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Big Tech Has Become Way Too Powerful -Robert Reich

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Conservatives and liberals interminably debate the merits of “the free market” versus “the government.” Which one you trust more delineates the main ideological divide in America.

In reality, they aren’t two separate things. There can’t be a market without government. Legislators, agency heads and judges decide the rules of the game. And, over time, they change the rules. The important question, too rarely discussed, is who has the most influence over these decisions and in that way wins the game.

Two centuries ago slaves were among the nation’s most valuable assets, and after the Civil War, perhaps land was. Then factories, machines, railroads and oil transformed America. By the 1920s most working Americans were employees, and the most contested property issue was their freedom to organize into unions.

Now information and ideas are the most valuable forms of property. Most of the cost of producing it goes into discovering it or making the first copy. After that, the additional production cost is often zero. Such “intellectual property” is the key building block of the new economy. Without government decisions over what it is, and who can own it and on what terms, the new economy could not exist.

But as has happened before with other forms of property, the most politically influential owners of the new property are doing their utmost to increase their profits by creating monopolies that must eventually be broken up.

The most valuable intellectual properties are platforms so widely used that everyone else has to use them, too. Think of standard operating systems like Microsoft’s Windows or Google’s Android; Google’s search engine; Amazon’s shopping system; and Facebook’s communication network. Google runs two-thirds of all searches in the United States. Amazon sells more than 40 percent of new books. Facebook has nearly 1.5 billion active monthly users worldwide. This is where the money is.

Despite an explosion in the number of websites over the last decade, page views are becoming more concentrated. While in 2001, the top 10 websites accounted for 31 percent of all page views in America, by 2010 the top 10 accounted for 75 percent. Google and Facebook are now the first stops for many Americans seeking news — while Internet traffic to much of the nation’s newspapers, network television and other news gathering agencies has fallen well below 50 percent of all traffic. Meanwhile, Amazon is now the first stop for almost a third of all American consumers seeking to buy anything. Talk about power.

Whenever markets become concentrated, consumers end up paying more than they otherwise would, and innovations are squelched. Sure, big platforms let creators showcase and introduce new apps, songs, books, videos and other content. But almost all of the profits go to the platforms’ owners, who have all of the bargaining power.

Contrary to the conventional view of an American economy bubbling with innovative small companies, the reality is quite different. The rate at which new businesses have formed in the United States has slowed markedly since the late 1970s. Big Tech’s sweeping patents, standard platforms, fleets of lawyers to litigate against potential rivals and armies of lobbyists have created formidable barriers to new entrants.

The patent system is crucial to innovation. The law gives 20 years of patent protection to inventions that are “new and useful,” as decided by the Patent and Trademark Office. But the winners are big enough to game the system. They make small improvements warranting new patents, effectively making their intellectual property semipermanent. They also lay claim to whole terrains of potential innovation including ideas barely on drawing boards and flood the system with so many applications that lone inventors have to wait years. The White House intellectual property adviser Colleen V. Chien noted in 2012 that Google and Apple were spending more money acquiring patents (not to mention litigating them) than on doing research and development.

Antitrust laws used to fight this sort of market power. In the 1990s, the federal government accused Microsoft of illegally bundling its popular Windows operating system with its Internet Explorer browser to create an industry standard that stifled competition. Microsoft settled the case by agreeing to share its programming interfaces with other companies. But since then Big Tech has been almost immune to serious antitrust scrutiny, even though the largest tech companies have more market power than ever. Maybe that’s because they’ve accumulated so much political power.

In 2012, the staff of the Federal Trade Commission’s Bureau of Competition submitted to the commissioners a 160-page analysis of Google’s dominance in the search and related advertising markets, and recommended suing Google for conduct that “has resulted — and will result — in real harm to consumers and to innovation.” But the commissioners chose not to pursue a case. Investigators also found evidence that Google was pushing its products ahead of competitors’ on search results, though no legal action was recommended on this point.

It’s unusual for commissioners not to accept staff recommendations, and they didn’t give a full explanation. The F.T.C. noted a competing internal report that recommended against legal action, but another plausible reason has to do with Google’s political clout. Google is now among the largest corporate lobbyists in the United States. Around the time of the investigation the company poured money into influencing both the commissioners and the commission’s congressional overseers.

Google is heading into a major fight with antitrust officials in the European Union for some of the same reasons the F.T.C. staff went after it. Not incidentally, Europe is also investigating Amazon for allegedly stifling competition in e-books, and Apple for doing the same in music. While many on this side of the Atlantic believe Europe is taking on these tech giants because they’re American, another possible explanation is that Google, Amazon and Apple lack as much political clout in Europe as they have here.

Economic and political power can’t be separated because dominant corporations gain political influence over how markets are maintained and enforced, which enlarges their economic power further. One of the original goals of antitrust law was to prevent this.

“The enterprises of the country are aggregating vast corporate combinations of unexampled capital, boldly marching, not for economical conquests only, but for political power,” warned Edward G. Ryan, the chief justice of Wisconsin’s Supreme Court, in 1873. Antitrust law was viewed as a means of breaking this link. “If we will not endure a king as a political power,” Senator John Sherman of Ohio thundered, “we should not endure a king over the production, transportation and sale” of what the nation produced.

Sherman’s Antitrust Act easily passed Congress and was signed into law by President Benjamin Harrison on July 2, 1890. Twelve years later, President Teddy Roosevelt used it against the Northern Securities Company, which dominated rail transportation in the Northwest. In 1911, President William Howard Taft broke up the Standard Oil empire.

