytica-explained.html

 

When the scandal broke, the Data Giants went from shiny penny to malign influence. All of the sudden, their free digital tools no longer seemed so benevolent if they were masking a data vacuum exploited for questionable purposes. People started making the connection between their private data, the oligopoly power of the Data Giants, and some very ugly changes in our democratic life.

 

Yale’s BTLR Report was perfectly timed to formulate the Canadian response to the power not only of Netflix, but of Google and Facebook too.

 

The Report’s cultural agenda is hardly a surprise to anyone following the decline of Canadian media.

 

It recommends extending current cultural regulations —-rules that compel Canadian media companies to bankroll the expensive public goods of journalism and Canadian culture—- to Netflix and other foreign Internet TV companies that have grabbed audience share from Canadian broadcasters while evading all obligations. The CRTC had recommended the same thing two years previously.

 

Yet it is the Yale Committee’s approach to the Data Giants that many didn’t see coming and raised a few eyebrows.

 

In addition to dealing with Netflix, the Report recommends that “media sharing platforms” (i.e. Facebook or Google’s You Tube) should also pay the standard regulatory contribution to Canadian media outlets’ sponsorship of journalism and Canadian content. The Report specifically recommends that Google and Facebook ——owning 75% of online advertising revenue in Canada—- should contribute financially to Canadian news production.

 

Now there are those who will argue Canadian media just can’t compete anymore: they’ve lost their advertising-dependent business model to the Data Giants, fair and square. Maybe they don’t deserve regulatory help?

 

But whether or not you blame mainstream media for losing a massive share of its life-sustaining ad revenue to the Data Giants, the reality is a comeback is out of the question. They can never hope to reposition themselves to compete again because of the Giants’ market power and huge data banks.

 

No media organization in the world can overcome the data giants’ economies of scale, unparalleled collection of private data, patents, multinational reach, and oligopoly over the different digital products required to compete with the Giants.

 

To illustrate how unlevel the playing field has become, imagine we allowed media organizations around the world to combine themselves into two or three global media companies big enough to compete with the Data Giants in the advertising market? The competition for eyeballs might even out, but the implications for democracy would be grotesque.

 

Or suppose we sanctioned media companies selling out to the data giants themselves? Picture Fox News merging with Facebook; or how about Postmedia doing a deal with data-rich VISA?

 

Such outrageous hypotheticals make the case for doing something dramatic about the giants’ iron grip over the data-driven advertising market.

 

What is to be done? The go-to anti-trust remedy is to break-up oligopoly. But in the case of the Silicon Valley oligopoly, that is far beyond the power of Canadian regulators.

In the meantime, the Yale Committee seems to be on the right track.

 

 

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Howard Law

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