Downside of dominance

Outage of Google's services shows the risk of concentration

The brief outage of Google’s services on Monday highlighted one aspect of market dominance that is often overlooked when considering monopolistic market scenarios. If everybody is reliant on a single service provider and that entity is incapacitated, for whatever reasons, the negative impact is devastating. This is especially worth mentioning in the context of the antitrust suits filed recently in the US against Google and Facebook. Those suits allege that the two tech giants have variously abused market dominance to prevent competition from arising. Economic theorists assume, with good reason, that competition is good for consumers. But the outage on Monday made it obvious that competition is not merely good; it is vitally necessary to ensure continuity.

This is particularly relevant in the global digital space, which is dominated by near monopolies. Most of the digital world is controlled by the so-called FAANGs — Facebook, Amazon, Apple, Netflix and Google. Each of these firms holds dominant market share in specific segments. In Mainland China, where they were prevented from operating freely, local monopolies like Alibaba, Tencent, Weibo and Baidu emerged. Another major digital market, India, could soon see Jio Platforms holding similar dominant market share in several segments. The rise of these corporate monopolies and the over-dependency of the global economy on this small list of players is ironical because the Internet was conceptualised as a diffused channel way back in the 1960s. The Internet was supposed to maintain connectivity in the aftermath of a nuclear attack, or some natural disaster, by utilising any available communication systems. Indeed, it has successfully performed that key role many times, after September 11, 2001, and after the 2004 tsunami and several major earthquakes.

But nobody foresaw the Internet would become such a key conduit for a wide variety of services, and thus become indispensable to 21st century society. Nor did anybody know that the structure of the highly decentralised Internet would paradoxically be foundational to the development of many highly concentrated markets. Sundry Google services were down for about 45 minutes to an hour on Monday. However, all sorts of businesses were seriously disrupted across the world. It will take weeks perhaps before the losses can be quantified, if at all. This is because Google holds dominant market share across so many segments, with its 3.5 billion users. All this is in addition to the frontline search engine, YouTube and Android functionalities. Gmail is the world’s largest email service provider (including both paid and free segments). Google provides both free and paid cloud backups on Google Drive. The online office suite, Google Docs is widely used along with Google Forms. Calendar and Meet are default options for online conferencing. Google Classrooms have been a vital resource during the pandemic. Google Pay is a major fintech player. Google DNS services are popular, and a multitude of location-dependent services around the world run on maps from Google. In addition, many smart devices are dependent on Google Assistant. 

Whatever the legal outcome of the antitrust cases may be, this brief outage and the damage it caused, highlights the need for competition across multiple highly-concentrated digital markets. Users must have alternatives available to ensure business continuity if any given service provider is out of action for whatever reasons. Policymakers need to take this factor into account as they review market dynamics across the digital universe.