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Is 'This Time Different' Concerning Big Internet Dominance?

from the a-question-worth-asking dept

I've made a similar point a few times in the past, but now that the antitrust knives are out for the big tech companies (mainly Google, Facebook, Amazon and Apple), it does seem worth noting just how quickly the tech landscape seems to change. I moved to Silicon Valley 20 years ago. At that time, the "dominant" companies were: Microsoft, Sun, Oracle, Netscape, IBM, SGI, Intel and Yahoo. Those were still the days of "no one gets fired for buying IBM." Google's headquarters today were once SGI's. Facebook now occupies Sun's headquarters (affectionately nicknamed Sun Quentin, for its resemblance to the prison a bit north of here). A decade or so ago, I remember the general refrain about the startup ecosystem was that there were three "dominant" companies in the marketplace that any startup was trying to sell to. The so-called "GYM" companies: Google, Yahoo, Microsoft. Yet, today, all anyone can talk about is "GAFA" (Google, Amazon, Facebook, Apple) or in some versions "FAANG" (add in Netflix).

The tech market is one of disruption. It's a celebrated term around here -- often mocked by outsiders. But dominance has a way of falling. And falling fast. So I appreciate a recent piece by Ryan Bourne at Cato asking some fairly pertinent questions regarding the new antitrust focus on "GAFA."

Almost exactly the same arguments about how “network effects” might make Facebook or Google entrenched monopolies were used against Myspace, Microsoft’s Internet Explorer and AOL’s Instant Messenger. Analysts worried that web managers optimizing sites for IE because of its high use numbers would ossify the browser market in Microsoft’s favor. In the case of AOL, 40 companies wrote to the Federal Communications Commission asking it to make AOL’s network compatible with others. Of course, Myspace was rendered obsolete by Facebook, Internet Explorer by Google Chrome, and AIM by, well, a lot (there are many apps with instant messaging facilities).

But it’s not just network effects. In 2007 Forbes was running articles about how economies of scale for Nokia would act as a barrier to entry for rivals. The higher profits were generating “more money to invest in research and development.” It was said Nokia’s supposed technological superiority meant “no mobile company will ever know more about how people use phones than Nokia.” That year saw the first iPhone launch.

Today, consumer groups wail against Apple’s supposed “monopoly” power with its app store, saying it’s unfair to bundle it into its phone while prohibiting other means of download. Yet similar arguments were made about Apple’s iPods inability to play songs that weren’t downloaded from iTunes. Of course, developments in the music purchase market, mobiles and speaker technology completely unbundled music purchase from listening devices.

None of this is to say that there can't be antitrust concerns or market-power concerns to watch out for with these companies. But, the burden should be on those insisting that the only obvious thing is to "break up" these companies to explain why this time is different, and why no new competitors will be able to really enter and disrupt the legacy players.

When I first came to Silicon Valley, it was just as the antitrust effort against Microsoft was heating up -- and I totally supported it at the time. In retrospect, it's unlikely that case did much at all. There were other forces at work that limited Microsoft's power (though it's still a very big company doing quite well). After working around here for over two decades, though, and seeing just how much this place changes every few years, I've yet to see a convincing case that "this time is different." Indeed, I see plenty of entrepreneurs who are eager to disrupt the big players.

Filed Under: antitrust, big tech, dominance, internet companies, monopolies
Companies: amazon, apple, facebook, google

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  1. icon
    Anonymous Anonymous Coward (profile), 1 Jul 2019 @ 8:50am

    Is it different?

    I see the problem with wanting to break up big companies is that those looking into to future lack the imagination to conceive what might be 'harmful' to the current leading crop. This is not necessarily their fault (or a bad thing), as if they were capable of creating the next big thing, they would be doing so rather than prognosticating about things they know nothing about. And fear. Fear of the unknown and that the unknown will never come to pass.

    There is also the problem of trying to identify vulnerabilities in the current crop, as the disruptions of the companies mentioned in the article came from...shall we say 'left field' rather than direct attacks. While the Iphone was targeted at competing with Nokia, the things that made it different and better weren't that it made better phone calls. The things that took out AIM weren't that it sent messages better, but that they weren’t in the AOL silo. The things that brought Chrome and other browsers to their current market positions was that they weren't IE, and focused on things not Microsoft rather than containing themselves to that walled garden.

    So what will be the next disruption? It's not likely that anyone knows now, or they are not far enough along with their development for many to be talking about them yet. Just as with other disruptions it won't necessarily be some new technology competing with existing technology but possibly something that enables a new 'need, or convenience' that we, today, don't know we need, or need easier, yet. We used to listen to radios who programmed our listening, then we carried music around with us, to program our own listening, and now we have moved back to a wireless connection to music that has a greater variety but is still not only programmable but has access to new music as it comes out. There are other nuances to that analogy, buy songs rather than albums, for example.

    So the things that will be different are what the marketplace determines is important to them. Those things may or may not exist yet, and whether those things will be accepted by the market, let alone become important to the market will depend not only on the uniqueness of the product/service, and the quality of the implementation of the product/service but whether it captures some link to the imagination of the market. While the actual disruption might be new and different, the process will be the same.

    As mentioned above, a big problem is the fear created by the size of the current market dominators. That fear is irrational as, for example, while Microsoft and IBM are are still around, they have been re-imagined or taken some different directions than they had in the past, and aren’t quite as dominate as they were, while competitors are/have developed products/services that filled in the gaps. Who knows what Amazon might turn into, or what convolution of technologies might make it passe (maybe a new product search engines along with emerging delivery technologies that combine to make manufacturer to direct to consumer much more efficient, that then makes Amazon less relevant) or Facebook’s placement of everyone/thing in one place being replaced by some distributed connectivity that allows people to feel/be connected without the intrusion of Facebook’s leering over everyone's every thought and deed. The fear of size and the dislike for dominance which seems to be not able to be overcome has been shown to be overcome-able in the past, and likely will be in the future, even if those seemingly insurmountable obstacles continue to grow. While the process will remain the same, the disruptions will be different, and alike.

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