It’s about time — or better said, it’s timely. The Justice Department earlier this week announced it was opening antitrust investigations into some of the biggest tech companies around, including Facebook, Google, Amazon and others. This is nothing that either the public or the companies involved should fret about.
For a long time, I’ve been writing that this was a necessary step and that it is part of the evolution of the tech sector. Furthermore, we’ve been through this kind of thing before. In fact, each economic era, which I researched and wrote about in a book, follows a similar trajectory. A disruptive technical innovation arises, many companies quickly emerge to take advantage of it, and a long process of dispersing the innovation throughout society takes place.
That last bit about diffusion happens at the same time as winnowing — as in all the companies don’t survive, most are bought, merge, or go out of business. It’s that part that drives formation of oligopolies or a monopoly (the simplest form of oligopoly). The tech sector is quickly becoming the preserve of a few oligopolistic vendors and thus the DoJ is, in my opinion, right to pursue this action.
Oligopoly Memes
We’re at that point when the oligopolies are so recognizable that they have acronymic memes that are not at all complimentary — like FAANG (Facebook, Amazon, Apple, Netflix, Google). Monopoly or oligopoly status is reached when a service becomes so necessary to the public and the economy that depriving anyone or charging disproportionately inflicts harm, so antitrust actions arise.
Historically, oligopolies don’t get wiped out — they become regulated in one of several ways. In one of the most obvious outcomes, they become utilities. This is often good for the economy; for example, utilities are regulated to prevent the former oligopolies from price gouging.
Around the turn of the 20th century, J.D. Rockefeller’s Standard Oil company had such a tight grip on the petroleum market, setting prices even for its competitors, that the government required the company be split into seven parts, the Seven Sisters.
Such breakups often stimulate the marketplace and foster innovation while lowering consumer prices.
When AT&T was broken up in a 1984 consent decree, it ended a century of monopolistic phone service. Suddenly people could purchase (not simply rent) phones, and a whole host of new services and devices quickly evolved, like voicemail. Wireless devices and long-distance competition quickly followed and costs to consumers fell.
New Age
We’re living at the tail end of the Age of Information and Telecommunication, as I wrote in a recent book. When the era started, there were thousands of companies competing in computer chips, hardware, storage, operating systems, databases, compilers and applications.
Gradually that consolidated to the point that only a small number of players dominate most categories today. Cloud computing has taken that situation a step further by commoditizing even the basic idea of owning and operating IT. Cloud computing is both the ultimate commoditization of IT and the beginning of the IT utility.
Today the tech sector is maturing rapidly, and consumers need protection from monopolistic vendors of what have become essential services. That’s where antitrust efforts come in, but it’s early days. There are great differences between Facebook and Netflix, and one can be excused for not seeing a similar economic threat that each would pose if left unchecked.
Additionally, vendors like Facebook and the cable companies exist on the wrong side of the common carrier concept, an antitrust idea that you can’t own all of the means of production and set prices and have a healthy market.
A common carrier must take on all customers asking for service because the service has become so integral to the economy that preventing some people from access causes economic harm. A cable company that both provides content and the infrastructure for delivery is in a position to throttle its content competitors.
This also applies to Facebook, whose decisions about safeguarding user data fell to secondary status in the pursuit of pure profits for advertising on its infrastructure.
It’s likely that at least some parts of IT, and tech in general, will consolidate into utilities. We’re already seeing early examples beyond generic cloud computing.
For instance, Oracle and Microsoft last month entered into a relationship that enables interoperability between Microsoft Azure and Oracle Cloud. This easily could be the start of IT as a multivendor utility and resembles the situation with electric utilities.
We don’t have a national electric grid — which might be a good thing as grids are being challenged by hostile foreign powers. The electric utility is an assortment of vendors in various parts of the market and geographies that adhere to a common set of standards, thus producing the semblance of a grid. Is this a model for the future IT utility?
Other tech vendors might have better cases but maybe not. Consider Amazon, which rapidly is becoming the go-to vendor for many consumers. Does any one of us want only a single choice for so many things? As I wrote recently, I’ve been doing book signings in actual bookstores recently, and I was shocked at what I’d been missing through buying online.
