THE PROBLEM
Everybody knows that there is an imbalance of power and wealth on the internet, skewed massively in favour of the giant internet monopolies; in particular Alphabet and Facebook who dominate, respectively, “search” and “social-networking”, and between them, the digital advertising market.
The COVID-19 pandemic has accelerated by many years the digitisation of our world because people have been compelled to avoid physical contact. British internet users now spend on average more than 4hrs a day on the internet and much of this time is either on the applications of Alphabet and Facebook – which include Google, YouTube, Facebook, Instagram and WhatsApp – or accessed through these applications.
Because of the “network effect” – whereby in both search and social-networking the greater the number of users the more attractive the platform – Alphabet and Facebook are effectively “natural monopolies”, and yet they are not governed or taxed as such. Whereas they should have more regulation and more taxation than the average “normal” business in a competitive industry, they have far less.
Attempts to regulate and tax them are proving futile, due to a lack of international cooperation amongst lawmakers and regulators and also the vast sums Alphabet and Facebook spend on political lobbying. The idea of “breaking them up” is not suitable because barriers to entry would still be too high for new entrants; and anyway, to really break them up you’d have to break up the internet itself.
However, Alphabet and Facebook are not invulnerable and neither should they be allowed to transcend government; rather, the strength of Alphabet and Facebook – the network effect – is also their vulnerability.
AN AUDACIOUS AND ORIGINAL IDEA FOR FIXING THE PROBLEM
In order to take them on, Alphabet and Facebook must be played at their own game; the “network” should be recaptured from them, and the best way to recapture the network is by financially incentivising the users to switch.
However, returning their individual digital advertising values to the users would not provide a great enough incentive, and instead, the users should be incentivised to switch to a National Search and Social Network (“NSSN”) with the lure of free lottery tickets for massive prizes funded by the collected revenues from digital advertising.
Users would receive an equal number of free lottery tickets if they make the NSSN their principal search engine and social-network. Initial prizes should be funded to encourage the switch, however the NSSN will very quickly go viral and then the prizes will be self-funding with the huge revenues from digital advertising.
In 2020 Alphabet and Facebook captured about 80% of the £15bln spent on digital advertising in the UK. Assuming over time the NSSN was able to capture £10bln of revenues and that 10% was used for costs and regulated profits for the operator(s), £9bln would be left. Perhaps half of this, £4.5bln, could be distributed to the government as much needed tax revenues and the other half could be distributed to the users in the form of lottery prizes.
This would amount to a staggering 12 lotteries a day of £1mln! Surely enough to incentivise users to keep using the NSSN?
The regulatory role-model for the NSSN would be the National Lottery, and this is no coincidence, after all the lottery is also based on a network effect; as more people buy lottery tickets, more are inclined to buy tickets because the prize becomes bigger. Currently, without an NSSN, and with Alphabet and Facebook controlling the networks, rather than the users winning the “prize” (vast advertising revenues), the prize is continually won by the platforms. An NSSN would flip the balance in favour of the users and away from the platforms – as befits “natural monopolies”.
The government should launch a public tender – such as it did for the National Lottery in 1994 – and invite different syndicates to form and pitch to create the NSSN, or perhaps a few NSSNs which could coexist. There are many companies which might naturally want to make-up syndicates, across the tmt sectors and also further afield. Perhaps Alphabet or Facebook themselves might pitch?
A thorough investigation would be carried out first – perhaps by the Department of Business – establishing the parameters for the tender and rules for the NSSN. For example: costs and profit margins for the operator(s); data privacy rules; algorithm criteria to protect the general public and especially the young; data storage restrictions so that energy is not needlessly wasted; protection for content publishers; surveillance against nefarious content.
The new Digital Markets Unit which is planned could be the regulator which oversees the NSSN. As it is with the National Lottery, every few years the operator(s) would be reviewed and the NSSN would be up for tender again to ensure ultimate accountability.
The personal data of the users would never be owned by the operators, but would be held in trust by the operators for the users. Algorithms would be totally transparent.
Set-up costs and initial prizes to encourage users to switch could be financed by the issuance of bonds. This would help publicize the NSSN, and would be paid back easily once the NSSN went viral.
Crucially, all sides of the media would support and promote the creation of the NSSN. After all, Alphabet and Facebook have, unfairly, not been paying publishers for content they have been monetising on a huge scale. The general public would get behind this campaign to “reclaim the network”.
The NSSN would be open to anyone from anywhere in the world, and in time there would be a domino effect of NSSNs in different countries connected to each other.
CONCLUSION
An NSSN would be transformational for the economy in terms of redistributing wealth in a way which would also massively free up competition and broaden and increase investment and innovation.
An NSSN would provide an enormous fillip to government finances when we need it the most to help pay for the financial costs of the COVID-19 pandemic.
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