Lawmakers don’t like them, but what they bring to the competition with China may be too valuable to break up.
The heads of Facebook, Apple, Google and Amazon appeared before angry lawmakers Wednesday as Congress prepares to weigh new anti-monopoly regulations, including possibly breaking them up. Facebook’s Mark Zuckerberg turned to a familiar argument, saying that breaking up the big tech companies would hurt U.S. competitiveness against China in developing new technologies and America’s ability to curb Chinese influence globally.
So are U.S. tech giants an asset to the U.S. in its competition with China or a hindrance?
Google CEO Sundar Pichai answered several questions about his company’s loyalty to the United States by recounting its expanding work with the Defense Department. Ever more, he attempted to cast Google as an engine of U.S. innovation.
“Our engineers are helping America remain a global leader in emerging technologies like artificial intelligence, self driving cars and quantum computing,” he said.
Zuckerberg contrasted between what he described as Facebook’s “American” values and ideas with those of China. “China is building its own version of the internet focused on very different ideas, and they are exporting their vision to other countries,” he said in his prepared testimony.
He is not alone in this view. Daniel Castro, director of the Center for Data Innovation at the libertarian-leaning Internet Technology and Innovation Foundation, told Defense One, ”Breaking up U.S. tech firms would undercut American innovation. At a time when Chinese companies are growing more dominant in the global digital economy, U.S. policymakers should not hamstring successful tech companies.”
Eric Schmidt, Google’s former CEO who now chairs the Defense Innovation Board, has made similar statements, telling the Telegraph in May, “Chinese companies are growing faster, they have higher valuations, and they have more users than their non-Chinese counterparts...It’s very important to understand that there is a global competition around technology innovation, and China is a significant player and likely to remain so.”
But not everyone agrees. David Segal, co-founder of the left-leaning group Demand Progress, took a categorically different view, telling Defense One, “Far from stifling innovation, antitrust enforcement is necessary in order to enable it.” He pointed to what he described as “kill zones” or areas of technology development that are too close to the products that the giants produce to attract venture capital.
Legal scholar Ganesh Sitaraman argues that conflating big tech with American innovation is part of the problem. Big tech, he says, is too intricately intertwined with China to be purely American.
“The claim that big American tech companies are somehow an alternative to Chinese dominance—or, in the more extreme form, that they are competing with China on behalf of the United States—is largely backwards” he argues, in a January article for the Knight First Amendment Institute. “Big tech’s integration with China thus supports the rise and export of digital authoritarianism; deepens economic dependence that can be used as leverage against the United States in future geopolitical moments; forces companies to self-censor and contort their preferences to serve Chinese censors and officials.”
Lawmakers of both parties love to hate on big tech and its poster-child representatives, like those summoned to Wednesday’s hearing. Conservatives routinely claim that Google is censoring their speech, a line they returned to repeatedly on Wednesday. Liberals argue that Facebook doesn’t do a good enough job of calling out misinformation, especially if it might anger conservatives. Some observers worry that all of those resentments get in the way of a functional discussion about whether or not the companies are too big.
“I’m not confident that in the current environment you would see constructive solutions put forward that are not based on political retaliation, rather than a principled approach,” said Mieke Eoyang, vice president for national security at think tank Third Way.
There is ample reason for lawmakers to be suspicious of how the big tech interacts with the Chinese government. A May report from London-based research firm Top10VPN shows that Amazon provides web services to Chinese companies on a Commerce Department sanctioned “Entity” list. Google has an AI research effort in China.
Facebook, which is effectively banned in the country, is arguably the least reliant on the Chinese market. Hong Kong-based TikTok is a major competitor to Facebook-owned Instagram. But that doesn’t tell the whole story. Facebook is such a large gamer marketplace, it still makes money off of China from companies like Tencent that need Facebook's users to play their games.
From the Pentagon’s perspective, American tech giants do offer a unique technological resource, one that does produce innovation and that arguably would not exist if they were broken up. Consider the Pentagon’s JEDI cloud program. Smaller cloud providers complained that the program’s requirements were tilted toward Amazon, the only company that many believed could meet them. Part of the reason that the JEDI contract came down to a race between Microsoft and Amazon (after Google pulled out) is because those are the companies with the largest cloud offerings, able to provide the highest level of security. It was only after visiting them that former Defense Secretary James Mattis realized that what American’s private big tech firms were doing with cloud computing was decades ahead of what the government was doing with smaller, patchwork capabilities. He also realized that cloud computing at enterprise scale was essential to real innovation in AI.
The size of that cloud capability and the amount of data available plays a big role in a company’s ability to develop next-generation AI products. Google’s compute power, and access to a massive dataset of online video footage via YouTube, was vital to the development of deep learning technologies. Facebook’s compute power and its access to billions of biometric facial records — pictures of faces — allowed it to create unique facial recognition technology to rival the human brain.
These companies developed the world’s largest compute capabilities in order to become the world’s largest companies. Busting them up could eliminate something that doesn’t exist anywhere else and actually is a driver for innovation, one that arguably requires more regulation and oversight but also that can’t be replicated at a smaller scale.
The unique resource of big tech firms is what Congress is considering in the context of these companies’ overall effects on the market, individuals, and tangled U.S. relations with China. How to do that? The answer is carefully and case by case. While Republicans and Democrats love to vilify big tech, these companies are very different from one another, even if they do have anti-competitive practices.
“I think these companies are all differently situated based on their business models. So when it comes to discussions around breaking them up, the implications are all different,” said Eoyang, “as are the unintended consequences of doing so.”