The Social Utility
you study economic cycles, you can watch the evolution of a disruptive technology throughout its lifecycle, from a specific product to a competitive industry. The last phase in the evolutionary chain is the formation of a utility.
For example, over a couple of centuries we've seen the evolution of electricity from a curiosity, to a business, to a group of public companies. Along the way there were the inevitable mergers and acquisitions to enable a winnowing field of competitors to achieve the scale needed to compete in very large markets.
It wasn't just the electric industry that went through an evolution. The oil, gas and coal industries did the same. Banking is in a similar position. In fact, any industry that attracts the term "too big to fail" is showing signs of utility status.
When your business becomes so big that it affects large segments of society, it can't be allowed to fail lest it crater the economy or cause massive disruption that would injure many people. At that point, government has a compelling interest in preventing failure -- and along with that, an interest in regulating the riskiest corporate behaviors.
Used as Intended
The latest example to hit the radar might be social media, which has completed many steps of the lifecycle with blistering speed in just over a decade. This speed notwithstanding, we are now at a point where what happens in social media affects all of us.
The recent interference in the U.S. election, which all the American intelligence agencies have confirmed, is a proof point that social media is now a utility and needs some form of regulation. Regulation is a thorny issue wrapped in individual freedom -- but it is also a logical way out of an impasse.
Popular social sites -- including Facebook, Twitter and Airbnb -- provide tools that enable users to find and segment the groups that are best subjected to their targeted messaging, wrote Joshua Geltzer in a recent article in Wired.
His point is simple: The bad actors didn't pervert social media or hack its code. They simply used the tools provided to mount a campaign to upend a U.S. election, and there's evidence of similar activity elsewhere.
By this measure, social media is now too big to fail. It is too essential to a large segment of society, and its potential excesses must be managed so that it does not consume the society and the users who depend on it. Geltzer's article clearly, but inadvertently, makes the case that social media is now a utility in need of regulation.
When Russia manipulates elections via Facebook, or when ISIS recruits followers on Twitter, or when racist landlords deny rentals to blacks and then offer them to whites through Airbnb, commentators and companies describe those activities as "manipulation" or "abuse" of today's ubiquitous websites and apps. The impulse is to portray this odious behavior as a strange, unpredictable and peripheral contortion of the platforms.
It's not. It's simply using those platforms as designed.
What would a social media utility look like, and how would it be different from what we see today? First, regulation should be done with as light a touch as possible. Grandmothers sharing baby pictures should not have to change their use habits, for example. Second, to achieve positive ends, regulation should be implemented at two distinct levels -- the source and the periphery.
At the source, regulation comes down to access for any person or entity with a beneficial and productive need for the utility's services. In the electricity markets, this means stable pricing for all and a commitment to serve as a common carrier.
Common carrier law began in railroads and shipping. In return for use of public lands and roads, the carrier commits to serve all parties equally. In broadcast industries (radio and TV), slices of electromagnetic spectrum play the role of roads that the broadcasters use through grants (licenses) from the people.
In transport, the waterways also are owned by the people. So are the roads. Railroads historically have received government help because they provide a useful service to society.
It goes on, but you can see that source regulation amounts to giving all participants a fair shot at using the public's assets. Regulation at the periphery takes on a different cast, notably in America, where so much of modern utility regulation evolved.
A great deal of peripheral regulation occurs through certification and licensure. People interested in careers involving one of the utilities often serve apprenticeships, learning from a master before earning journeyman status. They also must pass tests to prove their knowledge and skill.
Barbers, beauticians and other personal services professionals go to school and sit for certifying exams. Other professions are similar. Doctors, dentists, lawyers and many others must take many years of education, pass tests, and serve different forms of internships before practicing on their own.
The point is that we already regulate the day-to-day best practices of many industries. We do it with a light touch and in the interest of the culture, and the society functions quite well despite -- or more likely because of -- this light approach to regulation.