April 10, 2017
For a more in-depth overview of this topic, listen to Episode 68 of the Multinewmedia podcast.
Many people use the phrase "bought and paid for" incorrectly. They assume it to mean something akin to "in the clear" or "debt free." The real meaning of the phrase, however, signifies that something is controlled by corruption, typically fiscal bribery. In this series, the current state of privacy and net neutrality from an American perspective will be explored.
Special interests (another oft-misunderstood term) have reached beyond lobbying into government policymaking and established a horizontal integration like never before seen. They've allowed for the consolidation of content and digital infrastructure companies into behemoths with unfettered access to the personal data and behaviors of private citizens. The United States has taken an additional step toward the erosion of online privacy in the recent reversal of online privacy protections for individuals against ISPs, much to the disapproval of the inventor of the world wide web, Tim Berners Lee.
This multi-piece article (and accompanying podcast episode)will detail how the current attacks on user privacy are simply another round in the attack on net neutrality. However, instead of forcing the creation of an anti-competitive market for bandwidth prioritization, the objective this time is to identify and subvert the content-focused technology companies who typically serve as defenders of neutrality. The digital infrastructure companies, after not being allowed to merge into a U.S. national monopoly in the '90s and thwarted by net neutrality in the '00s, are adopting and utilizing the advertising model to undermine the very same companies they weren't allowed to acquire or charge for prioritization.
Go back 20 or more years and look at a Top 100 listing of the most popular websites. You'll see varied dot-com newcomers sprinkled with the occasional retailer, cable channel, and print newspaper. In the current day, a Top 100 listing of websites may appear to read similarly to those of yester-year, but only if omitting one key detail: ownership. The top 100 websites in the '90s were spread across almost as many corporate entities. Today, companies like Google, Facebook, Amazon, Alibaba, Microsoft, and Verizon (AOL + Yahoo = Oath) dominate the roster with only a handful of American and Chinese independents filling the gaps. Even these one-off sites tend to be for large publicly traded companies, but that's okay... the web has grown up fast and that's to be expected.
Economies of scale in the digitally-connected world are drastically different than you learned in school. Your studies were likely based on physical goods, not digital. Digital goods, because of their nature, have virtually no sense of diminishing returns for companies and also only infrequently exhibit diminishing or negative marginal utility for customers. For instance, would you collect as many mobile apps as you currently do--and, admit it, you do--if you had to store them somewhere physically in your home or office? Of course not. While the differences between physical and digital economics are neither good or bad on their own, these truths allow companies to innovate (or manipulate) actions within markets that are currently unregulated, or at least less regulated than they will be in the future. This also illustrates the uncanny ability for innovative businesses to undermine the regulatory ability of a government comprised mainly of out-of-date and technologically illiterate officials.
Specifically, the cross-section of content and infrastructure comes to mind. Infrastructure companies, like Verizon, have long been tired of being "dumb pipes". They want in on the action, and this is why some in the U.S. government's legislative and executive branches are more than happy to repeal privacy protections and to allow ISPs to sell the browsing behaviors and histories of their customers. Unlike web content providers like Facebook and Google who have long been allowed to sell similar data (more on that in the Privacy section), ISPs had been banned from this activity for several reasons. The primary reason is that an ISP can capture all behaviors and traffic without requiring any type of implicit or explicit opt-in by the end user.
In today's world, the leading content conglomerates are more valuable than the leading infrastructure conglomerates. However, the barrier to entry for content is significantly lower than for infrastructure. This provides infrastructure companies--and others--a plethora of small and mid-size content creators to buy and sculpt into a patchwork content conglomerate resembling Frankenstein's monster. Content companies, on the other hand, have a significantly more difficult time entering into the world of infrastructure.
Infrastructure companies began to make a move towards content in the '90s, but were largely thwarted by regulators. They then attempted to turn their attention towards pay-for-play to extract higher service fees from content companies, but were thwarted as those plans were in violation of net neutrality rules and overthow attempts failed. Now, they've successfully lobbied the U.S. government to repeal privacy protections. While seemingly unrelated, a discussion on privacy illustrates why this is simply another veiled attempt at degrading neutrality.
