Applying the brakes to the tech giants

IT giants have had it pretty much their own way up to now, writes Kyran Fitzgerald, but finally

Applying the brakes to the tech giants

Over the past couple of decades, gale force winds originating on the west coast of California have swept across the global economy in what has amounted arguably to the greatest transfer of wealth in history.

The great technological transformers have really had it pretty much their own way up until now, but increasingly, there are signs of a counter-reaction as analysts and increasingly, regulators and politicians wake up to the threats posed to national tax bases and individuals by the cocky new kids who are not merely on the block, but on their way to controlling the whole neighbourhood.

In recent days, the taxi ride-hailing company Uber, once again, has found itself in the news for all the wrong reasons.

Earlier in the summer, its former chief executive Travis Kalanick had to quit after he was caught on camera in a heated row with one of his company’s hard-pressed drivers. The company was attracting flak over what was perceived as a toxic and exploitative corporate culture.

Its drivers are treated as self-employed despite being subject to detailed direction. Uber gets the best of both worlds.

Last week, it was administered an even more painful dig in the ribs when the London Transport Authority announced that it was withdrawing its operating licence on the basis that it was not a “fit and proper operator”.

The news has generated a strong reaction among the company’s largely young client base. It claims 3.5m users and 40,000 drivers.

A big fuss on social media ensued but one suspects that a compromise will be reached between Uber and the regulator, with Uber committing to carry out greater background checks on its drivers with the aim of boosting customer safety.

However, it is significant that the crackdown has the backing of the politically astute London mayor Sadiq Khan.

While Uber has undercut taxi prices by an estimated one-third, while boosting service quality, there are concerns about predatory pricing and the exploitation of drivers. In the US, Uber has become the first major tech company to see its approval rating drop below 50%.

Companies like Apple, Google, and Facebook retain high levels of popularity, particularly among the young but even there the worm may be turning. Older media has belatedly awoken to the threat, but many academics and even politicians are joining in.

Security experts are increasingly critical of the failure of Google, YouTube, and Facebook to tackle the penetration of their networks by political extremists, particularly Islamists, not to mention pedlars of fake news.

Facebook stands accused of lacking patriotism by virtue of a self-interested reluctance to curate the content on its burgeoning network.

Social media and other IT players also stand accused of undermining national tax bases. The European Commission has been on the case over allegations of anti-competitive behaviour and improper tax avoidance strategies, the most prominent example being the judgment against Apple “in favour” of the Irish Government.

In June, the Commission fined Google €2.4bn for abuse of monopoly, while Facebook has been ordered to cough up €110m for providing misleading information.

The tech giants have been spending heavily on lobbying activities in Washington and Brussels. This summer, Facebook boss Mark Zuckerberg took to the road to meet farmers in Iowa and across the MidWest in an effort to boost his mega profitable company’s image.

Mr Zuckerberg has cannily sensed a shift in the wind and is seeking to channel feelings that could yet turn ugly. Increasingly, the tech giants, having gobbled up much of the commercial space occupied by traditional media companies, travel firms and retailers, are eying up new territory. The self-drive vehicle, for example, has already begun to generate huge profits for Silicon Valley entrepreneurs.

Uber is spending $600m (€502m) to acquire Otto, a self-drive truck operating company. Forbes magazine has predicted that 10 million self-drive cars could hit the roads by 2020. Companies such as Apple and Google want a cut of this new pie.

Drivers, empowered by the presence of this technology, will have much more time available for other activities while on the road.

This could mean several billions in extra revenue for everything from media to food and beverage companies.

Google parent Alphabet is spending more than $1bn investing in self-drive. However, there will be losers, many of them among the 17 million Americans either driving trucks or working in sectors servicing the drivers.

The truckers are among the most fervent supporters of the US President Donald Trump. His relations with the tech leaders, in general, have been uneasy, with significant deterioration occurring in the wake of his response to the demonstrations and death at Charlottesville, Virginia.

Some experts believe that it will be a decade at least, before well-paid driver jobs are eliminated but jobs in support areas could disappear quite soon as trucker productivity is boosted by the new technology.

We are clearly at the start of a period of transformative change in transport, with manufacturers and governments committed to phasing out diesel and petrol cars.

However, the road ahead may not necessarily be smooth. Policymakers will welcome clean technology and the much more efficient utilisation of road space, but there could be a catch.

There are concerns, in particular, over the risks and expense associated with the current generation of lithium batteries used in electric vehicles. It is reported that McKinsey, the consulting group, believes it will take over a decade for the price of electric vehicles to match their petrol equivalents.

Expensive charging infrastructure will also have to be rolled out and there are also concerns about the impact on the electricity grid.

Politicians and policymakers are gradually waking up to the social costs imposed by the runaway success of social media.

There are concerns about the growth in bullying and narcissistic behaviour among teenagers continually exposed to smart phones, a paradox given the undoubted role the phones and social media plays in bringing people together.

At the other end of the scale, some legal experts are beginning to express concern over the threat to competition posed by companies as they set about amassing market power.

Writing in the Yale Law Journal recently, Lina Khan suggested that US antitrust law will have to be overhauled to deal with a company such as Amazon, the fast-expanding online retailer which combines this activity with marketing, logistics, the holding of auctions, publishing and the provision of payments.

In her view, competition law is no longer up to the job of tackling businesses which assume greater and greater dominance by cutting prices and taking losses up front.

In the 1990s, Microsoft had its wings clipped and came close to being broken up.

The politicians may have something similar in mind for the corporate Godzillas of the contemporary world which crash around like King Kong trampling on long-established industries with little or no regard to the human and social cost.

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