Review of Smyrnaios, N. (2018) Internet Oligopoly: The Corporate Takeover of our Digital World
Smyrnaios, N. (2018) Internet Oligopoly: The Corporate Takeover of Our Digital World,
Emerald (ISBN 9781787692008)
“Internet Oligopoly” is written by Nikos Smyrnaios, Associate Professor at the University of Toulouse, France. The book is a recommendable reading for economists as it effectively challenges the assumptions at the basis of laissez-faire policies and the assumingly efficient self-regulating markets of the so-called ‘new economy’, showing how the internet came to gradually operate under an oligopolistic regime. In it, Smyrnaios advances a substantial critique of the digital political economy by arguing that the commodification of the internet on the one hand, and the use of market power by top internet firms on the other hand, significantly limit real competition in such markets. This has a number of negative spillovers, including lower labour standards and the worsening of employment conditions worldwide.
The book is composed of five chapters. The first two chapters trace the history of the founding period of the internet and both its subsequent privatisation and commodification: ‘Over the period from the 1960s until the beginning of the 1990s, networked computing emerged as a public good but then began to deviate from this initial notion towards a market-centred one’ (p. 15). Chapter 3 focuses on the favourable conditions common to the key actors on the digital markets, enabling them to grow large and consolidate their position to the point of constituting an oligopoly. Chapter 4 provides a critical discussion of global market platforms that exert an unprecedented adaptive force on traditional actors in a variety of economic sectors. Finally, Chapter 5 puts into perspective the advertising dominance of the internet by critically assessing its consequences for the society and, ultimately, for contemporary democracy.
In Chapter 1 Smyrnaios takes the reader on a journey showing her/him how in the early 1980s the US government and the UK government implemented deregulation policies of their respective telecommunications industries, which had previously been subject to state regulation. For instance, by dismantling the American Telephone and Telegraph (AT&T) in 1982, the Regan administration in the US ‘undermined the idea that had previously dominated: namely, that protecting the public interest required a single network under the supervision a public regulatory body’ (p. 24). What followed, according to Smyrnaios, was the convergence of neoliberal economic policies and the belief that the advent of the information society was inevitable. Despite the initial resistance of some countries such as France, the example was soon followed more-or-less substantially by almost all Western countries.
In Chapter 2 Smyrnaios convincingly argues that speculation is somewhat intrinsic to the ‘new economy’: as he observes, from the mid-1990s onwards, the internet proved to be a privileged place for speculation, particularly for financial speculation originating from the ‘unbrilled search for capital gains’ and from the ‘search for investment opportunities in high tech’ – a trend that eventually culminated in the dot-com bubble and its burst (pp. 46-47). The crisis of the digital economy resulted primarily from the over-valuation of the possibilities offered by the internet and the performance of digital firms. Nevertheless, following Smyrnaios’ arguments, one is left questioning pretty much whether any lessons have been learned so far.
Throughout the book, the author of “Internet Oligopoly” sheds light on how market liberalisation and the concurrent deregulation in Europe and North America created favourable conditions that helped to increase the concentration of market power of oligopolistic internet players. This helped a few multinationals, referred to in the book with the acronym ‘GAFAM’ (obtained from the first letters of Google, Amazon, Facebook, Apple and Microsoft, and commonly used in France) to become an oligopoly governing the information at the basis of contemporary communication, transactions, etc.. According to Smyrnaios, their market power is indeed very clear: ‘the internet oligopoly is omnipresent. Its services and products are used on all seven continents by billions of individuals. Apple, Google, Amazon, Microsoft and Facebook are now brands as well known throughout the world as Coca-Cola or McDonald’s’ (p. 68).
As we learn from the book, within the framework of a globalised economy developments in the ‘new economy’ were matched by the worsening of working conditions, originating for instance from the vast number of new possibilities for subcontracting intellectual work and freelance work ‘to an extent never seen before’ (p. 61). As it is by now well recognized, this is not only a problem for the so-called advanced economies, but also for developing countries: ‘The internet oligopoly actors exploit to the maximum the possibilities offered by the globalised economy when organising production. Indeed, they all practice outsourcing to low-cost countries to varying degrees’ (p. 71). In this respect, Smyrnaios effectively shows how the reshaping of the society through the digital economy over the last twenty years has impacted on social and economic inequalities – not solving them, but adding new forms and dimensions of inequality.
