Is 'This Time Different' Concerning Big Internet Dominance?

I've made a similar point a few times in the past, but now that the antitrust knives are out for the big tech companies (mainly Google, Facebook, Amazon and Apple), it does seem worth noting just how quickly the tech landscape seems to change. I moved to Silicon Valley 20 years ago. At that time, the "dominant" companies were: Microsoft, Sun, Oracle, Netscape, IBM, SGI, Intel and Yahoo. Those were still the days of "no one gets fired for buying IBM." Google's headquarters today were once SGI's. Facebook now occupies Sun's headquarters (affectionately nicknamed Sun Quentin, for its resemblance to the prison a bit north of here). A decade or so ago, I remember the general refrain about the startup ecosystem was that there were three "dominant" companies in the marketplace that any startup was trying to sell to. The so-called "GYM" companies: Google, Yahoo, Microsoft. Yet, today, all anyone can talk about is "GAFA" (Google, Amazon, Facebook, Apple) or in some versions "FAANG" (add in Netflix).

The tech market is one of disruption. It's a celebrated term around here -- often mocked by outsiders. But dominance has a way of falling. And falling fast. So I appreciate a recent piece by Ryan Bourne at Cato asking some fairly pertinent questions regarding the new antitrust focus on "GAFA."

Almost exactly the same arguments about how "networkeffects" might make Facebook or Google entrenched monopolieswere used against Myspace, Microsoft's Internet Explorer andAOL's Instant Messenger. Analysts worried that web managers optimizing sites forIE because of its high use numbers would ossify the browser marketin Microsoft's favor. In the case of AOL, 40 companies wrote to theFederal Communications Commission asking it to make AOL'snetwork compatible with others. Of course, Myspace was renderedobsolete by Facebook, Internet Explorer by Google Chrome, and AIMby, well, a lot (there are many apps with instant messagingfacilities).

But it's not just network effects. In 2007 Forbes wasrunning articles about how economies of scale forNokia would act as a barrier to entry for rivals. The higherprofits were generating "more money to invest in research anddevelopment." It was said Nokia's supposedtechnological superiority meant "no mobile company will ever know more about howpeople use phones than Nokia." That year saw the firstiPhone launch.

Today, consumer groups wail against Apple's supposed"monopoly" power with its app store, saying it'sunfair to bundle it into its phone while prohibiting other means ofdownload. Yet similar arguments were made about Apple'siPods inability to play songs that weren't downloaded fromiTunes. Of course, developments in the music purchase market,mobiles and speaker technology completely unbundled music purchasefrom listening devices.

None of this is to say that there can't be antitrust concerns or market-power concerns to watch out for with these companies. But, the burden should be on those insisting that the only obvious thing is to "break up" these companies to explain why this time is different, and why no new competitors will be able to really enter and disrupt the legacy players.

When I first came to Silicon Valley, it was just as the antitrust effort against Microsoft was heating up -- and I totally supported it at the time. In retrospect, it's unlikely that case did much at all. There were other forces at work that limited Microsoft's power (though it's still a very big company doing quite well). After working around here for over two decades, though, and seeing just how much this place changes every few years, I've yet to see a convincing case that "this time is different." Indeed, I see plenty of entrepreneurs who are eager to disrupt the big players.