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Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

Privacy and the digital economy are at odds

Finding a balance between them will not be easy for tech giants like Google

Data is the new oil. That pithy bit of wisdom has been doing the rounds for a few years now—hyperbolic, perhaps, but also getting at the truth about the centrality of big data to the digital economy. And like oil, data means more than money. It means security, and consequently, political investment. These elements have intersected repeatedly in the European Union’s (EU) tussles with US tech companies over the past few years. The European Commission bringing antitrust charges against Google last week is the latest such instance.

The case revolves around this: Google requires manufacturers that make Android smartphones to sell the devices with Google Search, as well as a number of Google apps such as the Chrome browser, YouTube and Google Maps, pre-installed and set as the default. Those that choose not to do so and run a non-Google version of Android—possible since Android is open source software—are locked out of the Google Play Store, the virtual storefront for apps and media on Android devices, and Google’s own apps.

For most manufacturers, this is a losing proposition; the Play Store and Google’s apps are the core selling propositions of an Android device. Google’s claim that it offers manufacturers and competitors that have signed on full freedom on which apps to offer on Android smartphones hasn’t cut much ice. The EU has held that Android’s overwhelming dominance—it has about 80% of the EU market—places a higher burden of responsibility on Google. And by ensuring that its own apps are prioritized, it is potentially stifling innovation and competition from other developers.

At stake is Google’s user data-based business model, and by extension, those of other tech giants like Facebook. They don’t make money off the services they offer; they make it off advertising—in Google’s case, $11 billion last year via advertising sales through its apps, by some estimates. Targeting users effectively is essential for this. For that, Google must collect data about users’ personal details, browsing habits and preferences via apps, search engines and service sign-ups. If it unbundles its apps from Android as per the EU’s wishes, it will undermine its entire business model. Facebook, under the cosh for years now for alleged violations of user privacy and how it uses user data, is facing similar problems; multiple European countries are investigating its privacy practices.

These are not singular cases. The commodification and sale of user data drive the Internet economy. As Klaus Mueller, chairman of the Federation of German Consumer Organizations, has put it, “User data is often the currency which consumers pay for supposedly free services." If the data is currency, it follows that regulators must attempt to preserve a free market with an optimal outcome of the best service for the least data—and its corollary, preserve the user’s ability to easily transfer their data to a competitor.

Or so EU regulators have shown themselves to believe. US regulators have had a lighter touch. The US has also birthed the reigning tech giants, while the EU has none. Whether that is correlation or causation is a matter of debate. What is not is that the genie of free services and goods is out of the bottle. It is difficult to see consumers agreeing to pay for, say, email, social network usage or digital news—all currently funded by data commodification—save a minority with niche needs.

Allowing tech companies to continue innovating and creating this public good while protecting user rights will not be easy. And it will be complicated further by multiple factors: shifting perceptions of digital privacy with millions of users showing little concern about signing their data over as long as they get a good deal for it; sovereignty and security concerns about US government access to the data that has elevated data flows to the realm of diplomacy and brought about deals like the US-EU Privacy Shield agreement.

The vigorous Free Basics debate showed that there is an awareness and appetite for such issues in India’s public spaces. It is only a matter of time before the Internet’s data-driven economic model comes under scrutiny here too, on the back of rapidly expanding user bases and a smartphone boom driven by Android devices. As elsewhere, laws and regulations geared for an offline world will have to play catch-up. Would a more hands-off approach that favours subtler mechanisms like public awareness and service agreements with default opt-outs achieve the best balance? Or will a firmer stance such as the EU’s prove necessary?

Oil or currency, data is likely to prove to be as tricky to handle as either—and as crucial.

Should tech companies be restricted from commodifying user data? Tell us at views@livemint.com

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