In Chapter 4 the Greek scholar refers to the concept of ‘infomediation’, originally used by Canadian researchers Iris Fitzpatrick-Martin and Kimon Valaskakis in late 1970s, in order to further shed light on the fundamental economic role of digital platforms and their relations to the media. As Smyrnaios argues, infomediation is characterised by an intermediary position between a supply and a demand on digital markets; it also serves as a means for selecting information that involves algorithms and mediated social interactions; finally, it favours business models depending on commissions and using data collected from users for marketing purposes and advertising (a topic furtherly discussed in Chapter 5).
Smyrnaios evaluates how vertical integration serves as a leading strategy of the internet oligopoly. The latter is present in a number of markets that are part of the so-called ‘infomediation infrastructure’ and comprise operating systems, consumer electronics, telecommunications networks and centres. As a result of the developments that occurred during the last three decades, the most successful internet firms managed to develop global platforms forcing traditional actors in the cultural industries to adapt and serve the ultimate goal of maximising their profits. Contrary to what is perhaps still the general perception of the internet, the author suggests that ‘the internet oligopoly works less in favour of diversity and pluralism than it does in commodifying and industrialising online culture and information, as well as strengthening financial control over the internet’ (p. 100).
In the conclusion of “Internet Oligopoly” Smyrnaios concludes that the internet nowadays resembles what it originally was thought to oppose, namely computing as a technology of power and economic domination: ‘our uses of the internet increasingly depend on the goodwill of the owners of platforms and infrastructures, whose main concern is satisfying their invisible but omnipresent shareholders’ (p. 147). In providing this argument, he offers a rather dystopian point of view on the internet – one that stimulates the reader to take a critical stance against dominant discourses on the democratic nature of the internet by recognising instead the fact that a criticism of the new centralisation of the internet cannot be separated from the criticism of the neoliberal capitalism: ‘without connecting the two together, it is impossible to propose a coherent alternative path’ (p. 148), one that could perhaps bring us back to the original idea according to which the internet shall be conceived of as a public good (if not a public property).
Selected quotes from the book
‘Despite resistance in several European countries, including France, the new policy of deregulation and privatisation became the dogma of the European Union, not only among the groups that traditionally propounded this doctrine such as the Conservative and neoliberal parties, but even within the political currents that had historically been interventionist, such as the British Labour Party and the French Socialist Party. Throughout the 1990s, the European Commission promoted initiatives in this direction, approved each time by EU heads of state’ (pp. 25-26)
‘The switch of the internet from public service to gigantic market place happened very quickly. In a few years, thousands of commercial websites were created including Google, Yahoo!, eBay and Amazon, popularising what is now called start-up culture’ (pp. 41-42)
‘Hundreds of billions of dollars from sources as diverse as the sovereign funds of the Gulf countries, Russian oligarchs, US hedge funds and European banks were thus invested in the main internet players … Satisfying shareholders has become these companies’ top priority, taking precedence over anything else, such as the interests of internet users’ (pp. 65-66)
‘The rationales of productivity, immediacy and exhaustiveness that dominate on high-audience sites, whose economic models depend heavily on advertising revenue, increase their dependence on third-party sources such as news and public relations agencies’ (p. 136).
Some additional questions for Nikos Smyrnaios (January 2021)
Q1: In what ways are the internet and digital markets different in comparison to other, more traditional markets?
The first characteristic of the internet that breaks with previous media is the fact that it carries data which is basically a non-rival good meaning that there is no restriction nor reduction in its consumption by some due to their consumption by others. Non-rivalry often goes together with non-exclusivity, which means that it is sometimes difficult, if not impossible, to prevent the consumption or use of non-rival goods by anyone who is not prepared to pay the price. This is why many digital goods and services are free for users while funded by advertising, thus generating a “surveillance capitalism” as defined by Soshana Zuboff. Another economic characteristic of the internet is its strong positive externalities, that is to say, the actions of agents have a positive impact on other agents. For instance almost every freely accessible online resource benefits Google’s search engine and every picture uploaded on Instagram by ordinary users is monetized by Facebook. The most succesful internet firms are those that manage to exploit value generated by their users in the form of “digital labor”.
Q2: What about the economic advantage of lower transaction costs on the internet?
Digital networks are also characterized by lower transaction costs than physical markets. As a result, they enable business transactions that were previously impossible from a practical or cost point of view. Reduced transaction costs allow for the generalization of outsourcing and subcontracting, which explains the success of Uber, AirBnb or Deliveroo. Finally, the digital economy is characterized by a winner-take-all logic. These economic characteristics of the internet, have led to two strong tendencies: a) the commodification of entire areas of human activity that were previously not commercialised; and b) the establishment of conditions favourable to the emergence of monopolies.
