Facebook WhatsApp purchase point out a new sector that needs regulation
Apr 3, 2014
Facebook's WhatsApp acquisition prompts concerns about concentration of power in the telecommunications industry and the need for regulation.
Just a few days after shocking the world and splitting opinions by buying WhatsApp for $19 billion, Mark Zuckerberg hosted a dinner at his home in Barcelona. He shared the table with the 20 most powerful executives in the telecommunications industry and the topic of dinner conversation was the global market for SMS. The creator of Facebook wanted to calm the nerves of the industry owners, which were estimated to have lost $33 billion in 2013 due to the drain caused by WhatsApp. But when Facebook and the largest telecom companies come together to decide on interests that basically affect the entire world, one can see that things are taking on a new magnitude. The meeting of these two forces suggests a concentration of power in the hands of a small group of players to the point where regulation may be necessary. The state does not have to enter the market - it just has to ensure that no one dominates it.
Facebook's entry into the telecommunications market via WhatsApp is not the first clash of the social network with the industry's companies, nor is it the last concern that should involve one of the industries most at the epicenter of the digitization process. Telecommunication companies have mostly come from a state background around the world to become the sixth most profitable market on the planet and in most countries where they operate, they had carte blanche to make as much profit as they wanted, offering very low-quality services and cartelizing prices by coordinating supply among few competitors. Brazilian users may have felt a deja-vu with the last sentence.
The issue goes beyond the $33 billion that telecommunications companies failed to make in 2013 as message traffic migrated to free (or nearly free) tools like WhatsApp or Viber. Facebook was already causing grumbles among the giants of the telecom sector because of the massive data traffic that passes under their noses without them receiving an extra penny. The dispute now clearly revolves around the solidity of the concept of net neutrality.
Telecommunication companies are paid by their users who already pay for data traffic to do whatever they want – including using Facebook, WhatsApp or not. The assumption that Facebook would also have to pay because it generates a lot of traffic implies that the provider can interfere with transfers. Attempting to eliminate net neutrality is only less worrying than the possibility of such neutrality being broken with the agreement of the companies that generate more traffic. In addition to the unpredictable outcome that this data manipulation could have, an "agreement" between those who provide internet access and those who offer services using this access constitutes a cartel and would require more than regulation.
In politically stronger economic communities like the European Union, this will probably lead to investigations like the one Google faced. Add to this (yes, there's more) the fact that telecommunications is not a market that any entrepreneur can invest in. Only companies with the ability to invest on a global scale can install new infrastructure expansion (and still, usually with loans from local governments). This point is one of the telcos' arguments for being able to bite a piece of Facebook's pie, but it should not be the last, because the technology to simply replace the need for a voice service like the one offered today is on the verge of becoming a reality. Facebook's mega-acquisition creates a hybrid telecommunications sector that can operate without the need for telecommunications companies. Because of its potential size, the risk of a private monopoly is too great to ignore.
Capitalism has never had such a wide dominance in the world economy as it does today. Paradoxically, mass usage markets like telecommunications tend to have fewer and fewer companies controlling it and thus, moving the market away from the ideal of capitalism. Few service providers are bad for society because they manipulate price, lower quality and prevent the emergence of new competitors. Before someone has the brilliant idea to create a Tweetobras or return to Jurassic telecommunications companies like Telerj, society and market need to quickly establish norms to avoid tariff manipulation, low-quality service and - even more serious - control of information flow. Unfortunately, at least in Brazil, we do not have a political class with the instruction or ability to understand the problem.