To regulate digital platforms in the future, we should look to the past

A decade ago, regulators and the public took it for granted that the rise of digital platforms and their promise to remove intermediaries and bottlenecks would provide new economic opportunities to those who had been shut out by the existing incumbents. Today, a handful of companies control unimaginable portions of the world’s economic activity and investment capital.

A decade ago the rise of social media appeared to usher in a golden age of citizen journalism and pro-democracy movements around the globe; today, we see these same platforms used to spread conspiracy theories, hate speech and fake news designed to undermine our democracy and sow distrust in our fundamental institutions of government.

As a result, a sense of urgency bordering on panic has set in among national and global regulators. We have moved very quickly from a consensus to leave digital platforms unregulated to demands that regulators constrain these platforms’ apparently unlimited power either by breaking them up into smaller companies or by tightly regulating the content and services these digital platforms provide. Last month alone, the European Parliament passed a law requiring digital platforms to take down “terrorist content” within an hour of designation, while a leading American presidential candidate has called for breaking up digital platforms into separate retail and platform-hosting businesses in the name of competition.

On the other hand, there are those who continue to push for the status quo. Whatever the harms done by digital platforms, they argue, surely they are outweighed by the benefits they offer. Imposing massive government regulation on digital platforms, they believe, will do more than deprive us of the possible future benefits these platforms promise; so much of our commerce and communication takes place on digital platforms today that radical shifts in the regulatory regime will cause more disruption and harm than any of the ills regulators have identified. They argue that the cost of regulation will cement incumbent market power and block new entry. Efforts to block fake news and hate speech, they maintain, will end up undermining the free exchange of ideas central to a free and democratic society.

Each side in this debate accuses the other of bad faith and of using dystopian, over-the-top rhetoric. Each side has an endless supply of real-world examples, from the manipulation of Facebook by the government of Myanmar to promote ethnic cleansing on the one hand to the use of Facebook to document police brutality on the other hand. Those who support deregulation point to the number of independent businesses these platforms enable, while those favouring economic regulation highlight the ability of these companies to crush competitors and dictate the rules of international commerce to suit themselves.

Although it may at first glance appear that previous technologies such as the telephone or television have little in common with the internet and digital platforms, we must remember that these technologies were equally disruptive in their day. Like digital platforms, their ability to enable communication and to broadcast content simultaneously to millions of people across the world fundamentally challenged every aspect of commerce and civil society – creating new economic and social opportunities, promising democratisation of content, and opening the door to both harassment and demagoguery on an unprecedented scale.

The good news is that we have been here before. The bad news is that the problems are real. We know how to solve these problems, and we have a set of enduring values that have withstood the test of time to guide us. But doing it right takes time, and there are no shortcuts. Our democratic values must guide us, and the lessons of the past should inform us; but only a rigorous, transparent debate can navigate the invariable tradeoffs between promoting competition and promoting efficiency, and between protecting the public from harmful content while respecting freedom of expression.

Today, my employer Public Knowledge, in partnership with the Roosevelt Institute, is releasing an ebook that examines the framework for addressing these urgent and apparently contradictory imperatives around digital platforms. The Case for the Digital Platform Act: Market Structure and Regulation of Digital Platforms looks at the last 150 years of regulating telecommunications and electronic media to provide guidance on how we can regulate digital platforms in a manner consistent with our enduring values as a democratic society, by striking the proper balance between government oversight and freedom to innovate.

The book proposes a universal definition of “digital platform”, which is necessary to construct a sector-specific regulator capable of providing adequate sector-specific oversight to promote competition, address the issues of content moderation, adequately protect consumers, and provide for public safety. Because digital platforms often challenge traditional concepts of antitrust markets and traditional metrics of market power, we are proposing a new metric, the “cost of exclusion”. Recognizing that the power of digital platforms derives from the powerful network effects possible with flexible, multi-sided markets, cost-of-exclusion measures the cost to an individual or business based on their exclusion from the platform. This measure is designed to be flexible enough to apply both to the economic cost of exclusion and to the cost to individuals from being excluded from platforms increasingly central to civic discourse and the public sphere.

The book reviews the wide area of pro-competitive tools used globally to transition from monopoly telecommunications and media regulation to a competitive framework that also serves the public interest. Rather than recommend a specific solution, it recommends that governments empower a specific national regulator capable of addressing the myriad of issues created by digital platforms in a comprehensive manner. Although written by an American advocate for the United States Congress and American regulators, The Case for the Digital Platform Act offers a useful starting framework for global policy-makers as well. It advises governments to:

1) Embrace comprehensive sector-specific regulation by empowering a single regulator to oversee digital platforms, rather than using multiple agencies to apply a mix of competition policy, content moderation policy, consumer protection and public safety. Only by recognising the unique nature of digital platforms can governments ensure comprehensive and appropriate policy across the board.

2) Provide guidance to the sector regulator based on enduring values of promoting competitive markets, protecting consumers, encouraging free expression and news production while protecting vulnerable members of society from harassment, and utilising the capacities of the sector to protect public safety.

3) Governments should recognise that while we must not allow the complex nature of the technology and the difficult social and economic tradeoffs to freeze us into immobility, we should not rush to pass broad laws of general applicability that will generate unforeseeable consequences. Rather, governments should provide the new sector regulator with a broad array of tools to address the many issues raised by such an important and diverse sector.

4) We must recognise that effective, comprehensive regulation of such an important sector takes time to establish. No law will work perfectly on day one, or even day 1,000. We will continue to revisit these important questions for the near future.

I believe that this framework will enable us to move forward in a way that centres our enduring values, and ensures that digital platforms will serve the public interest.