Now that the Justice Department has wrapped up the Sprint/T-Mo deal, the federal watchdogs seem to be moving on to the real problem within the tech sector – Silicon Valley. It was recently announced that the Federal Trade Commission is preparing for a down and dirty battle with the players in that arena.
Facebook, Amazon, Apple, Netflix and Google (collectively known as the FAANGs), Twitter and others continually get caught with their hand in the privacy data cookie jar. Facebook, especially, just seems to go about its business, selling user data in one way or another, with the cavalier attitude that nothing will happen. Other than being fined, Facebook continues on its merry way, more data is compromised and another fine is levied. (July 25, 2019, $5 billion, largest fine in FTC history) One has to wonder how much more Facebook, and others are making versus the fines, since the transgressions just keep on a-comin’. Apparently, fining them has little effect and is not much of a deterrent.
We should not be surprised. Typically, fines imposed by entities such as the FCC, FTC, or other regulatory agencies are simply slaps on the wrist, with hopes that the violator will see it as a warning and change their evil ways. To be fair, that approach has worked, to some degree in the past. However, it seems that it is not working with Silicon Valley.
So now, the feds have some idle time on their hands and is turning its pea-shooters towards Silicon Valley. But this time, the target is much more powerful. Silicon Valley seems to be ramping up for a battle rather than wringing its hands in consternation.
For example, Facebook’s Jeff Zuckerberg has been quietly integrating the various business units. The theory being that, an integrated company with a single business unit is more difficult to analyze. With separate business units, divestiture can be accomplished much quicker because each unit has detailed and defined business processes that do not mix across other unit’s assets.
Facebook claims this integration allows cross-pollination of assets such as revenues, losses, expenses and the like. It also makes for richer data analytics by putting all the data in one big bucket. But in reality, it makes close scrutinization of the various elements more complex and time-consuming.
Much of the well-known Silicon Valley giants have been putting this practice into place in the last few years. Some started earlier than others. They argue that this is a common practice among mega-corporations. The feds’ argument is that it complicates their investigations.
Take, for example, Google. It has been on the fast acquisition track for quite some time. Had regulators had the foresight to look into them as they gobbled up Android, YouTube, DeepMind and others, they might have had a better chance to see if Google was living on the edge. Now, the components are so integrated it is almost impossible to single out each unit’s operating bounds.
Same goes for Amazon. Trying to analyze the exact makeup of this organization would be a years-long undertaking necessitating tremendous resources, both personnel-wise and financially. And, the government really does not have the necessary expertise to understand the complexities of technology and how one platform integrates with another. The Boeing 737 MAX 8 debacle proved that.
Even if the feds were able to disassemble all the moving parts. What then? A similar scenario played out around the turn of the century with Microsoft. In the end, both Microsoft and the DoJ settled, Microsoft remained Microsoft, simply because no one knew what the actual results, benefits, economic effects, and more, would be, going forward. So, Microsoft simply became both a software and OS company, each as a separate unit. Some say it was the first to use the cross-pollination technique to complicate the investigation.
One view on this outcome is that Microsoft managed to structure its business in such a way it became almost impossible to split-up. If the technology giants of today can learn some lessons from Microsoft, they might well be able to circumnavigate any aggression from the U.S. government.
This is only the beginning. There are several government segments setting sights on Silicon Valley. Besides the three already mentioned, Apple is on the feds chopping block as well. And, it is not likely to stop there. The government sees these mega-corporations as a serious threat to the competitive ecosystem. Worse, they are concerned that high-tech mega-corporations are so sophisticated that it will not be able to understand how they operate, therefore regulate.
Also, do not forget the political scene. Silicon Valley is a convenient whipping boy for aspiring politicians looking to find some solid ground in 2020. Virginia Senator Mark Warner and Elizabeth Warren are shining examples of that.
There is justifiable concern around all this. Friend or foe of Silicon Valley, the bare-naked truth is that we are in the throes of a conversion to a digital economy. And the concentration of power such mega-corporations are acquiring, in this ecosystem, is worrying.
The complexities of this digital economy make understanding it difficult for traditionalists, who make up much of the regulators. That is a scary thought. Knowledge is power and our government has not kept up with the digital age. For, perhaps the first time in our history, there is genuine concern that the government regulators may not be able to do what is best for the economy. They might just lose against these giants.