Business

Australia’s Big Tech fight does not provide a model

The titanic struggle between Big Tech and Australia’s government over paying for news content this week produced two strikingly different outcomes. Facebook blocked sharing of news in the country, leaving users without access to news sites — plus some government health and emergency services sites — via its services. Google chose instead to agree licensing deals with Australian companies, and a global accord with Rupert Murdoch’s News Corp. Far from providing a model of how to rebalance the economics of online news, the Australian case highlights the potential pitfalls when using legislation to tackle the matter.

It has, at least, shone a spotlight on a pressing issue. The internet and the tech giants have torpedoed the economics of traditional media — by providing access to vast volumes of free content that has hit sales revenues and, thanks to their ability to attract vast numbers of users, scooping up the lion’s share of advertising revenues. The impact is especially acute on local journalism — a keystone of healthy democracies. By forcing platforms such as Google and Facebook to pay for media companies’ content on their sites, Canberra aimed to help Australian news publishers fight back.

The tech platforms argue they do not make revenues from news, but benefit news groups by driving traffic to them. In fact, Facebook and Google derive significant indirect value from enhancing their offerings with news links or content. A search engine, in particular, without news results cannot claim to be comprehensive — which may explain why Google chose to cut a deal.

Yet Australia’s approach is flawed. Warnings that the law would destroy the free and open internet by forcing companies to pay even for links were overdone. But it intervenes, in essence, on behalf of one side in an intercorporate battle. It has helped the Murdoch empire — one of the big beasts of the “old” media world — wring a deal out of a big beast of the new, but done little to help small, struggling local publishers.

Most importantly, the media industry remains just one example of how tech companies are reshaping global business and commerce, from retailing to publishing, taxis to hotels. While it is important not to regulate away the benefits this profusion of innovation has brought — many highlighted by the pandemic — a multi-faceted and multinational approach is needed to ensure tech giants do not distort competition or abuse their dominance.

That is true of the industries affected. Instead of the most powerful “legacy” companies having to cut deals one by one, it would be better, for example, for media groups of all sizes to negotiate collective agreements with the platform companies.

Similarly, governments and regulators need to co-operate across borders to police the biggest tech companies, which have become quasi-utilities, or “gatekeepers” to different online sectors. International structures are needed on the lines of, say, the Basel Committee which sets standards for banking regulation. Legal and regulatory tools exist on tax, competition, copyright, privacy and data protection; the task is to develop and agree upon the best combination of approaches.

A digital services tax, as proposed by the OECD, would be a start, helping to level the playing field between multinational tech groups and traditional businesses. Signs of a greater appetite to curb Big Tech at US state and federal level and the arrival of Joe Biden as president boost somewhat the prospects for such co-operation. One of the most important contributions of the Australian case would be if it gave a further push to a holistic, global approach.


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