Could Global Public Companies Replace Internet Media Monopolies ?

“That means, if we’re going to have credible, independent, competitive news media – and it will be digital – the resources are going to have to come from the public. The great challenge we face in democratic societies is how do we do that? All countries need to be looking at that very seriously.”

Excerpted from an interview of Sally Burch with Robert McChesney:

– Coming back to the issue of monopolies… in a globalized economy, global political agreements and institutions are needed to establish the necessary rules, controls and checks on its functioning, in the public interest (as most nation states have to limit monopolies at the national level). But these international spaces are increasingly captured by the same global corporations that they should be controlling. With respect to the Internet, what do you see as the key issues to take on in terms of global governance?

– I think your question is so good that it has part of the answer, because global trade, economic and governance arrangements are crucial, especially for the Internet. Unfortunately, because there is so much money now in the Internet, these governance arrangements are dominated by huge monopolistic companies that are so wealthy and so powerful that they can call on the US government to be their private police force. The global function now of the US government is to protect the interests of these private monopolies. It never does anything against their interest. That means that the ability of nation states in Europe, Latin America, Africa or Asia to countermand these pressures, to set up their own autonomous digital realm, is much more difficult without effectively taking on the entire economic structure of the world.

– You have been involved in some of the big battles taking place in the US around freedom, rights, democracy and the Internet. What do you see as the main issues at present?

– In my view the big issues in the US, and I think to varying degrees worldwide, are threefold. First, on the issue of getting serious funding for independent, non-profit, non-commercial, uncensored and competitive news media institutions, at the local and national level, we are working with colleagues on the idea of having a US$200 voucher of federal money that anyone can give to a news medium of their choice. So you’d have a huge public subsidy of non-profit news media, but the government wouldn’t control who gets the money, the people would.

The second great issue in this country – and probably everywhere – is that control over access to Internet and to cellphones is limited to just three companies: Comcast, Verizon and AT&T. There are a few other companies in the game, like Sprint and T-Mobile, but the big three set the terms and everybody else follows. They have divided up the market like a cartel, they don’t compete with each other, their prices are high so Americans pay an incredible amount of money for cell phones and Internet access for a very mediocre service. It’s really outrageous. We need a campaign in the US – or internationally – to take Internet service provision out of the hands of private monopolies, and make it like the post-office. Internet access should be a human right; the government should run it and then the costs would come tumbling down. It will be a difficult fight, because these companies are world-class lobbyists, they own all the politicians, but their existence is really illegitimate. They do nothing of value, except gouge us for super-monopoly profits to give us lousy service.

The third area –and this brings us back to the question of natural monopolies – is that there comes a point where you have three choices in a democratic society about how you deal with monopolies. Now, the way economists use the term monopoly basically means a company that has so much market share that it can set prices on the whole industry and it can determine how much competition it has. If it wanted to rub everyone out of 100% of the market, it could probably do it, but that would hurt its profits, so it settles for a lower percentage of the market and less people stay on the margins, but it gets the maximum profit it can in the industry. That’s the sort of monopoly world we’re looking at. John D. Rockefeller, at the peak of his Standard Oil monopoly, did not have 100% of the oil market in the US, I believe his peak percentage was in the low 80s, but he was in a situation where if he wanted to, he had the power to lower the price to drive people out of business. It just wasn’t in his interest to do so. Google, Apple, Amazon, Facebook, eBay and Paypal all have Standard Oil type of monopolies, and as a rule the only competition they face in their core monopoly markets comes from the other companies. So Google has a successful search, then of course Microsoft will have a competitor one. There are no independent companies competing with them, as they all get bought up along the way.

So what are we going to do about these monopolies that are completely antithetical to democratic theory? This isn’t even a progressive notion. Milton Friedman – the right-wing conservative economist, whose legacy in Latin America, thanks to the Pinochet era, is quite dark – was the first one to argue that the defense of capitalism in a democratic society was that the people who ran the economy didn’t run the government. Power was diffused and that allowed freedom to prosper, unlike feudalism, unlike existing communism then, where the people who ran the government also ran the economy. The key to Friedman’s argument was that the economic market had to be competitive. If it was dominated by a few giant firms, those giant firms would invariably and inevitably take over the government, and then that whole premise of democracy collapses like a house of cards. That’s why, in democratic theory, from both the right and the left, monopoly economic power has always been a crisis.

