Why Big Tech is not Tech at All

A Critical Look at the #DigitalSingleMarket strategy Part 2

The brand value studies refer to GAFA as “technology companies”, and US bloggers simply call them “Big Tech”. But not only does each individual company have its own monopoly, they also have a very individual business strategy. In order to see the bigger picture, we should not look at GAFA as tech companies at all. They are mainly digital infrastructure companies, more building digital networks than technologies. Facebook is building a social media network, and is now trying to become the first international news conglomerate. Google is placing itself as the middle man in yet unchartered territory seizing search engine domination, mobile operating system domination and online service company domination, and trying to create as many synergies between those networks as possible. Apple masterfully combines its slick hardware and service repertoire with each other, actually selling content and not trying to give it away for free or at the lowest price. Amazon is trying to disrupt not only local retail, but also the traditional value added chain by becoming the entire chain from a virtual book publisher that finances a book to the digital outlet that sells it. The common denominator between those companies is that their key asset is the digital INFRASTRUCTURE they develop, not the technology itself. So in order to see the bigger picture, we should try to comprehend GAFA as infrastructure companies, not as technology. And then the broader structural conflict does become more visible.

It’s Not Technology vs. Content but Infrastructure vs. Content

It is common knowledge amongst economists that the exclusivity of goods is a prerequisite of a functioning economy.

Because the broader struggle we are facing here is not the struggle of technology vs. content, but the struggle between infrastructure vs. content. US author Robert Levine took a profound look at the US creative economy in his book Free Ride (Doubleday, 2011) and goes through the different branches; music, film, TV, newspapers, book publishers, etc. And the struggle that he outlines in his book is not mainly a struggle between content and technology, but rather than a struggle over frame conditions between content and infrastructure and distribution. Examples are not only the music industry associations versus companies like Grooveshark or Megaupload, but also the struggle of book publishers versus Amazon, or newspapers against Google and YouTube. And it is always the content industries fighting for survival. Now, one could critically say that all those business models are obsolete, and that the creative industries have failed to adapt to the new conditions and innovations, and as such they will be going the way of companies like Kodak that were extinct by the advent of digital photography. But that is not fully true, as no creative branch of the economy is denying the disrupting effects of digital technology, but they all ask for a level playing field between content and infrastructure. Because only a level playing field will result in a fair value added chain and a fair split of the proceeds. Only a fair split of those proceeds would then create a just value added chain, a properly functioning market and sustainable innovation.

It is common knowledge amongst economists that the exclusivity of goods is a prerequisite of a functioning economy. Without property rights, you cannot sell, rent or otherwise exploit your assets.

And this might be the key reason as to why the digital economy does not add to the general economy. Because what we see at the moment is not content and infrastructure trying to build a sustainable value added chain, but we are seeing most of the infrastructure side trying to disrupt the content side. And this results in a huge conflict for the digital value added chain.

Conflicts like these are not so unusual, and they usually play out in the development of a free market. But to have the market forces play out properly, the competitors have to be on a level scale and on a functional market in the first place. This does not only require a level playing field between the competitors through a balanced competition law, it also requires the markets not failing in the first place.

Continue in Part 3

Return to Part 1

0

Leave Comment

Comment on this article