“Tightening the nuts”: why everyone started talking about tightening regulation of the IT sector

    Recently, in many specialized areas, industry events and in the media have begun to actively talk about government regulation of the IT sector. The reason for this is the set of events that may not be as significant individually, but together they demonstrate that the usual state of the industry is changing rapidly.

    We have already written about how the sector and the regulator look at personal data protection and copyright - entities that have recently been rethought by both the legislator, the provider companies, and the Internet users themselves.

    Today we tell why this is such a complex and controversial topic - and what changes in online life and online business may be waiting for us in the near future.

    / Pxhere PD Photo

    Business model and a bit of monopoly

    Antitrust laws in developed countries are quite well developed - it has a rich history, and the first regulatory act in this industry appeared in 1889. At the same time, Facebook and Google are in many respects a monopoly, but in a more complex understanding than is considered in the relevant legislation.

    Formally, from a business point of view, they are not monopolists - the business models of these companies are mainly based on advertising revenue, and in this direction companies have many competitors in different media. But for users of Facebook and Google - unconditional monopolists: as social media, where all their friends and colleagues are sitting, and as a search engine for information, where there are answers to all the questions.

    Of course, these companies do not make direct profits from direct users, but they “sell” them: access to certain demographic groups - advertisers through targeting, and attention - to interested brands through contextual ads. And therefore, they depend on information - huge amounts of personal data that allow them to more accurately customize their algorithms in order to offer the results of their calculations to advertisers.

    At the same time, the fact that services are mostly free for the end user allows them to avoid antitrust regulation : in recent years it has been sharpened to control those transactions that may entail an increase in the cost of production for the consumer.

    This may be the problem: now there are no laws and mechanisms that could prevent IT services from developing horizontally. Therefore, Facebook can buy Instagram and WhatsApp, and Google - Waze (a service that could become a competitor to Google Maps): these deals are often invisible to users, but they help IT giants get more information about them.

    This is the reverse side of the lack of antitrust regulation. It would seem that it should mean freedom and space for development - but in fact the opportunities for small companies and IT start-ups are limited, because it is simply useless for them to deal with large companies in some areas - venture capitalists call them “defeat zones” (kill zones ).

    Thanks to the basics of their model (free and total), Google and Facebook have become an integral part of the daily life of billions. This is partly why large-scale leaks of personal information were followed by heated debates and discussions about the regulation of the IT sector: this is not just a business issue. Now it is also a question of the future of services, without which many cannot imagine their life.

    Platform or "information tycoon"?

    One of the possible solutions is to look at companies whose business depends on access to personal information as if they were the “oil magnates” of the last century . This has its own logic: in order to grow, Facebook also needs to constantly increase not only the quantity, but also the quality, detail and width of personal information about users, on the basis of which contextual advertising settings algorithms work.

    There is also an analogue of “political lobbying,” although less straightforward. Large IT services are no longer just services: they are no longer platforms for ideas, companies and people, and they have become aggregators - this is, in the opinion of Ben Thompson, the author of the Stratechery IT distribution , a very important distinction, especially with regard to regulation of the sector.

    The platform helps a business or information source to find its consumer without interfering in this process. Aggregators, to which Thompson just refers Facebook and Google, on the contrary, can interfere in the relationship between business and user: for example, Facebook can change the priority algorithm for issuing posts in the feed so that the news goes down, and people's posts go up; or Google may change the search algorithms, affecting the principle of issuing links.

    Stories about how Facebook and Google influence election results and fight the spread of fake newsThey also do not speak in favor of the independence of these services as platforms that do not interfere in the relationship between the user and the source of information. For example, algorithms that offer content that may seem interesting to the user, based on his previous search queries or following links, limit a person to his “social bubble” , where polar opinions do not reach him — such interference (or - participation) in a person’s life not a platform task.

    The impact of services on the advertising market is also enormous: 3 out of 4 dollars that US advertisers spend on advertising in digital are either Facebook or Google. 84% of the global advertising budget for advertising on the Internet, they also get. Amazon in a significant wayaffects online commerce and even book business .

    / Pxhere PD Photo

    Such a different regulation

    Despite this, there are justifiable doubts as to whether the regulator is able to control such a complex and changeable area as IT. Recent financial crises have shown that even in the economic, investment and banking sectors, legislation is not so perfect. In addition, as even the European GDPR has shown, compliance with new regulatory standards is a complex and sometimes expensive administrative task that can be solved by large companies that have the necessary resources, but put small businesses at risk. In this case, the regulation may cause more harm than good.

    Tim Cook made a statement that in the current situation a considered form of regulation may be necessary. But Mark Zuckerberg, commenting on the scandalwith Cambridge Analytica, built a more complex argument: stating that he “does not believe that the sector should not be regulated”, he turned to talking about sector self-regulation, moving to a more transparent process of generating promotional offers and possibly using AI to track content that violates the rules service or law.

    At the same time, Facebook lobbyists are trying to stopthe adoption of the Honest Ads Act, which was submitted in October. The draft act presents new rules for the dissemination of political advertising: for example, technology companies that distribute them must keep copies of all election campaigning, and the ads themselves should have a disclaimer indicating who paid for this advertisement, how much and to whom it targets .

    In the industry itself, there is another opinion: so, if the IT sector has not succeeded in protecting the personal data of usersthen he should support state initiatives to regulate himself. The main argument is to increase the convenience and comfort of users: the very principle that technology services should ideologically follow. This is especially true for the United States - if government regulation of IT does not become a centralized process, then there is a risk that each of the states will eventually offer its own initiative to protect personal data, and this will significantly complicate the lives of not only business, but also users.

    There are three main requirements: the process of using personal data should be transparent, the user should have the right and ability to manage and delete their personal data, and those companies that illegally use other people's personal information must be accountable to the law. This, however, may entail the most global change for IT services in recent years - they will have to abandon the premise that the information is virtually free for them.

    The issue of regulating IT services is as complex as possible - it includes a huge number of problematic topics, little known areas of law, and dozens of different (sometimes oddly contradictory) interests of different process participants. In the near future, discussions are unlikely to fade away - and, most likely, they will still lead to some kind of changes, especially against the background of the expansion of regulation in Europe. And the lack of a consolidated opinion in the industry only complicates the situation.

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