In that context, there are three choices of what society can do. One, you can keep the private monopoly power and then try to regulate it in the public interest. In the US we did it for a long time with the telephone company AT&T and we still try to do it a little with our phone and cable companies. But the evidence is that it doesn’t work. These companies are too big, they capture the regulators, they own the government and the regulation is largely ineffectual; so you still have monopoly gouging you and the monopolists run the government. That’s really not a good solution.

The second solution is to try to break up the monopoly into smaller units that would actually compete. So instead of having one oil company, such as Standard Oil, you would break it up into 5, 10 or 15 that would compete with each other and give you the benefits of market competition without having the detriments of monopoly control of the government. Unfortunately, in the case of the Internet that’s really not possible. Because of network effects, they become monopolies very quickly because that’s the logic of the technology. There’s no way to have competing search engines because people would gravitate to the best one and all the others would go out of business.

So with natural monopolies, you have only one course left, and it was Milton Friedman’s mentor who actually said this. He said, even if you have free market capitalism, you need to socialize and nationalize the monopoly companies, because otherwise they will steal profits from smaller businesses and charge them and consumers higher prices, and they will corrupt market economics from working efficiently, just to their benefit. So even those who truly respect and desire market economics should want to socialize those larger monopolies that are impossible to be competitive.

– Might that mean nationalizing or socializing Google or Microsoft…?

– Well, that’s the conversation we’ve got to have, ultimately. We can start now, or we can wait for 20 years and talk about it then, but eventually we’ll have to do something along those lines. If you look at the 30 most valuable companies in the US today, in terms of their market value, 12 of them are Internet monopolies; the ones I’ve just named and a few others. They completely dominate the American political economy (if not the world political economy); they are the vibrant force, such as it is, of capitalism today. This sort of economic power translates into complete control over the government. In America, we always talk about the too-big-to-fail banks that got the huge bailout. As senator Dick Durbin from Illinois said, they frankly own the government. They own Congress, they get their way with whatever they want. Well there are only two or three of those banks among the 30 largest firms in America, but there are 12 Internet monopolies. So if we’re serious about addressing monopoly power as a threat to both the economy and to political democracy, if we’re serious about reinvigorating democracy, even if one’s a free-market person, then sooner or later we’re going to have to address this issue of monopolies and I would say the sooner we start having that conversation the better.

– In the case of global monopolies, would that mean looking at the possibility of having global public companies?

– These are really interesting questions, and I think that in America we haven’t had that debate anyway near enough, because our markets are so enormous and the companies are based here. We think in terms of national solutions being sufficient, since we have the companies here that we need to deal with. I think, though, as soon as one crosses the border to any other country in the world, the debate has to change, because then, clearly, purely national solutions have real limits to them, even in theory, and international or regional solutions become much more important. But at this point of the discussion I become a student, not a teacher.”

1 Comment Could Global Public Companies Replace Internet Media Monopolies ?

  1. AvatarPatrick S

    Interesting article, thanks.

    I’ve long had an inkling that Facebook etc would become like railroads … massive entities that are in a sense the basic infrastructure of their time for non-local interaction, commerce, etc. Where a few ‘barons’ could battle it out for dominance in the early days and the winners make massive $$ in the process.

    Most countries eventually nationalised railroads in the 20th century as a recognition of benefit of having these in public hands (though in the US I understand some of the tracks are privately owned by freight companies, so perhaps were never nationalised like Amtrak?). Though with neoliberalism some of these have been re-privatised.

    In Australia in the 1990s we privatised our previous public telecommunications provider. While there is some level of market competition as a result, Telstra (former public provider) is still the dominant player. We’ve had a hell of time trying to upgrade to a fibre-to-the-home optical network since 2007, and this privatisation seems to play into that.

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