National Firewalls as Ineffective Responses to Big Tech

-- By AikenLarisaSerzo - 22 Oct 2021

I. Context

A handful of companies dominate the way we share content, host files, conduct search and e-commerce -- Google, Amazon, and Facebook. The market share of these companies translates to situations where the majority of a country’s digital population (i.e. individuals with access to the internet) get their information from the foregoing platforms. Such dominance has demonstrated to influence national governments and communities, with heavy implications for a country’s sociopolitical experience: from news, protests, to national elections.

As a response, governments have considered instituting regulations that limit the activities and control of the reigning platforms, with the aim of protecting democratic processes, privacy rights of its citizens, and the integrity of community activities.

Such regulations may also have been crafted to protect and encourage the growth of domestic tech players. It could be argued that the embedded-ness and stickiness of the dominant platforms have made it impossible for local competitors to operate and survive. Hence, governments argue that fencing off foreign platforms will allow local companies to grow and eventually compete globally.

However, an analysis of such regulations shows that giving the government a freehand in determining what limitations will be put in place may be problematic. It is also not a guarantee that regulations will lead to more democratic and ethical technologies, and ultimately a more privacy-conscious or freer society.

II. Form of Firewalls

Government regulation on digital protectionism usually takes any or a combination of the following forms: (i) regulations that limit participation in media, internet businesses, and telecommunications to domestic entities; (ii) regulations that impose a priori registration or licensing requirements before being able to engage in the said industries; or (ii) regulations that mandate data localization or data sovereignty. As corollary tools, unscrupulous regimes may intrude into the operations of platforms by requiring the disclosure of certain types of information to the government.

III. Effect: Misalignment between intended objectives and actual effects

Digital protectionism in its various iterations may prove to be inadequate or incompatible with the objectives of protecting democracy and the fundamental rights of individuals. It may also be ineffective at creating an environment that will spur the growth of domestic entrepreneurship.

A Ownership Limitations and Licensing Requirements as Ineffective Tools to Achieve Superior Tech

It is doubtful whether digital protectionism will achieve the objective of supporting and empowering local tech startups to be globally competitive.

Digital protectionism alone will not address infrastructure shortages such as low broadband speeds, lack of bandwidth and geographical coverage. Another crucial issue is to ensure that the education system and continuous skills development programs are sufficient and accessible for the demands of a burgeoning tech industry. Policies should also be aimed at educating the population about the use and implications of technology.

A culture of regulation may lead to an increase in a priori requirements for tech companies. For example, engaging in certain types of activities may require additional approvals and clearances. It may also increase compliance and management cost.

Such requirements increase operational costs and regulatory risks for tech companies, thereby slowing down innovation and disincentivizing tech development. Hence, there is a weak probability that said policies will lead to better technology or even increase local competencies.

Further, reliance on government limitations on competitors may economically disincentivize local companies to invest in research and development. There is no need to come up with superior tech if the entity’s market position is protected by government-imposed barriers.

B Ownership limitations and A Priori Requirements as Ineffective Tools to Bring About More Democratic Technologies

More importantly, these limitations will not translate to technology that is more democratic and ethical. Such policies may only replace big tech with local oligopolies or a tyrannical government.

For countries with weak institutions, an environment with increased regulatory barriers is also vulnerable to patronage politics and corruption.

The non-tariff trade barriers that are currently existing in South East Asia are illuminating were tech regulations are primarily hinged around ownership limitations. However, it is questionable whether these regulations provide better consumer protection. There is no rule to ensure that algorithms of local tech companies are explainable, or if the processing of personal information of citizens is conducted in a manner which sufficiently informs the data subjects about the extent and purposes of such processing. The Philippines implemented a strict consent-based framework (with criminal consequences for violations) which is even more onerous than the GDPR. However, this only led to long and legalese consent forms. Arguably, such frameworks enabled the legal exploitation of data without empowering privacy rights.

The China experience may further be illustrative. The Chinese firewall was effective in allowing the growth of local technology companies that could go against the likes of Google, Facebook, and Amazon. It helped that China’s population can sustain fenced-in companies without the need for the latter to expand offshore to maximize revenue.

However, such companies are dependent on government imprimatur. The privilege of becoming technology behemoths comes at the price of cooperating with, and largely being controlled by, the Chinese Communist Party. Tiktok for example faced domestic criticism when it tried to sell its US arm. As for the rest of the population, information provided by homegrown platforms enabled governments to crackdown on dissidents. It also allowed Chinese companies and the government to effectively exclude individuals that do not pass certain criteria from accessing certain services.

IV. Conclusion

Digital protectionism or any type of response centered on government regulation may be a misguided approach in solving the economic and ethical challenges attributable to the dominance of US Big Tech. Each country has different issues and more ad hoc solutions should be considered. A reallocation of resources towards raising access to quality education, coupled with an affordable and open telco infrastructure may be better alternatives. Such efforts should be towards educating the general population about the breadth and ability that can be offered by technology. Hopefully, this will pressure the market to provide better and more ethical services.

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