Q3: In “Internet Oligopoly” you suggest that the interventions of regulators on these markets were missing for a long time. At best, they proved to be largely ineffective. What would be the costs and the consequences if regulators started to intervene now?
Regulators have started to intervene, notably in Europe through the General Data Protection Regulation but also the Digital Services Act. In the United States, many states have started antitrust investigations against Google, Facebook and Amazon. In addition, many countries such as the UK, France and Germany have introduced specific binding legislation targeting oligopolistic internet players such as Google and Facebook, in relation to copyright, taxation or the dissemination of hate speech and disinformation. All these measures are encouraging because they show a political awareness of the harmful effects of this monopolistic concentration. However, there are two points that seem problematic to me: the first is that in most cases governments act without consulting the population with the main objective of defending their political interests. This is the case, for example, of the law against “fake news” voted in France in 2019 by the government of Emmanuel Macron, which puts in place a system of online censorship, against the opinion of all the expert groups (journalists, ONGs, academics, etc.). The second problem is that these initiatives, such as the Digital Services Act, are motivated by a belief in neoliberal principles that see “pure and perfect competition” as the solution to all problems. However, the idea of public service or the perspective of democratic control over the digital giants is never taken into account because it seems too “radical”.
Q4: Could you comment on the Trump ban by social media?
Far from constituting transcendent and autonomous powers, the oligopolistic firms of Silicon Valley are political entities that are the object of internal and external struggles with nothing less at stake than the democratic functioning of the digital public space. The suspension of Donald Trump’s accounts by Twitter, Facebook and YouTube is proof of this. This event generated many criticisms especially among the European left who denounced the arbitrary power of major platforms.
These concerns are obviously justified. On the one hand, cases of arbitrary censorship on these platforms are legion and are not limited to the racist, homophobic and sexist extreme right. Very often professional alternative media are targeted, but also social movements that question neoliberal hegemony, social and environmental injustices or even outright the principle of representative democracy or the bourgeois state (Black Lives Matter, Extinction Rebellion, antifascists, anarchists etc.). In view of the latest developments, one is entitled to wonder whether this counter-hegemonic discourse questioning the established order still has its place in social media. Today, the latter constitute the main means of expression of the representatives of the radical and anti-authoritarian left because of their exclusion from mainstream media (whereas the extreme right is regularly welcomed there). There is therefore a real danger that Trump’s censorship will be used by political and economic power to try to remove from the digital public space any voice that is at odds with the dominant ideology.
On the other hand, pointing out the hypocrisy and incompetence of the platforms is also absolutely justified. For a long time, the latter have accommodated hateful and manipulative speech as long as it discreetly increases “engagement” and therefore advertising revenues. Moreover, disinformation and propaganda campaigns on social media have influenced electoral processes in many countries such as the Honduras, Ukraine, Ecuador or India, and have even claimed numerous victims, as in the case of the Rohingya genocide in Myanmar, fuelled by hate speech on Facebook. We know today that these tragedies have not been avoided for trivial reasons such as the lack of human resources devoted to moderation of content, poor coordination between services or simply the lack of interest and consideration for these countries that constitute “small markets”.
However, all these arguments are not enough to disqualify the historic and intrinsically positive nature of the decision by Facebook, Twitter and Google to silence Donald Trump. For contrary to what is widely believed, this is not an “arbitrary” decision, but an imperative imposed on oligopolistic platforms by a powerful popular movement that reached its peak in the United States following the trauma caused by the events on Capitol Hill, but which preceded it. For years, progressive political organizations, civil rights advocates and anti-racist organizations have been calling on the platforms to silence Donald Trump and his supremacist friends, without success. As time went by, these calls have been joined by platform workers who are beginning to organize and demand the right to participate in decisions that affect the operations of the companies they work for.
At the same time, states and supranational organizations such as the European Union are coming out of their passivity that has lasted more than twenty years and are beginning to take up the question of regulating the digital economy. There is thus a generalized awareness of the exorbitant power of oligopolistic Internet actors and an increasingly strong social demand for their accountability. This demand has pushed certain platforms to gradually form a corpus of regulations that are increasingly political, in the sense that they are led to defend the values that underpin liberal democracies.
Unless we claim public control of the web giants, which is a viable option, it is up to society and its mediators – politicians, researchers, journalists, associations, trade unionists – to go further by imposing a framework of democratic regulation of online political expression on the private companies that are its vectors.
From: pp.2-5 of WEA Commentaries 11(1), April 2021