Regulation is messy, takes time, and has unintended consequences

By Martin Recke

When it comes to possible fixes for the digital woes our societies suffer from, regulation is always an option. To be clear, the digital sphere isn't really unregulated, and never was. Even the most fervent critics of any new regulation argue that existing law also applies to the internet and its offspring. The topic of sometimes hot debate is then whether this law is fitting or not. In some cases, existing regulation stifles the development of new products. In other cases, new products call for new regulation.

Today, the EU Parliament voted on a proposed copyright reform. While this vote is only one step in a process that will take some more months to complete, there was a lot of heated debate. In today's digital world, there are a few big guys, especially Google and Facebook, making tons of money from advertising, while at the same time being platforms for content other people have created. In the past, for example in the TV world, those content creators would license their stuff to the platforms and thus get paid.

Not so in the digital age, at least not when it comes to Google and Facebook. In general, they don't pay for content that's distributed through their platforms. With some exceptions, their business model is different. But content creators and traditional publishers want their piece of the advertising cake, and they don't like their content be distributed via Google and Facebook without proper license deals, read: without being paid. Fair enough. Regulation can deal with this.

A new balance needs to be found

And then, there is the very American notion of free speech, First Amendment and all that jazz. The coalitions we see these days are a bit funny, with freedom activists fighting side by side with web giants like Google and Facebook, who are threatening the same freedom through their sheer size and power. It's a typical value conflict, where a new balance needs to be found between copyrights and freedom of speech. But also between the giants and the rest of the world.

We no longer live in a world where Google and Facebook are tiny upstarts that shouldn't be stifled by tough regulation. They can afford more regulation, and they probably should be regulated to reduce negative externalities. Of course, regulation needs to be balanced (freedom of speech etc.) and feasible for smaller companies as well. And regulation will have negative side effects, regardless how well it is done. That's the price we have to pay. For example, some business models will be invalidated or at least less profitable through regulation.

With the current EU copyright reform as an example, we clearly see that regulation is messy, takes time, and has unintended consequences. But come to think of it, the same is true for digital innovation: it's messy, takes time, and has unintended consequences. I don't think Mark Zuckerberg's intention was to build a machine that can decide elections, but that's what he did. And there's still no regulation in place to fix this. Will Facebook itself fix it? You bet.

With great power comes great responsibility. That's a classic. The digital sphere has risen to great power, but still needs to cultivate the appropriate sense of responsibility. Where self-regulation fails, the political system will step in and regulate, like it or not.

Photo by Piron Guillaume on Unsplash