Would breaking up ‘big tech’ work? What would?

We’re clearly going to be arguing about the size, power and market share of large technology companies a great deal in the next couple of years. Many of the underlying concerns we have around technology are complicated, and involve deep-seated trade-offs where we actually have to make choices, and not everything is a competition problem anyway ( I wrote about this here). But if we presume that something is a competition problem, what do we do about it? The discussion here tends to jump straight to ‘break them up’, which also means presuming that break-ups would actually work. I’m not sure about that. 

The folk memory here, of course, is Standard Oil. John Rockefeller built a network of production, processing and distribution companies that he bundled, tied and cross-leveraged in all sorts of ruthless and devious ways to squeeze out competition. Then in 1911, when Standard Oil was forcibly split up into over 30 different companies, that market power was broken and the oil industry became competitive again, or so the story goes. 

This is a great story, but I’d suggest it’s more useful to look at, and contrast, the breakup of AT&T and the proposed breakup of Microsoft, which give a rather more mixed picture. 

In 1982 AT&T settled an anti-trust case by splitting off its local access telephone network into seven regional companies (the Regional Bell Operating Companies or ‘Baby Bells’), keeping long-distance and the telecoms equipment business (which was also later split off and is now (Read more...)