The Danger Of Making Facebook, LinkedIn, Google And Twitter Public Utilities

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Are social networking sites such as Facebook, LinkedIn, Google+, and Twitter “information monopolies” that should be regulated as public utilities? Some people seem to think so. Treating these digital services like the equivalent of a local sewage company would be a disaster for consumers, however, because public utility regulation is the arch-enemy of innovation and competition.

A columnist at SAI Business Insider argued this week that “social networks are a critical layer of infrastructure for a wide variety of applications and content” and claimed lock-in might occur without “social network neutrality.” Others have labeled Facebook a public utility and suggested regulation may be needed. And plenty of people are lining up to declare Google a utility. Those calls may increase with the recent successful launch of its new Google+ social networking service.

We could be headed for a day when the worst regulatory ideas of the past century — public utility mandates, common carriage restrictions, “neutrality” rules, price controls, and the Fairness Doctrine — are applied to the Internet and digital platforms. Sadly, few seem to remember how those ideas wreaked havoc on earlier communications and media technologies.

Much of this recent angst over the growing scale of some social networking sites has been prompted by the work of influential Columbia Law School professor Tim Wu, about whom I’ve written about here before. Wu’s recent book, The Master Switch: The Rise and Fall of Information Empires, and essays like “In the Grip of the New Monopolists” have been drawing attention and winning converts in cyberlaw classrooms and Internet policy circles.

Wu was named a senior advisor to the Federal Trade Commission earlier this year and it might not be a coincidence that the agency recently announced an investigation of Twitter’s business practices in addition to pursuing Google. Twitter and Google are two of the many companies that Wu labels an “information monopoly” or “information empire.”

There are several problems with declaring social networking services to be utilities and converting them into regulated monopolies.

First, a utility is typically considered an “essential facility” that has no good alternatives. Local sewage and water systems are the classic examples. Social networking sites are in a different league and would hardly be considered essential services.

The breakneck pace of change in the social networking sector makes these sites distinct from utilities. Not only are most of these cyber-services relatively new, but they keep displacing each other. A dozen years ago, AOL, AltaVista, CompuServe, and Prodigy ruled the online world, only to see their early leads evaporate rapidly. And just five years ago, it was Friendster and MySpace that were on everyone’s lips, but they too have faded quickly from the spotlight. Rupert Murdoch and News Corp. paid $580 million MySpace in 2005 only to sell it for $35 million last month. So much for “information empires.”

New alternatives come from unexpected quarters. Just this week, myYearbook, a social networking site started five years ago by two high school-aged siblings, sold for $100 million. It already has 20 million members.

Second, there’s the problem of “regulated monopoly” becoming a self-fulfilling prophecy.  Critics apparently don’t see the irony of classifying all these services as regulated monopolies when they all compete so vigorously against each other. That’s not the case in typical utility sectors. The very act of imposing “utility” status on a service or platform tends to shelter it from competition and lock them in as real monopolies for the long-haul.

Third, public utilities are, by their very nature, non-innovative. Consumers are typically given access to a plain vanilla service at a “fair” rate, but without any incentive to earn a greater return, innovations suffers. Of course, social networking sites are already available to everyone for free! And they are constantly innovating.  So, it’s unclear what the problem is here and how regulation would solve it.

That raises the biggest danger of government intervention. Regulation could have a very direct cost for consumers in this case.  If these social networking services were classified as utilities and government regulated their data collection practices or advertising-based business models, prices could be imposed for the first time as sites struggle to adjust to new rules.

This debate comes down to a classic conflict of visions between the static versus dynamic competition mindsets. Those who take static snapshots of markets are bound to see big bad bogeymen around every cyber-corner. By contrast, a dynamic view of market economies — especially markets built on code — appreciates how Schumpeter’s “perennial gales of creative destruction” continue to roll through the digital economy. Digital Davids are constantly displacing cyber-Goliaths.

Hopefully, for the sake of consumers and competition, policymakers won’t listen to the fussbudgets who so casually affix public utility labels to today’s dynamic social networking platforms. It would be the death of Internet innovation if they got their way.

 

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Are You Ready For Google+?

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What’s Google Plus, you ask? Only Google’s foray into social networking and an attempt to take down Facebook once and for all. That’s right, Google has been looking to corner more of the Internet’s market for quite some time, with Google Buzz and Google Wave, failed attempts at high-demand software which would change the way we work and network. That having been said, a full-scale social networking tool had to come down the pipe some time, and it looks as if the time is now.

As Google’s fledgling answer to Facebook, the start-up site actually has some features that should give the social networking giant a run for its money (granted they can woo enough people over to it and away from Mark Zuckerberg‘s runaway hit of a website).

What features can it possibly have that really rival Facebook? For one, better privacy.

Facebook has come under heavy scrutiny for its liberalism with people’s private and personal information. Google+ is looking to exploit this as an opportunity to woo identity theft-leery users. One of the ways they approach the issue is to provide literal circles of friends on the site. You group all of your friends into different circles or categories, and then you choose which photos, documents, videos, etc. to share with each circle. If you don’t share these things with a certain circle of friends, they don’t get to see it.

Probably the major feature that will make Google+ a formidable rival to Facebook is a little something they like to call Hangout. Basically, it’s a video chat feature that allows up to 10 people to participate in a video conference call take that, Skype.

Speaking from personal experience, this feature works really well. However, people might be less excited about it now that Facebook announced video calling (for the record, this was announced following the buzz that initial previews of Google+ garnered).

Now that most smartphones function as digital cameras for their owners, you will automatically be able to upload photos taken on your mobile device to your own personal folder. You decide who to share them with whenever you want although I’m not sure how that fits in with the better privacy initiative. Other features include a suggestion tool, which shows you pictures, videos, and pages based on interests you type into a search engine, and a mass message feature that allows you to group chat or text with several users at once (for instance, to decide which movie to see and what restaurant to hit afterwards). The smartphone app for Google+ has already hit the Android and the iPhone, by the way.

Of course, the standard features like status updating and such will be there as well, along with the option to ‘follow’ other users, a la Twitter.

On the downside, the chat feature is pretty awkward, requiring you to type in e-mail addresses to chat with friends. Furthermore, there is nothing to show you who’s online at any given time, meaning that chats need to be more scheduled (when Google is supposed to make communicating less complicated). The ability to write on “walls” doesn’t exist yet, either. Best you can do is tag someone in a status by using the @ or + keys. It’s still in the limited trial edition, however, and those guys are certainly smart enough to figure out something better.

As you can see, I’m already there. We’re willing to send invites to as many people as we can as long as you post a comment (just make sure you include your e-mail address)! If not, it’s set for an official launch July 31.

To find out more about Google+, click here.

Source: Yahoo

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