On Facebook, Regulation, and Unintended Consequences

 

Among my takeaways from Facebook boss Mark Zuckerberg’s whirlwind Washington tour is that Congress thinks the status quo is unsustainable. Of course some politicians might think the “status quo” is the data privacy reality before the pre-Cambridge Analytica scandal. But the social media platform has announced a number of steps to tighten things up since then.

Yet none of those voluntary measures will stop legislators from trying to push new rules on Facebook. As Sen. John Kennedy, a Louisiana Republican, told Zuckerberg:

Here’s what’s going to happen — there are going to be a whole bunch of bills introduced to regulate Facebook. It’s up to you whether they pass or not. You can go back home [and] spend $10 million on lobbyists and fight us, or you can go back home and help us solve this problem.

Of course writing a bill is a whole lot easier than building enough consensus to pass one, especially in a contentious Congress in a midterm election year. Also consider that the Trump administration has made a big deal about deregulating American business. Hastily slapping new rules on one of America’s most successful and innovative technology companies would seem to cut against that. Indeed, one of Zuckerberg’s talking points listed in his notes addresses Facebook’s role as an American champion company of sorts: “Break up FB? US tech companies key asset for America, break up strengthens Chinese companies.”

But antitrust action seems a far less likely legislative remedy than regulation. After all, policymakers already have a handy model, Europe’s General Data Protection Regulation, to guide their thinking. What should also guide their thinking is the unintended consequences of a new massive regulatory scheme. Like what? How about actually reducing competitive threats to Facebook and helping cement its strong incumbency. On this point, I found the following analysis by Ben Thompson, laid out in a recent episode of his Exponent podcast, to be instructive:

It’s interesting to think about what that regulation might look like. The obvious answer, and Zuckerberg was basically saying as such in these interviews this week, is “Well people really want their data locked down. They value their data being locked in.” It’s so self-serving, but it’s also sort of inevitable. The answer is going to end up being don’t share data with anyone ever, which at the end of the day is not exactly the worst outcome for Facebook because they already have all the data, so now they don’t need to share it with any would-be competitors.

This is a fundamental challenge here. If you think Facebook is too large and is too powerful and you want competitors to come along, and I’ve proposed this, you need some sort of data portability. And by data portability I don’t just mean all your photos and pictures and all that — not just, “Oh, GDPR, that’s data portability.” Yeah, you have to have an API to export all your photos and status updates and all that sort of stuff. But you know what [GDPR] explicitly bars? Exporting stuff about your friends, identifying information about your friends. Guess what is the most valuable data that Facebook owns: The connections, the network.

We’re barreling toward this world where yes Facebook may get regulated, but that regulation will do nothing but entrench their position and make it that much harder for a competitor to come along, particularly when that competitor is not going to be able to take some of the shady shortcuts that other companies may have taken in the past to acquire your data.

What’s the other way that companies get networks? They use your contact book. . . . And you might think that’s a bad thing, but imagine if that didn’t exist. Imagine you were trying to build any sort of social network, any sort of community-based product and Apple locked down contacts, Android locked down contacts, Twitter locked down their graph, Facebook locked down their graph — you have to start from absolutely nothing, there’s no way to bootstrap it. And this is where we are barreling towards. And it’s arguably an even greater problem than the one we are trying to prevent.

Basically Facebook ruined it for everyone, by giving away so much data that the end result is going to be all data-sharing is going to be banned. And again, what is most needed is a way to export the friend graph of who your friends are. There is no perfect solution where you have perfect privacy and you have competition in these spaces. There has to be a balance here.

To me, the reasonable balance is you can export your friends’ names and email addresses, because those are the identifying information. We can have a debate about this, but the point is that debate is barreling toward not happening at all. We are just going to have total walls put up between these services, and it will be terrible for competition, and Facebook will end up as the officially-sanctioned data-holder for everyone.

Published in Business, Economics, Technology
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There are 6 comments.

  1. Member

    Face Book may be a threat, but it’s a threat that must face time, competition, bureaucratic bloat, and like every giant business that has ever existed it will be cut down to size, unless, of course, it is regulated. Then it will develop rules it can live with that kill competition and give it market leverage. It’s not as if we haven’t been down this road before. There may be a better way and some clever competitor will figure it out if we don’t lock it into a symbiotic relationship with our government. Our government is and will remain the long term threat, because that’s the nature of governments.

