Sooner or later, a regulator somewhere in the world is bound to take a crack at one or more of these companies on the basis that their networks constitute barriers to competition. If the challenge is successful, the outcome will be very different from what happened to Ma Bell. A case against Facebook in a small country might simply lead the company to stop offering its services there. In the United States or the European Union, that might not be an option.
A company like Facebook cannot simply be carved up into geographical regions or have some services separated from others. Its product is a holistic user experience, and -- if necessary -- it could serve the whole world from a single base of operations. Creating a slew of mini-Facebooks that covered consumers from different states or countries wouldn't remove any barriers, either, since the network and its uniform product would undoubtedly stay intact; dismantling such a popular product would probably end up hurting consumers more than helping them.
What are the alternatives? Governments could try to prevent Facebook from offering new services, in order to give new entrants a fighting chance. A more extreme possibility would be to nationalize the company or turn it into a public trust, forcing it to be run for consumers' benefit. In eBay's case, the solution might be to regulate its prices, as governments already do with utilities like water and electricity.
Yet any remedy that threatened to damage the company's business or its value to shareholders could ultimately be ineffective or even counterproductive. Facebook, eBay, or any other Internet company could just relocate its headquarters to a friendlier regulatory climate, taking thousands of jobs with it -- but with no interruption in its services. After all, the United States and the EU aren't in the business of blocking websites the way China and many Middle Eastern countries do.
It's tough to find a solution that would truly promote competition without destroying the Internet giants' valuable contributions to the global economy. These companies are part of a new species of global business not anticipated by decades-old antitrust legislation or standard theories of industrial organization. Right now, the world doesn't have the right jurisdictions, tools, or even ideas to deal with them. So do we just have to live with their virtual monopolies, whatever prices they decide to charge and whatever services they deign to offer?
Not necessarily. When government fails to act, or can't, consumers still have a choice. In early December, changes to the policy on ownership of photos at Instagram, a Facebook subsidiary, led to outcries among users and in the media. Even though Instagram dropped the changes after three days, thousands of users had already switched to or at least tried other services.
The next step is for consumers to organize themselves so that they can confront potential abuses. If they speak with one voice, the companies will listen and even consult with them before pursuing new strategies. Why? Because the billion-plus Facebook and eBay users aren't just customers -- they're also the companies' most important assets.
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