Anthony Clayton | The hyperscalers, and why we should worry about them – Part 1

This is part one of a two-part series on the way that the hyperscalers now control our digital world.

The world’s social, economic, and cultural systems are being transformed by the digital revolution. It has already upended the media and communications industries. These used to be organised by infrastructure (radio, television, telephone, print, film), which imposed clear technical and regulatory boundaries. Today, many different services can be handled on a number of networks and technology platforms, so the flow and reach of content are no longer limited by infrastructure, device or geography. News, information, work, entertainment, education, home management, commerce and many other services are all now just streams in an ocean of data.

This convergence has resulted in an exponential increase in opportunities and services as businesses and governments around the world have seen digitisation as a way to make transactions effortless, costless and weightless, removing barriers to competition and improving efficiency. The move to a digital economy was further accelerated by the COVID-19 pandemic as many companies adapted to working with a distributed workforce. Many now work remotely and meet on conferencing platforms or have personalised virtual offices and avatars for meetings.

Even more momentous changes lie ahead as digitisation removes the remaining non-regulatory barriers between different sectors. For example, there are developing countries where the most reliable way to store and transfer funds is via the mobile phone network. The service providers are still regulated as phone companies rather than as banks, so the regulatory framework will have to be largely rewritten as technology now allows competition to enter a market from completely different sectors. The UK is planning an even more comprehensive shift to Open Finance, with third-party Apps providing payments, money management and investment services, which could make many existing financial service providers redundant. Education, too, is being transformed. The global online education market was worth about US$19 billion in 2019 but is projected to be worth about US$350 billion by 2025 as students migrate online for cheaper, better education, and the rapid loss of market share will be fatal for a number of incumbent universities. Estonia is a leader in the digital revolution. Their national e-Governance framework has made 99 per cent of public services available online 24/7, including schools, universities, taxes, and voting. As a result, Estonia now has one of the fastest, cheapest, most efficient, open, transparent, and trusted systems of government in the world and one of the most business-friendly economies.

SLOW TO SEE CHANGES

Jamaica has been a little slow to see these changes as opportunities, which is surprising for the country that was one of the first in the world to have more mobile phones than citizens. It is important that Jamaica does not remain in the slow lane, however, as the digitisation of the economy is a vital step towards building a better future. A comprehensive, integrated digital ecosystem is an increasingly important determinant of competitiveness.

However, the potential of the digital transition is threatened by the aggregation of power by hyperscalers, a small group of companies that have achieved massive scale and now control the public spaces on the Internet where people meet, talk, trade, and connect. Facebook has the most users (over two billion), but also owns WhatsApp, which has the third largest number of users (1.5 billion), and Instagram, which has 1 billion users. The second largest social media platform is YouTube, with 1.9 billion users, which is owned by Google, which controls about 77 per cent of all Internet searches, while Amazon controls about half of the cloud, more than the next three biggest companies combined. So a handful of companies now control much of the Internet world.

This concentration of monopoly power by the hyperscalers creates an extraordinary potential for multiple abuses. The first is the largely invisible exploitation of personal information. The technology firms can now track everything that everyone does online. They know every social media post; every photograph stored or shared; every search, every website visited, and every product ordered. They have comprehensive records of everyone’s behaviour, which are translated into detailed profiles that are sold to advertisers. Many of the people who complain that a national identity scheme would be a gross intrusion into their lives have given much more personal information to Facebook and allowed access into every part of their lives without even noticing.

The second is coercion. In February 2021, Australia proposed to introduce a code to oblige Facebook and Google to pay publishers for their content. Google complied, but Facebook was willing to cut off Australia to force the government to change the law. They banned all users from sharing links to Australian news sources, stopped Australian publications from hosting any of their own content, and prevented Australian users from sharing any news links at all. They also prevented users from seeing posts on the pages of some government departments, health and medical providers, and fire and emergency services. This backfired badly. The Australian prime minister said that Facebook’s move had made his government even more determined to pass the law and that Facebook’s decision to cut off essential information on health and emergency services confirmed concerns about the behaviour of technology companies that think they are more powerful than governments.

The third is that the technology firms have acted aggressively to eliminate competition. Traditional media firms, in particular, are being destroyed in great numbers. They are competing against technology firms that operate, largely unregulated and untaxed, and are capturing most of the advertising revenue. As a result, many of them are bleeding to death; they are losing their audience and income. Over the last decade, hundreds of traditional media companies around the world have shut down. This has removed most of the gatekeepers and much of the quality control in media, leaving the world far more exposed to malicious rumours and fake news. Social media has little editorial control, regulation, or legal recourse against malicious or misleading information.

REINTRODUCE COMPETITION

When oil and telephone companies became giant monopolies on this scale, governments had to break up the corporations to reduce their coercive power and reintroduce competition to the market. The technology companies, however, have argued that their dominance could be quickly overturned by the next technological innovation, so they are still exposed to competition. Legislators largely accepted this argument until recently, but they are now less inclined to do so in the wake of revelations that extremists, political manipulators, criminals, and terrorists are now very active in some of the spaces, and social media is being used to spread hate speech, lies, and propaganda; influence the outcome of elections; and radicalise youth. The Christchurch massacres in New Zealand in March 2019 were planned for social media, and the killings were live-streamed, which means that social media does not just provide a platform for extremism and terrorism, it can also encourage it, allow it to propagate and give it global reach.

Social media has also been a gift for repressive regimes, and Facebook is currently sending out warning notices to 48,000 people, including journalists, dissidents, critics of authoritarian regimes, human rights activists and their families, who it discovered were being spied on by surveillance operatives who had created fake accounts to deceive their targets, collect intelligence about them, manipulate them, and compromise their devices.

Facebook, in particular, has been accused of prioritising its growth while taking little or no responsibility for the murders and mass killings that have resulted from the messages of hate and violence that it has disseminated or for the teenage anorexia and suicides that have resulted from harmful messages and shaming. As the 2021 Nobel Peace Prize winner, Filipino-American journalist, Maria Ressa said, Facebook’s algorithms “prioritise the spread of lies laced with anger and hate over facts”. Society has been made increasingly violent and polarised because conspiracy theories and malicious accusations generate so much additional traffic and revenue for the platforms, but companies like Facebook have been reluctant to acknowledge the extent to which their business has benefited from evil.

Anthony Clayton is professor of Caribbean Sustainable Development. Send feedback to columns@gleanerjm.com.