The Facebook Battle: Big Government vs. the Free Internet

As I wrote a week ago, everybody hates Facebook (NASDAQ:FB), even if the price of FB stock doesn’t exactly reflect that.

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Source: TY Lim /

The Federal Trade Commission (FTC), along with 48 states, filed suit on Dec. 9 to make Facebook sell Instagram and Whatsapp, acquisitions the FTC previously approved.

It’s part of a global campaign to rein in the power of “Big Tech,” which now threatens even the most powerful governments.

China is rewriting its antitrust rules to go after its “Cloud Emperors” — Alibaba Group Holding (NASDAQ:BABA), Tencent Group Holding (OTMKTS:TCEHY) and Baidu (NASDAQ:BIDU).

The West is doing the same against Cloud Czars Facebook, Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN), whose free and low-cost services have transformed the global economy over the last decade.

The European Union has filed antitrust charges against Amazon over its use of data. India has filed an antitrust suit against Alphabet over Google Pay.

All of these suits miss the point.

Paying for the Clouds

It helps to know a little history.

Cloud technology emerged over a decade ago out of the need for Google, and then Amazon, to scale their services. The Clouds were paid for not with loans, but with cash flow from advertising and low-cost commerce.

Facebook, founded just in 2004, joined the party before it had the required $1 billion per quarter in cash flow to compete. It took a huge risk. It also created the Open Compute Project to reduce Cloud construction costs. The instructions for building a bigger, better and cheaper Cloud, in other words, are freely available.

Did AT&T (NYSE:T) take advantage of this opportunity? No. Did International Business Machines (NYSE:IBM)? No. Did Intel (NASDAQ:INTC), HP (NYSE:HPQ) or Dell Technologies (NASDAQ:DELL)? No. Neither did any European company or government, despite Clouds proving to be the most important infrastructure innovation of this century.

Like characters in The Little Red Hen, they waited for the bread to be baked. Now, they not only demand to eat it, but to destroy the oven that baked it.

FB Stock’s Free Cloud Services

The creation of this infrastructure on the back of advertising cash flow has done amazing things for FB stock. It is now worth more than twice what AT&T and IBM are worth put together. But free internet services have done even more amazing things for the global economy.

Billions of people who in the 1990s had no communication with the outside world are now part of the global discussion. An Indian farmer making 36,000 rupee, roughly $487 per year, can now be heard around the world.

Without advertising cash flow, companies like Facebook would have to charge for services. The internet is worthless without the services that run on it.

Free Banking?

Facebook’s cryptocurrency Diem could do the same thing to banks that Facebook did to phone companies in the 2010s.

The cryptocurrency and its “digital wallet,” Novi, could combine with Kustomer, its latest acquisition, to let anyone become a merchant using WhatsApp for practically nothing.

This is not an innovation. Ant Financial, part-owned by Alibaba, is already doing this.

Less than 30 years ago, developing global phone monopolies charged up to $1 per minute for calls. Credit networks like Visa (NYSE:V) now charge merchants — and customers — huge fees to transact business. Diem can eliminate these settlement charges. Digital currency can transform the developing world, and the global economy.

The Bottom Line

Governments say they’re acting against greedy monopolies in targeting FB stock and the other Cloud czars.

They’re really acting against the free internet and, by extension, billions of people who have benefited from it. It’s an act of war against the rising prosperity of Asia, Africa and the global South.

In the world regulators propose, you might want to Google something. But you’ll pay hard cash for the privilege. Maybe you can afford it. But billions can’t.

At the time of publication, Dana Blankenhorn had long positions in AMZN, BABA and INTC.

Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn 

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