« Back to Posts

Google Facebook public utilities regulation

Will Trump Turn Facebook, Google Into Public Utilities Even As It Dumps Net Neutrality?

It may be one of the more unlikely headlines to come out of the Trump Administration lately (and yes, I realize that may be saying quite something):TheIntercept.com reports that senior Trump advisor Steve Bannon is pushing for tougher regulations on Facebook and Google because of their growing market power in advertising and beyond.

In fact, Bannon wants the government to declare the Internet duopoly, which dominates the online advertising business, as public utilities, because they’re too big, too powerful and too integrated into the very fabric of most people’s (and businesses’) life online.

This call from one of Trump’s most influential advisors to regulate the Internet giants comes at exactly the moment the Federal Communications Commission is considering dismantling Obama-era net neutrality laws. Cynics among you might point out that both Facebook and Google joined this month’s Day of Action protesting those plans (though Wired criticized both for their low-key protest methods). Is Bannon dangling a Damocletian sword over Facebook and Google, essentially threatening them with what would be a transformative new level of intrusive regulation?

It’s true that Bannon is hardly the first person to propose changes in the way the U.S. government regulates the Internet giants. Some have called for changes in antitrust law to keep up with the very different business realities of an era where scale and network effects can create market dominance far beyond the dreams of either former World’s Richest Man John D. Rockefeller or long-ago U.S. Sen. John Sherman.

The success of Google and Facebook – both reported another huge quarter of earnings and increasing dominance of the digital ad market (Google up 18 percent, Facebook up 47 percent) – has led advertisers to call for more alternatives or other regulation.

Just last week, publishers said they will seek an exemption from Congress to antitrust laws so they can negotiate en masse with Google given its market power. Last month, the European Union fined Google $2.7 billion for favoring its own comparison-shopping network over rivals in its search results.

So Bannon may be concerned about the market power of Google and Facebook, and believes a move to regulate them as utilities would be in the public interest. Or he may be seeking to mute the giants’ opposition to other regulatory efforts that matter a lot to big Internet service providers such as Verizon.

Even Amazon may not be completely immune to calls for enhanced regulation, especially after it announced a $15 billion acquisition of Whole Foods and sent the stock prices tumbling for other grocery chains by roughly a quarter. Amazon’s interest in delivering restaurant-made meals to clients has had a similar impact on food-delivery services such as Blue Apron that were already struggling to get in the black. And  Amazon has now begun distributing its own movies, beginning with Woody Allen’s latest potential Oscar contender, “Wonder Wheel.” As Variety put it, taking on distribution, alongside the $4.5 billion Amazon plans to spend on content this year, is “putting it on the path to becoming a full-fledged film studio.

The latest call for reconsidering Amazon’s significant influence came this week in the Washington Post, where an op-ed by law student Steven Pearlstein questioned whether current antitrust law is even able to regulate the realities of a winner-take-all digital economy that allows companies with scale and network effects to dominate all comers.

It’s worth noting, however, that Amazon (which also had a good, if not great quarter) has an ad sales unit that it is scaling up, according to executives on its earnings call. But the ad unit claims less than 1 percent of the global digital ad market, and is small enough compared to the rest of Amazon that it’s lumped in with “other,” in earnings reports.

All of this, of course, can make one’s head spin. Bannon, no friend of mainstream publishers, pushing for regulation of the two giants that have most complicated those publishers’ operations the past 15 years. But politics, as they say, can make for strange bedfellows indeed.