Five ways to cripple tech (and the US economy)

The tech sector does great things for the US economy. For example, IT made up 75 percent of US productivity growth from 1995 to 2002, and 44 percent from 2000 to 2006. In 2011, IT workers earned 75 percent more annually than non-tech workers. And, finally, tech made up 5.7 percent of the US workforce in 2014. Given these great contributions to citizens’ wellbeing, one would think tech companies and governments would be careful not to kill the proverbial goose that lays the golden egg. But that could be just what is going on. Here are five ways governments and industry are trying to cripple tech.

1. They ignore economics

The EU is once again attacking a tech company for not having a brick-and-mortar business model. The most recent case in point is Google, which the EU is charging with violating antitrust laws. The infraction? Giving away its popular Android operating system and making up the financial loss by enticing customers that use the operating system to buy other Google products. Effectively giving away a platform, such as an operating system, in order to sell other cool things was almost unheard of in the old days, but it is normal in tech. For example, Adobe gave away its Reader so that it could sell software for creating PDFs. Internet search is almost universally free so that the engines’ owners can sell advertising. This tech pricing model is based on sound economics. But if antitrust authorities keep crying foul when it is used, customers will have less to buy.

2. They punish success

One of the justifications the EU provides for its attacks on Google is that Google is dominant. In EU parlance, this basically means that a company has held on to a high market share — more than 40 percent — for an extended period of time. But high market share simply means that most customers prefer the Android operating system — and the competition for these customers is pretty intense. Attacking success implies that these antitrust regulators would prefer fewer happy customers.

3. They attack creativity

The FCC is looking into T-Mobile’s Binge On service, which allows content providers to pay for customers’ data usage. Making data more affordable certainly helps customers who struggle to pay for it, but this benefit seems to trouble the regulator. The irony isn’t lost on those of us who watch regulation and antitrust: It was just a few years ago that the FCC opposed AT&T’s acquisition of T-Mobile in part because the agency was concerned about losing an aggressive competitor. Now the FCC wants to slow the aggressive competitor down.

4. They substitute lawsuits for competition

Competing in an innovative sector like tech should be all about return on R&D, but sometimes it is about return on lawyer fees. In 2011, Apple and Samsung spent more money fighting lawsuits and patent disputes than they did on R&D. This isn’t all the companies’ fault: The US patent system has not kept up with the needs of the tech industry, and innovators naturally want to protect what they have created. But wouldn’t it be interesting to see what would happen if all of this money was diverted to employing engineers?

5. They regulate away the competition

Tech is replete with examples of companies seeking government regulation to stifle competitors. Google was an early proponent of net neutrality, a miscellany of policies that constrain Internet service providers in their ability to compete with Google — and their ability to offer Google’s rivals network features that Google is able to self-supply. Google was also a force behind the EU’s actions against Microsoft. Now the search engine giant is being investigated for business practices that are almost exactly like those of Microsoft. When will all of this end? It may not. Politicians brag about how many antitrust actions they pursue, and they seem to score more points the bigger the company they go after. Cottage industries have grown around opposition to new tech services, legal battles, and regulation. Ironically and sadly, these marketplaces work quite well.

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