The answer to the data economy is a ‘Digital Commons’, not a digital tax

Profile picture for user ddpreez By Derek du Preez August 6, 2020
Summary:
A new report by think tank Institute for Public Policy Research highlights the dangers of leaving big tech unchecked in the coming years, as it doubles down on the data economy.

Image of someone browsing social media
(Image by Erik Lucatero from Pixabay )

Governments around the world are struggling to get to grips with the role of ‘big tech' in the digital economy, with fears that just a few platforms have too much control over our data and that this centralised power will have adverse consequences for wealth creation and distribution.

Antitrust investigations are happening on both sides of the Atlantic, in the US and Europe, but with little consequence and poor solutions for how to manage the future data economy.

A new report out today by a UK think tank, the Institute for Public Policy Research (IPPR), argues the case for a ‘Digital Commons' - a new regulator with powers to both regulate digital service providers and also intervene to promote the use of open data. It is also pushing for the creation of a new kind of ‘data trust' and powers given to local authorities to take action.

The authors of the report argue that en vogue political ideas, such as calls to ‘break up big tech' or establish a digital services tax, are short sighted and won't be effective over the long term.

James Meadway, Associate Fellow at IPPR and author of the report, said:

Covid-19 risks further increasing the economic and social dominance of Big Tech, with stock market valuations skyrocketing as society becomes more dependent on data through homeworking and increased medical surveillance.

This Covid effect means their power to affect and influence our daily lives is becoming increasingly removed from public control. It also represents a loss to us all, as most of the value of trillions of gigabytes of data, derived directly from us every year, is held privately by these companies instead of being available for the common good.

We need to use the national regulation of data to develop a broader concept of a digital commons, with data derived from us held and used for the public good. A first step should be establishing a new Office for the Digital Commons, with the power to regulate big tech companies and enable shared and open-source use of our valuable data assets.

IPPR is making the case for completely rethinking how digital data is collected, owned and used in order to prevent a handful of technology companies dominating people's lives for decades to come.

It notes how six digital companies - Facebook, Alphabet, Apple, Microsoft, Netflix and Amazon - have seen their combined market valuations rise by $1.9 trillion since the pandemic began, an increase of 38 per cent. This compares to the average value of all stocks remaining roughly unchanged in the US, while it fell 16 per cent in the European market and 22 per cent in the UK.

The report argues that the pandemic has caused society to become even more dependent on data, through distributed workforces, workplace surveillance and government track and trace initiatives.

Why data is valuable

IPPR states that the collection, storage, analysis and application of data will become the dominant feature of economic and social life within the next few years. But it's worth firstly understanding the economics of data and why it's such a valuable resource - as this should frame the urgency with which governments should be taking action.

The report notes that even though data is often described as ‘the new oil', it has properties that make it distinct in its ability to generate value. In particular, data is both ‘non-rival' and ‘non-fungible'.

Non-rival simply means that data can be used over and over again, across a variety of applications, without losing its inherent value. Once oil is used, it's used. This means that data can be repeatedly used at minimum cost, once it's in the control of a data steward/owner.

Non-fungible means that a piece of data cannot be replaced by another. One can of oil is pretty much the same as another can of oil, whereas each piece of data is unique in its value.

These two points are important, the report notes:

In combination, these two properties give rise to the distinctive economics of data: the value of any single data point can be minimal, but the fact that it is unique - and still contains meaning - means that in aggregate it can become immensely valuable. The underlying drive, then, is always to both aggregate as much data as can be found, so as to analyse and extract as much value as possible, while, in competitive conditions, also seeking to exclude others from accessing the same datasets.

This sets the scene for the rise of Big Tech - post-industrial giants whose domination today owes much to their first-mover advantages in learning to accumulate and exploit as much data as they could faster than any rival. The attempts by all of them - assisted, increasingly, by states looking to gain strategic advantages - to move into the emerging field of machine learning is simply an extension of that existing dominance.

New powers

Knowing the above should give governments around the world enough incentive to regulate, manage and guide this emerging data economy. A popular response from politicians has been to tout a digital services tax on the tech giants, in order to extract revenue from their growth.

However, this misses the point and doesn't actually influence the structure of the emerging data economy. In addition, as the report highlights, once revenue starts to be extracted in this way, the motivation to pursue more innovative powers or models of control is reduced.

IPPR's recommendations are worth reading in full, but the key points are as follows. It's worth noting that these are recommendations specifically for the UK, but could clearly be applied elsewhere:

  • The creation of an Office of the Digital Commons - This should include the functions of a conventional market regulator, but also hold a broader remit to mould the future development of the data and digital economy.

  • Establishing a new definition of ‘data trust' - This should be distinct from conventional trusts as defined under British law and ensure that resources are made available to promote their creation and use. Future moves to extend the rights of citizens over their data should include the right to establish a data trust for the purposes of managing and regulating their data.

  • The intellectual pro poetry regime around AI research should be loosened and the government should prioritise procurement from providers using open source.

  • Stewardship of the digital commons should include protection from unfair international exploitation - Where very large, valuable datasets are created and held at the national level, there is a role for the state to play in protecting and conserving the value of them for the public good.

  • Local authorities should build consideration of the use of data for local public good into their procurement guidelines. Local licensing should include data use provisions as standard.

  • Open data should be a standard at a local level

  • Local authorities, either in partnership or individual, should identify the key points for intervention in new digital infrastructure and, where appropriate, commit resources to ensuring infrastructure is under local and democratic control.

IPPR argues that thinking about the data economy sooner rather than later is an imperative. The report notes:

As the world emerges from the first phase of the pandemic, the demands for a socially just and sustainable recovery have grown. The data economy can and should be an essential part of that reconstruction, from the efficient management of energy systems to providing greater flexibility in working time.

However, without effective public policy, and democratic oversight and management, the danger is that the tendencies in the data economy that we have already seen towards monopoly and opacity - reinforced, so far, by the crisis - will continue to dominate. It is essential, then, that planning for a fairer, more sustainable economy in the future builds in active public policy for data.

My take

These recommendations are noteworthy because they take a long term view of the data economy - recognising that it's going to grow and become central to our lives, whilst not trying to destroy it or extract revenue from it, but rather mould it and shape it into something valuable. The problem, of course, is that none of this is going to win big political points in the short term. A ‘digital commons' isn't quite the same headline grabber as a ‘digital tax'. Let's hope there are some politicians out there that have the foresight to think about this more carefully.