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19 March 2024 -- In all my musings on the attempts of the EU to regulate technology, I have had a simple, central premise: the regulatory state must be examined through the lens of the reconstruction of the political economy - the ongoing shift from an industrial mode of development to an informational, complex, networking one. Regulatory institutions will continue to struggle in the era of informational capitalism they simply cannot understand. Regulatory processes are befuddled by the regulatory issues and problems created by information markets and networked information and communications technologies.
The EU’s absence in any element of the digital age’s data architecture is by choice, not necessity, as I detailed in a monograph a few years back. The EU could have carved out a niche for itself. France and Germany still have some of the best mathematicians and engineers in the world.
But politics intruded. The EU chose to prioritize data protection over technology investment, especially in the field of artificial intelligence. For 15+ years the EU has served as the world’s leading digital police force, making up for its lack of massive tech companies by wielding tools such as multibillion-dollar antitrust fines, tax claw-backs and laws like the General Data Protection Regulation (GDPR), and now the Digital Markets Act and Digital Services Act.
I have quoted Steve Sinofsky many times before. He is the former president of Microsoft’s Windows division and now a very successful VC. Earlier this year he had an excellent deep dive on the EU’s Digital Markets Act (DMA), an Act that has tech litigation lawyers grinning because of its complexity, many holes and poorly drafted provisions. It is an entirely new regulatory paradigm that defies belief.
The Act is very squarely aimed at Apple, despite the fact that Apple is not a monopoly and has a significantly smaller share of the phone market than Android. Apple’s history is well known, in contrast with Microsoft it went for a closed system in which Apple controlled entry to a much greater extent. The same was true with iPhone versus Android.
I just want to quote a few bits. It is worth a complete read:
iPhone was successful but it was not as successful as Android that came shortly after because of the constraints Steve put in place to be the best, not the highest share or the greatest number of units. Android was to smartphones just as Microsoft was to personal computers. Android sought out the highest share, greatest variety of hardware at the lowest prices, and most open platform for both phone makers and developers. By making Android open source, Google even out-Microsofted Microsoft by providing what hardware makers had always wanted—complete control. A lot more manufacturers, people, and companies appreciated that approach more than Apple’s. That’s why something like 7 out of 10 smartphones in the world run Android.
Android has the kind of success Microsoft would envy, but not Apple, primarily because with that success came most all the same issues that Microsoft sees (still) with the Windows PC. The security, privacy, abuse, fragility, and other problems of the PC show up on Android at a rate like the PC compared to Macintosh and iPhone.
Only this time it is not the lack of motivation bad actors have to exploit iPhone, rather it is the foresight of the Steve Jobs vision for computing. He pushed to have a new kind of computer that further encapsulated and abstracted the computer to make it safer, more reliable, more private, and secure, great battery life, more accessible, more consistent, always easier to use, and so on. These attributes did not happen by accident. They were the process of design and architecture from the very start. These attributes are the brand promise of iPhone as much as the brand promise of Android is openness, ubiquity, low price, choice.
The lesson of the first two decades of the PC and the first almost two decades of smartphones are that these ends of a spectrum are not accidental. These choices are not mutually compatible. You don’t get both. I know this is horrible to say and everyone believes that there is somehow malicious intent to lock people into a closed environment or an unintentional incompetence that permits bad software to invade an ecosystem. Neither of those would be the case. Quite simply, there’s a choice between engineering and architecting for one or the other and once you start you can’t go back. More importantly, the market values and demands both.
That is unless you’re a regulator in Brussels. Then you sit in an amazing government building and decide that it is entirely possible to just by fiat declare that the iPhone should have all the attributes of openness.
Apple’s promise to iPhone users is that it will be a gatekeeper. Gatekeeping is what allows Apple to promise greater security, privacy, usability and reliability. Gatekeeping is Apple’s brand promise. Gatekeeping is what the consumer’s are buying. The EU’s DMA is an attempt to make Apple more “open” but it can only do so at the expense of turning Apple into Android, devaluating the brand promise and ironically reducing competition.
Do read the whole thing for more details on how technology and markets work, the history of tech regulation, the many of flaws of the DMA, and useful comparisons with the U.S. antitrust trial against Microsoft.
It is a Master Class in legislative analysis.
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