Pros and cons of breaking up big tech
We analyze the impact of breaking up powerful and far-reaching data-opolies
Crushing all competition, these tech giants picked up a combined market cap of $7.5 trillion in 2020 — the same year the COVID-19 pandemic smashed the broader economy.
Big Tech’s burgeoning success can be attributed to a range of online services that are hard to break free from. From Microsoft’s Teams for office collaboration to Google’s productivity tools, Big Tech’s boom isn’t without reason.
However, the rising data privacy debate is proof that all is not well with Big Tech. Senator Elizabeth Warren cited Big Tech as a threat to democracy, and former-President Trump equated them to monopolies. “They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation,” said Warren.
In a strange turn of events, Big Tech has fallen victim to its own success. Google’s parent company, Alphabet, is facing increased scrutiny over its data-collection policies. Amazon is under pressure for its anti-competitive conduct. Plus, Apple has attracted yet another lawsuit for throttling older iPhones.
As the alleged trade monopoly continues, a question remains — would it be beneficial or detrimental to break apart megacompanies? Below, we've set out the pros and cons of breaking up Big Tech to help you pick your side of the debate.
Pros of breaking up Big Tech
1. More opportunities for small businesses
Google answers 92% of the world’s search queries, and Amazon sells nearly everything a consumer may seek, leaving small business owners with little or no market space. Plus, buying smaller rivals is another trade practice Big Tech firms exercise to protect their dominance. For instance, Google has acquired over 270 companies since 2001. Over the last decade, Facebook acquired numerous rivals, including WhatsApp and Instagram, to kill the competition.
One way to ensure fair trade across industries is to bar Big Tech from entering adjacent markets. This will also prevent Big Tech from getting bigger.
2. Reduced data privacy concerns
When Facebook CEO Mark Zuckerberg testified and publicly apologized for a massive data breach in 2018, users worldwide questioned the platform’s ability to keep their information safe. Many believe Big Tech is increasingly seeking to monitor and dictate what consumers see and buy online. Targeted ads from Google have summoned similar reactions.
Once again, healthy competition can help end users’ privacy dilemmas. The more players looking to offer secure platforms, the greater the pressure on Big Tech to increase users’ data privacy.
3. Reduced national security concerns
For months, Russian hackers gained visibility into staff emails sent via Microsoft Office 365 at the National Telecommunications and Information Administration (NTIA) after breaking into the NTIA’s office software. The incident highlights how Big Tech can open a doorway into the government’s sensitive processes, military, and intelligence operations.
Regulating Big Teach’s outreach can minimize the scope and severity of cyber attacks on national security systems.
Cons of breaking up Big Tech
1. Loss of Research and Development
From investment in artificial intelligence (AI) to the money put into eliminating COVID-19, large companies are rightfully taking credit. Google has launched two funds, Gradient Ventures and the Google Assistant Investment Program, to support AI and machine learning startups.
Similarly, Amazon has spent over $20 billion on investing and acquiring at least 128 AI startups worldwide.
These investments have led to remarkable progress in autonomous vehicles, wearables, robots, and more. Breaking these companies up would also mean sacrificing the innovation and technological advancement that comes from them.
2. Impractical market fragmentation
The idea of breaking up large companies may seem attractive, but experts have argued about its practicality again and again.
For example, if the government broke up a social media giant into smaller social networks, it may give an illusion of choice. However, this approach is less desirable to users looking to manage all their communications in one place. Many would eventually tip in favor of one social network, essentially undoing the break-up.
3. Higher service costs
It’s believed that healthier competition among smaller companies will lead to a dip in prices, but experts are now pointing out that this may be a myth. Big Tech’s virtually free tools and services are hard to replace, given our dependence on them.
Even so, Big Tech’s split would instill a fair market, encouraging small businesses to introduce a new and competitive range of products and services. However, since startups can’t benefit from a free business model, there’s a high chance that end-users will pay heavily for each and every digital service they use. This may include daily emails, digital navigation maps, analytical tools for business, and more.
A Final Word
While free services are economical, the approach slowly but steadily kills innovation.
“The ideal solution is really somewhere in between, continuing to have companies create value, but taking into consideration the European approach of fair allocation,” says Van Alstyne, Questrom professor and coauthor of “Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You.”
By ensuring interoperability and data portability across rival products and services, it is indeed possible to restore balance in trade.
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