Platform Competition

When the internet first entered popular consciousness, enthusiasts marvelled at the dynamism and competitiveness of the early online ecosystem. Iconic companies like Netscape, Yahoo, AOL, and MySpace quickly emerged, peaked, and fell from prominence, and new competitors arose. However, in the last decade, a few big names have grown increasingly ubiquitous. Online players that started out like any online business, selling books or conducting basic searches, have become indispensable hubs of online activity. These massive digital platforms bring large swathes of the internet economy under one roof, providing billions with a streamlined, hyper-convenient user experience. However, by providing more services to more people, these platforms gain access to more data, and it can be very difficult  to operate outside their umbrella. Observers worry that new entrepreneurs simply can’t compete with the data reserves, market power, and loyal user networks of the incumbent platforms.

Many are calling on policymakers to take on the largest platforms. The economic characteristics of these markets make them prone to tipping towards one or two dominant firms, making meaningful competition difficult. Public Knowledge advocates for new, pro-competition laws to promote competition on and against digital platforms. Congress should build a record and consider legislation setting up a regulatory system targeted specifically at digital platforms. Reports recently emerged that the Justice Department and Federal Trade Commission are divvying up responsibility for antitrust investigations into the conduct of Google, Facebook, Apple, and Amazon. Each of these companies is powerful enough to merit robust antitrust scrutiny, and Public Knowledge supports investigations by these law enforcement agencies if the agencies conclude that such action is warranted. However, digital platforms present a number of challenges for our economy and our society, and it will take more than antitrust enforcement to address them. 

At several points in American history, transformational new technologies have given rise to industries that required new oversight regimes. The advent of railroads, radio communications and air travel each gave rise to new agencies like the Federal Communications Commission and the Federal Aviation Administration, and the unique regulatory toolkits that they bring with them. Public Knowledge also believes that it is past time we develop a new toolkit of policies to deal with the challenges posed by digital platforms. 

The first question PK is helping to tackle is: What exactly do we mean when we say “platform?” How is a platform different from just a website or an app? In his book, 'The Case for a Digital Platform Act," Public Knowledge Vice President Harold Feld contends that all digital platforms share three basic traits:

  1. Platforms are a service accessed via the internet. 

  2. The service is two-sided or multi-sided, with at least one side open to the public that allows the public to play multiple roles. For example, users can access Amazon as a buyer or seller. They can post status updates on Facebook, run ads, or view their feed. Uber “users” can refer to drivers or passengers.

  3. The service enjoys particular types of powerful network effects. Network effects refer to the fact that each new participant in the network increases the value of the network to other participants. Thus, a social media platform is more attractive the more people it connects. A bulletin board like Craigslist becomes more useful as more people post to it. However, these effects also encourage concentration and reinforce platform dominance.

These three features allow platforms to interact with users and markets in new ways, creating potential efficiencies, but also potential problems. Regulators need to be able to set certain rules for these platforms to encourage competition and discourage abuse. These rules might include:

  • Interoperability and data portability, which would allow users to connect with each other across different platforms and move their data from one platform to another.
  • Sets of rules for non-discrimination, CPNI (Customer Proprietary Network Information)-style usage limitations, and due process rights for commercial users who are hurt by sudden or arbitrary changes to the platform’s services. 

Public Knowledge also believes that digital platforms present some dangers to the public that more competition alone may not solve. That is why we need a rigorous public debate about social and consumer protections for online digital platforms, protections like:

  • Consumer data privacy 
  • Promoting a diversity of voices and prevention of information bubbles in the online ecosystem
  • Making Section 230 immunity of the Communications Decency Act work more effectively and giving Congress a share in the responsibility for moderating harmful online content

Public Knowledge’s Senior Vice President Harold Feld has released a seminal book, The Case for the Digital Platform Act, outlining these issues and the need for a digital platform agency to promote competition and protect the public. We encourage you to download it for free

We also recommend this report from the University of Chicago Stigler Center on competition in the digital platform space, co-authored by Public Knowledge President and CEO Gene Kimmelman. 

Check out this episode of the in_beta podcast, in which Public Knowledge President and CEO confronts the question “should the tech giants of Silicon Valley be broken up?”

Here are the PK experts on this issue:

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