Tuesday, August 02, 2011

Google+ and the Facebook Natural Monopoly: Is Market Competition the Key to Internet Privacy?

One of my students, whose husband apparently works for Google, recently asked if I thought Google+ was going to succeed in giving Facebook a run for its money.

I had to reply no. Facebook is quickly becoming what economists refer to as a "natural monopoly" - meaning that, as users build Friend Lists hundreds of people long and upload thousands of photos and other types of content, they become more firmly entrenched in the service. Facebook has a powerful inertia that makes it ever-less likely for users to switch to a competitor. For these reasons - entrenched users and higher switching costs - it's going to be nearly impossible for Google+ to gain any meaningful traction.

But if Facebook is, or is on its way toward becoming, a natural monopoly, what are the implications for privacy?

Ruben Rodrigues examines this question in "Privacy on Social Networks: Norms, Markets, and Natural Monopoly" (a chapter in The Offensive Internet by Saul Levmore and Martha C. Nussbaum).

His argument is based on the assumption that market competition is the key to securing privacy rights.

He then asserts that the best way to ensure competition is, first, to apply existing anti-trust laws to bar anti-competitive conduct. This hardly seems controversial.

Second, he says, the next best way to ensure competition is by keeping switching costs low by requiring that data be highly portable and interoperable. In practical terms, this means requiring Facebook to share your login information with 3rd parties so that competitors can more easily transfer your Facebook account to a different service without you losing your contacts, photos, and other information. The logic is that by making it easier for people to leave Facebook and go to another service, the market will stay competitive and services will continue competing for users on privacy grounds.

This strikes me as a very counter-intuitive claim. Would sharing my login information with 3rd parties really help enhance my privacy?

Rodrigues seems to be suggesting that each of us ought to purposely further damage our privacy in order to somehow protect it in a larger theoretical context. Forgive me for being a little bit skeptical. The thought of making my login information accessible to even more parties, for my own good, instinctively makes me cringe. And I doubt I'm alone.

Instead, I adhere to the notion purported by Lior Strahilevitz in "A Social Networks Theory of Privacy" - that "just because someone has consented to disclosing information to a set group of people does not mean the individual has consented to broader, public disclosure".

Ultimately, Rodrigues makes a strong case for how market competition is key to securing privacy rights, but puts forth an overly academic (read: impractical) argument in suggesting recommendations for how that competition is to be accomplished.

Would people's privacy be better protected if both Google+ and Facebook were strong players in the space? Perhaps. But requiring Facebook to provide all of its user data to any- and all-comers? Yikes!


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