The world’s most valuable resource

Economists and analysts, to whatever schools they belonged to, joint state: private companies have captured huge chunks and thus have unprecedented influence, having access to huge amounts of digital data. Experts say: of course, it is necessary to regulate their activity, and for this, we regulators need to take these antitrust rules, which must meet the requirements and challenges of today.

The experts write that on the basis of the new resource occurs profitable, fast-growing industry; antitrust regulators are forced to intervene to restrain those who control these flows. More recently unequivocally the most valuable resource was oil. Now the concern is the giants in the field of big data, which, in fact, become the “oil” of the digital era. We have to admit that very quickly appeared and formed a giant, five of the most expensive public companies in the world: the Alphabet (parent company Google), Amazon, Apple, Facebook and Microsoft, which seem vast and unwavering. Their incomes grow unprecedented pace. In the first quarter of 2017, they received more than $ 25 billion in net profit. Amazon takes half of what you spend at online stores Americans. Last year almost all revenue growth in online advertising in the U.S. occurred in Google and Facebook. In economic history this has never happened before, analysts say.

The dominance of these tech giants are expanding and the process control becomes increasingly difficult. That is why, against this background there are calls by some economists for the division of modern business monsters like it did with the oil giant Standard Oil in the early twentieth century. British experts point of view which is reflected in the material of the Economist, oppose such drastic radical action. Their arguments boil down to the fact that, in their opinion, the size of the company as such is not a crime. Moreover, the success of these giants is to the benefit of consumers. Few want to live without Google, one day delivery with Amazon or the news feeds of Facebook. Moreover, these firms are not of concern, when is their check on the basis of standard antitrust test. They are not involved in extortion: many of their services free of charge (in fact, users pay, giving them even more data). If you take into account their offline competitors, their market share is even less of a concern. The emergence of young companies such as Snapchat, shows that new players in this market are still unable to confidently assert themselves.

And yet, according to a number of analysts, the reasons for concern exist. Online companies provide a huge influence, gaining control of data. Old assumptions about competition, developed and honed in the “oil era”, seem out of date in modern conditions “data economy”. Experts believe that the world has changed, and new conditions need a new approach with its rules.

What has changed? Thanks to smartphones and the Internet, digital data has become voluminous, ubiquitous and far more valuable. Whether you go for a run, watching TV or just stand in a traffic jam — almost all your activity leaves a digital footprint — a new raw material for digital “distilleries”. The amount of data grows, as an increasing number of devices — from watches to cars — gets a reference to the Internet: according to some estimates, self-driving car generates 100 gigabytes of raw data per second. Meanwhile, the carriers of artificial intelligence, such as self-learning machines that extract more useful information from digital data. Algorithms allow you to predict when a customer is ready to make a purchase, the jet engine needs service or person at risk. Industrial giants such as GE and Siemens, are now positioning themselves as sellers of data.

This abundance of information is changing the nature of competition. The tech giants have always benefited from the network effect benefits: the more a user gets an account in Facebook, the more attractive it becomes to join that social network to others. Digital data create incremental effects of network benefits. Using the incoming information, the company is improving its product, it attracts new users and leads to entry of more data volume, etc. the more the data comes from unmanned vehicles Tesla, the more opportunities to improve their product to the company. This is one of the reasons why a firm whose sales accounted for only 25 thousand cars in the first quarter of the year, today is worth more than GM, realize 2.3 million cars. The possession of a large amount of data like the moat of security.

Access to the data protects the company from competitors another way. Yes, you can be calm because the competition in the field of information technology remains because today’s leaders are potentially at risk of a sudden attack from the young company, growing in the “garage startups”, or suffer as a result of unforeseen technological shift. However, in the “data era”, this probability becomes smaller. Surveillance systems companies-giants follow all the developments in the economy: Google sees what you are looking for Internet users, Facebook is what these users live and share with each other, Amazon as — what they are buying. They own the app stores and operating systems that provide their computing resources to startups. They are like the “all seeing eye” overlook all the activity on their own markets and beyond. They see when a new product or service is gaining momentum, which allows them to copy or simply to buy under the sudden success of the company before they become too dangerous competitors. Many believe that by buying WhatsApp, and employed less than 60 people for $ 22 billion in 2014, the company Facebook has implemented the “purchase for destruction” to get rid of a potential competitor. Creating barriers for newcomers and early warning system, digital data serve as a tool to suppress competition.

Efficiency old antitrust mechanisms falls from a consideration of these features of digital information. British experts believe that simply the dismemberment of Google five “minigulov” can’t drown out the effects of network benefits, and over time one of these companies will again dominate the market. Analysts say that based on today’s realities, the obvious fact that the need for a radical rethinking of the approach to Antimonopoly policy. As the Economist writes, noteworthy are two ideas.

The first is that the Antimonopoly service should move from the industrial age to the twenty-first century. Traditionally, making decisions about possible intervention in the corporate merger, they were guided by the size of the companies. Now, in assessing the implications of a particular transaction, you must pay attention to the amount of data constituting an asset of the acquired company. The purchase price also may signal the absorption of a potential competitor. From this point of view, the willingness of the company Facebook pay such a high price for the WhatsApp acquisition, which had almost no income, was to arouse suspicion. In addition, analyzing the dynamics of the market, the Antimonopoly service should exercise competence in the matter of digital data, for example, using the methods of computer modeling in order to track down the hidden pricing algorithms or to determine the best way to stimulate competition.

The second possible solution is to narrow down the possibilities of the Internet companies to monitor data, and those data provides, on the contrary to grant greater control. According to experts, would not hurt and improve the transparency of the company could be required to inform consumers about what information they have, and how much profit’s in it. Governments can encourage the creation of new services, widening access to its own data, or controlling key parts of the “data economy” as a public infrastructure — as it makes the Indian government with a system of digital identification of citizens Aadhaar. In addition, the state may make mandatory sharing of certain types of data on the condition of individual consent — that is what in Europe in relation to financial services: here, banks are obliged to provide customer data to third parties.

Experts warn that the “restart” antitrust policy in the information age will not be easy. This may entail new risks, especially those relating to data about the private lives of users. British experts believe that if the government do not want to be in the “data economy” dominated by a few large companies, it is necessary to take urgent measures.