While content companies can sell user data, doing so requires some form of opt-in on the part of the end user, such as creating an account or signing up for other services and not explicitly opting out of data collection. Companies that collect and sell user data have scaled to become so large that they can essentially track user behavior not only on their own properties, but across the entire Internet. The scale-up in data collection has been made possible because smaller and independent properties utilize, or rely upon, the development and functional tooling offered by larger properties (and their larger development teams). One-click log-ins, comment widgets, monetization and analytical tools all allow large companies the ability to get their tracking code willingly deployed across countless sites that they don't own.
Despite the potential to be considered invasive, this data-for-functionality arrangement has generally been favorable for all parties involved. Large companies benefit from the obvious data collection, smaller properties benefit from increased access to tooling and monetization opportunities, and customers benefit from being served non-interruptive relevant ads for products and services rather than being bombarded by irrelevant messaging utilizing interruption for effectiveness.
The problem with opening similar tracking and sales ability to ISPs is two-fold. First, ISPs see absolutely everything an end user does online through direct network monitoring tools or the use of supercookies. Private browser tabs disable tracking behaviors within a browser, but they can't disable tracking from an ISP. Up until now, ISPs weren't allowed to collect and then sell that user data, and as they gain the ability to do so, private browsing will become impossible without a VPN or other workaround. Even then, techniques exist to use unique computer signatures called fingerprints to target at an individual level well beyond what cookies could ever achieve. The second issue with ISPs monetizing user data is that doing so could sharply hurt the valuation of large content companies. Content companies can track users across almost the entire web, but not everywhere, and this means their data would be incomplete, and therefore less valuable than the data collected by ISPs.
The complete and accurate data that an ISP can provide without end-user consent is vastly more valuable to advertisers than tracking through existing methods. Lower accuracy equates to lower value. Over 25 years of monetization strategy and valuations will likely need to be adjusted, or content companies will further their own invasive techniques such as the use of the aforementioned fingerprints. Considering that content conglomerates in the technology sector are the highest value companies in the United States, and among the top in the world, this presents a situation where American politicians are choosing favorites and enabling infrastructure companies to undermine content companies. In economic terms, politicians are selling privacy rights away and knowingly devaluing the some of the country's most valuable companies to improve the fiscal performance of older technological infrastructure monopolies that were previously denied from absorbing the content industry. We can likely guess that these politicians likely hold more shares and positions with infrastructure companies than with content companies, and have completely abandoned the impartial professionalism of decades past as well as the responsibility to constituents.
Make no mistake that the larger problem exists, at the moment, with infrastructure companies rather than content companies. Infrastructure companies (modern day Verizon, Comcast, Spectrum, etc.) have been on a 30-plus year march towards consolidation and monopoly status. They successfully controlled and stifled cable television technology and limited the potential of the medium. Now, they see the Internet not as competition, but as a chance at redemption. Again, they've attempted to absorb the content industry, make the web pay-for-play, and are now working to devalue content companies through competition-stifling and privacy-invading legislation sponsorship.
Many of the companies that own the largest websites are content companies and support net neutrality, at least publicly, but also seem to be adamantly opposed to competition and may present an increasing threat to the open market as infrastructure companies make legal progress towards anti-competitive objectives. Whether reviewing the history of Verizon (infrastructure) or Facebook (content), or any of the others, a clear pattern becomes visible in their acquisition histories. They buy other companies and shut them down. Most of the time the intent is innocent; they are looking to acquire specific human capital or intellectual property. At other times, the acquisitions tend to appear much more like process or competitive sequestering.
Then there's the final concern that content companies have already begun to implement fingerprint technologies to identify individual computer signatures for tracking even before infrastructure companies received legislative support. Content companies were willing to circumvent their own safeguards of requiring opt-in and offering opt-out in order to achieve even higher data precision for increasing revenues and profit.
In the current business and political climate, regulation is often viewed as a bad term. There is a negative connotation that has been attached by every group from the far-right to the far-left, but these are often no more than political propaganda in order to promote agendas for individual gain. In my view, after all of the facts are reviewed and potential motivations (current or future) are evaluated, the only sensible action is to increase regulation regarding the interactions and ownership capabilities of digital infrastructure and content companies, as well as to regulate end user data collection as a set of consumer-protecting privacy laws.
Or maybe I'm just another "annoying" millennial who sees countless levels of insight and nuance whereas the technologically illiterate politicians from older generations see nothing but old money versus new money. Or more accurately, their money versus all of the other money that they think should be theirs.
For a more in-depth overview of this topic, listen to Episode 68 of the Multinewmedia podcast.
What do you think?
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