    • #1
    • April 13, 2018 at 1:27 pm
    • Like
  2. Member

    Going down the OP’s described path definitely raises the specter of regulatory capture, probably aided by a willing Deep State. There is another way:

    Break them up. The breakup of the old AT&T provides a precedent. Back in the day they whined that that would be impossible, since they managed the database of phone numbers. That was moved to a third party – that’s where number portability came from – and we managed to live through it. There is a modern equivalent: Online identity and authentication. Move that from the proprietaries to a third party, and then break up Facebook, Amazon, Twitter et al along functional lines: search back in one bucket, photo sharing, chat, etc. each in their own. Integration of identity across them only by permission of the individual.

    The FAANGs have been given a pass by the CDA and other regulation with the understanding (and in the CDA an explicit requirement) that they act as neutral, non-editorial platforms, IOW common carriers. They have all repeatedly and obviously violated that neutrality, both censoring and playing favorites, and deserve the consequences.

    • #2
    • April 13, 2018 at 1:55 pm
    • Like
  3. Member

    Andy Kessler’s solution solves all problems: vest title, ownership, and rights to each person’s data in that person. The application (FB) can use aggregate and anonymized data without consent, but must get specific consent each time to share any personalized data. Period. This should be at least as restrictive as HIPAA is for health care data.

    • #3
    • April 13, 2018 at 2:27 pm
    • 2 likes
  4. Member

    Locke On (View Comment):

    Going down the OP’s described path definitely raises the specter of regulatory capture, probably aided by a willing Deep State. There is another way:

    Break them up. The breakup of the old AT&T provides a precedent. Back in the day they whined that that would be impossible, since they managed the database of phone numbers. That was moved to a third party – that’s where number portability came from – and we managed to live through it. There is a modern equivalent: Online identity and authentication. Move that from the proprietaries to a third party, and then break up Facebook, Amazon, Twitter et al along functional lines: search back in one bucket, photo sharing, chat, etc. each in their own. Integration of identity across them only by permission of the individual.

    The FAANGs have been given a pass by the CDA and other regulation with the understanding (and in the CDA an explicit requirement) that they act as neutral, non-editorial platforms, IOW common carriers. They have all repeatedly and obviously violated that neutrality, both censoring and playing favorites, and deserve the consequences.

     

    That puts the DOj deep in the middle. I don’t like the government in this area at all because there will be capture or take over nothing good can come of it. We broke up At&t because it had been captured because of our regulations in the first place. We set about to uncapture it. We know the risks and have to find ways around them if we must, but I’m not sure we must.

     

    • #4
    • April 13, 2018 at 3:30 pm
    • Like
  5. Member

    Since my last post on the last Facebook hearings post by Jim was ahem “moderated” out of existence for quoting directly from that salacious firebrand and sitting Senator Ted Cruz, I will just try to paraphrase him this time.

    For reference of the law germane to the subject, Section 230 of the Communications Decency Act says ““No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider” (47 U.S.C. § 230). In other words, online intermediaries that host or republish speech are protected against a range of laws that might otherwise be used to hold them legally responsible for what others say and do. The protected intermediaries include not only regular Internet Service Providers (ISPs), but also a range of “interactive computer service providers,”-CDA 230 blog. 

    Okay, what Ted is saying is that those “interactive computer service providers” like Facebook and others that seek to censor political speech ( which Facebook surely has) should lose the protections afforded them in Section 230, and be unprotected from liability lawsuits because they have chosen a side and in affect have become a publisher. Which is a very simple thing to do. 

    That way we do not need to cross the tyranny begetting Rubicon of regulating free speech, which I agree should be avoided at all costs. 

     

    • #5
    • April 14, 2018 at 10:28 am
    • 1 like
  6. Thatcher

    There will be no new regulation. This whole thing was to make sure the techno boy get with the program and get Democrats elected next election. They blew it last time and HRC, the destined one, did not become POTUS as was foreordained.

    • #6
    • April 14, 2018 at 1:42 pm
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