My Two Bits
Those of us who remember the earliest days of the tech era are slowly coming to the realization that our market has matured and we’re on the cusp of consolidation and utility formation. We need not mourn this transition. Antitrust actions are designed to keep mature markets mature and functioning as essential parts of society for a very long time.
Moreover, as with the telephone example, antitrust actions can spawn huge bursts of creativity, innovation and business expansion.
It’s worth noting that before the 1984 consent decree, the industry was known for “POTS,” or “plain old telephone service.” Afterward it became the telecommunications industry, marrying computing, networking, telephone and a lot more. Antitrust? Bring it.
This passage is saying: the government is starting to look into whether today’s biggest tech companies have become *too powerful*, and that this is normal—and can even be good.
Here’s the idea in simpler terms.
## 1) What is the Justice Department doing?
The U.S. Justice Department (DoJ) announced it’s opening **antitrust investigations** into huge tech companies like **Google, Facebook, Amazon**, and others.
**Antitrust** laws are rules meant to stop companies from becoming so powerful that they can:
– crush competitors unfairly,
– control prices or choices,
– or hurt the public because people have no real alternatives.
An *investigation* doesn’t automatically mean the companies did something illegal. It means: “We’re checking.”
## 2) Why does the writer think this is “timely” and normal?
The writer says this happens in almost every major “technology era”:
### Step A: A new invention appears
Example: oil, telephones, computers, the internet.
### Step B: tons of companies jump in
At first, it’s like a wild race with many competitors.
### Step C: the market “winnows” (thins out)
Over time, most companies:
– fail,
– get bought,
– or merge with others.
### Step D: only a few giants are left
That often creates an **oligopoly** (a few big companies dominate), or even a **monopoly** (one dominates).
The writer’s point: today’s tech world is reaching **Step D**, so government attention is expected.
## 3) What are monopoly and oligopoly (kid-friendly)?
– **Monopoly**: one company is basically the only choice.
Like if there were only one store in town and you *had* to buy from it.
– **Oligopoly**: a few companies control almost everything.
Like if there were only 3 stores in town and they all kind of control the market.
The passage mentions the meme **FAANG** (Facebook, Amazon, Apple, Netflix, Google) as an example of how obvious these giants have become.
## 4) Why is it a problem when a service becomes “essential”?
When something becomes as necessary as:
– roads,
– electricity,
– water,
– phone service,
– internet-like services,
then one company controlling it can hurt society. For example, they might:
– charge too much,
– block certain people,
– block competitor services,
– or reduce privacy and quality because users can’t easily leave.
## 5) What usually happens to giant monopolies historically?
The writer says big monopolies usually don’t just “disappear.” Instead, governments often do one of these:
### Option 1: Break them up
Example: **Standard Oil** (early 1900s).
It was so powerful it influenced prices across the oil industry, so the government forced it to split into smaller companies.
### Option 2: Regulate them like utilities
A **utility** is something essential (like electricity). Utilities are often regulated so they can’t overcharge or treat customers unfairly.
### Option 3: Force fair rules (like “common carrier” ideas)
A **common carrier** is a company that must serve everyone fairly because it’s so important.
Example idea: if you control the main “road,” you can’t block only certain cars from driving on it.
The passage argues that some tech companies act like they control the “roads” of digital life (platforms, data, infrastructure), so they may need stronger rules.
## 6) Why mention AT&T?
AT&T used to have a near-monopoly on U.S. phone service. After it was broken up in 1984:
– people had more choices,
– prices fell,
– innovation exploded (new devices/services like voicemail, competition, etc.).
The writer is suggesting something similar could happen in tech: **government action could lead to more competition and new ideas**.
## 7) What is the “big conclusion”?
The writer’s main message is:
– Big tech becoming dominated by a few giants is a normal stage in a technology era.
– Antitrust investigations are meant to keep the market fair when companies become too powerful.
– This could protect consumers and even create a new wave of innovation.
– So the writer says: **don’t panic—this is part of how economies evolve.**
If you want, I can also summarize it in 3 sentences, or explain “common carrier” using a school or playground example.
Denis Pombriant is a well-known CRM industry analyst, strategist, writer and speaker. His new book, You Can’t Buy Customer Loyalty, But You Can Earn It, is now available on Amazon. His 2015 book, Solve for the Customer, is also available there.
Email Denis.