The underlying issue has little to do with whether one prefers the “free market” or government. The real question is how government organizes the market, and who has the most influence over its decisions. We are now in a new gilded age similar to the first Gilded Age, when the nation’s antitrust laws were enacted. As then, those with great power and resources are making the “free market” function on their behalf. Big Tech — along with the drug, insurance, agriculture and financial giants — dominates both our economy and our politics.

Yet as long as we remain obsessed by the debate over the relative merits of the “free market” and “government,” we have little hope of seeing what’s occurring and taking the action that’s needed to make our economy work for the many, not the few.

 

source: https://www.linkedin.com

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ONEPLUS IS GOING TO START MAKING TVS

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OnePlus is is getting into a new line of business: making TVs. Best known for its phones, China’s OnePlus also has a small catalog of really good accessories like wireless earphonesand surprisingly awesome backpacks, though nothing as complex or expensive as a television set. In announcing the news on the OnePlus online forums, company chief Pete Lau describes it as “the first step in building a connected human experience.”

Every hardware manufacturer is now looking intently at ways to monetize the smart home space. Samsung and Huawei recently announced smart speakers, Apple and Google already have the HomePod and Google Home, respectively, and Microsoft and Sony are old incumbents with their Xbox and PlayStation consoles. OnePlus has decided to make its entry point into this market the TV itself, which has always been at the center of home entertainment, though often with the help of other connected devices. Reading Lau’s teaser announcement, the OnePlus TV — which so far only has a project name, no timeline or specs have been revealed — will serve as the connectivity hub for OnePlus’ future vision of the smart home.

The OnePlus smart TV will be developed by a new division within OnePlus, led by Pete Lau himself. Still at the earliest stages of development, OnePlus is currently seeking input from its fans, as it often does, about what their priorities with a future smart TV will be.

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AMAZON IS REPORTEDLY BUILDING A FREE STREAMING VIDEO SERVICE FOR FIRE TV OWNERS

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Amazon is said to be prepping an ad-supported streaming video service; it’ll be available to folks who own any of the company’s Fire TV streaming dongles and set-top boxes, reports The Information.

It’ll be separate from Prime Video, which offers a range of licensed shows and movies, as well original content produced by Amazon, to people who are subscribed to Prime.

Amazon's latest streaming device is the Fire TV Cube
Credit: Amazon
Amazon’s latest streaming device is the Fire TV Cube

Do you like good gadgets?

Those sweet cool gadgets?

Oh, yeah

The idea behind this upcoming service, which is dubbed Free Dive, is to help Amazon bring in more revenue through advertising. Ads presently account for a small fraction – about $2 billion out of more than $200 billion – of its annual revenue, but they offer higher margins than retail, and are one of Amazon’s fastest growing earners company-wide.

To that end, the company’s been selling ad space on its site, and is slated to run ads during live sporting events on Prime Video. It also turned off ad-free viewing on Twitch – its game video streaming service – for Prime subscribers earlier this month.

Free Dive could give Amazon a chance to rival Roku, which offers a similar ad-supported streaming service for owners of its devices and is expected to reach 59 million users by the end of 2018. Roku also made its ‘Channel’ service available via the web earlier this month to folks in the US, so you don’t need the company’s hardware to access it. It’ll be interesting to see if Amazon follows suit – and how it plays its cards with customers across the globe, especially in cost-conscious markets like India, where it’s expanding its media offerings.

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AMAZON SETS ITS SIGHTS ON THE $88 BILLION ONLINE AD MARKET

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Verizon doesn’t sell its mobile phones or wireless plans over Amazon. Nor does it offer Fios, its high-speed internet service. But Verizon does advertise on Amazon.

On Black Friday last year, when millions of online shoppers took to Amazon in search of deals, a Verizon ad for a Google Pixel 2 phone — buy one and get a second one half off — could be seen blazing across Amazon’s home page. And on July 16, what Amazon calls Prime Day, an event with special deals for its Prime customers, Verizon again ran a variety of ads and special offers for Amazon shoppers, like a mix-and-match unlimited service plan.

Amazon, which has already reshaped and dominated the online retail landscape, is quickly gathering momentum in a new, highly profitable arena: online advertising, where it is rapidly emerging as a major competitor to Google and Facebook.

The push by the giant online retailer means consumers — even Prime customers, who pay $119 a year for access to free shipping as well as streaming music, video and discounts — are likely to be confronted by ads in places where they didn’t exist before.

 

In late August, some gamers were angered when Twitch, a video game streaming service acquired by Amazon in 2014, said it would soon no longer be ad-free for Prime members unless consumers paid an additional $8.99 a month for a premium service called Twitch Turbo.

Amazon derives the bulk of its annual revenue, forecast to be $235 billion this year, from its e-commerce business, selling everything from books to lawn furniture. Amazon is also a leader in the cloud computing business, with Amazon Web Services, which accounts for around 11 percent of its revenue but more than half of its operating income. But in the company’s most recent financial results, it was a category labeled “other” that caught the attention of many analysts. It mostly consists of revenue from selling banner, display and keyword search-driven ads known as “sponsored products.” That category surged by about 130 percent to $2.2 billion in the first quarter, compared with the same period in 2017.

Those numbers are a pittance for Google and Facebook, which make up more than half of the $88 billion digital ad market. But they come with big and troubling implications for those two giants.

Much of online advertising relies on imprecise algorithms that govern where marketing messages appear, and what impact they have on actual sales. Here, Amazon has a big advantage over its competitors. Thanks to its wealth of data and analytics on consumer shopping habits, it can put ads in front of people when they are more likely to be hunting for specific products and to welcome them as suggestions rather than see them as intrusions.

Amazon is gaining in advertising when the public perception of Google and Facebook has soured. In addition, some advertisers have yet to return to YouTube, a growing ad channel for Google, after brands like AT&T were found appearing adjacent to videos that promoted racism or terrorism.

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