It's Not About Facebook; It's About the Next Facebook

It's Not About Facebook; It's About the Next Facebook

Are the internet’s best days behind it?

U.S. lawmakers are asking that question in light of growing concerns about data use. Some are looking for a potential solution in the stringent new data rules that went into effect in the European Union on May 25, called the General Data Protection Regulation (GDPR). But internet regulation comes with serious downsides, potentially solidifying the power of a few companies and slowing the pace of innovation. Regulators must consider these tradeoffs before acting. 

In 1996, a Republican Congress and President Clinton passed the Telecommunications Act. Section 230 of the law protects intermediaries like social media platforms and websites from lawsuits stemming from content created by their users. The law also encouraged each platform to develop its own norms, guidelines, and community standards. As a result, a diverse framework of standards emerged. For instance, Reddit allows adult content, Facebook does not; the Apple App Store has a very rigorous approval process, the Google Play Store is more open. 

While some general norms have emerged, the diversity of standards reflects the diverse values and ways in which communities interact and form. Some platforms and communities like Twitch have even developed their own languages. Advocates for new Internet laws disagree on whether platforms should censor more or censor less — a noteworthy problem in itself — but top-down regulations in either direction would create a one-size-fits-all approach that would likely satisfy no one.

One major challenge in trying to regulate the internet is the sheer scale of online communities. Each minute in 2018, around 500,000 new tweets were shared and Google received about 3.7 million search queries. It would be difficult for even the most advanced platforms to monitor the content of each one of these interactions. 

Then there’s the problem of trying to determine which norms should prevail. For example, congressional Republicans have complained that Facebook censors conservative views when applying its terms of service. At the same time, some on the Left have complained about fake news, propaganda, and hate speech. Even seemingly straightforward issues such as hate speech or cyberbullying quickly become murky because they have different meanings for different communities. It is difficult to develop universal content norms for a global community. 

New privacy and content regulations may actually benefit the big players the most because they are the most able to comply. A PwC study reports that 88 percent of companies who have completed their GDPR preparations spent at least $1 million to do so, and 40 percent have spent at least $10 million. These costs are not just for data upgrades, but also for increases in the number of employees dedicated to compliance. One survey found more than one-third of businesses have had to hire at least six new employees to deal with GDPR compliance and almost one-fifth had to hire at least 10. These are resources that could have been spent developing new products or engaging in community-specific moderation instead. 

Sure, the tech giants like Google and Facebook may be able to deal with the costs of complying with more of these regulations. But can the “next Facebook” currently running a barebones startup in someone’s mom’s garage shoulder the hefty fines and fears of litigation? Consider the examples of Unrollme, Verve, and CoinTouch. These startups have all left the European market or blocked EU users rather than deal with GDPR compliance. Regulations such as the GDPR clearly make it more difficult for competitors to emerge. Is it a surprise that some tech giants have been open to the idea of the “right” regulations?

America’s long-standing policy of government restraint toward the internet has made the United States a global innovation factory. As a result, legacy telephone monopolies collapsed, media empires lost their dominant positions, and internet services now reach nearly all Americans. U.S. lawmakers’ foresight in 1996 helped create this process of innovation and, on balance, improvement.

Amidst the push for more internet regulation, our current lawmakers should ask not only whether there is a problem, but also, if there is, whether it’s one that regulators can fix. Some cures are worse than the disease.

Brent Skorup is a senior research fellow and Jennifer Huddleston Skees is a legal research associate with the Mercatus Center at George Mason University’s Technology Policy Program.

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