Think pipes, not utilities

Elon Musk’s takeover of Twitter and his controversies commands and decision as its owner, spurred a new wave of calls for regulate social media companies. Elected officials and policy scholars have argued for years that companies like Twitter and Facebook—now Meta—have great power through public discussions and can use that power to promote some views and suppress others. Critics also accuse the companies does not protect the user’s personal data and downplaying harmful effects of social media use.

As an economist who studies utility regulations such as electricity, gas and water, I wonder what that regulation will look like. There are many management models in use around the world, but very few seem to match the reality of social media. However, observing how these models work can provide valuable insights.

Not really regulating the economy

The central ideas behind economic regulation – safe, reliable service at a fair and reasonable price – have been around for a long time. century. The United States has a rich history of regulation since the early 20th century.

The first federal economic regulator in the United States was the Federal Trade Commission, established by Federal Trade Act of 1887. This law requires railways, that is Considerable development and become a high-impact industry that operates safely, fairly, and charges a fair service fee.

The Federal Trade Act reflects a concern that railroads – which are monopolies in the areas they serve and provide essential services – could behave in any way they choose. and charge whatever price they want. This power threatens those who rely on railway services, such as farmers send crops to market. Other industries, such as bus transportation and trucking, will later be subject to similar regulation.

Separate, individual, individual social media company does not really fit this traditional economic regulatory framework. They are not a monopoly, as we can see from people leaving Twitter and turning to alternatives like Mastodon and Post.

While Internet access is rapidly becoming an essential service in the information age, it is debatable whether social media platform provide essential services. And companies like Facebook and Twitter don’t directly charge people to use their platforms. So the traditional focus of economic regulation – the fear of exorbitant interest rates – does not apply.

Fair and safe

In my view, a more appropriate regulatory model for social media could be the way the United States manages grid and pipeline operation. These industries are under the jurisdiction of the Federal Energy Regulatory Commission and state utility management agency. Like these networks, social media carries a commodity—in this case, information, rather than electricity, oil, or gas—and the primary public interest is companies like Meta and Twitter should do it safely and fairly.

In this context, regulation means setting standards for safety and fairness. If a company violates those standards, it will be fined. It sounds simple, but the reality is much more complicated.

First, setting these standards requires careful definition of the roles and responsibilities of the company being managed. For example, your local power company is responsible for providing safe electricity to your home. As social media companies are constantly adapting to the needs and desires of their users, establishing these roles and responsibilities can be challenging.

Texas tried to do this in 2021 with HB 20a law that prohibits social media companies from banning users based on their political views. Social media commerce groups sued, arguing that the measure violated First Amendment members’ rights. Federal Court of Appeals block the lawand the case may be taken to the Supreme Court.

Determining the appropriate fine is also very complicated. In theory, regulators should try to establish a penalty commensurate with damage to society due to violations. However, from a practical standpoint, regulators see fines as a deterrent. If the regulator never has to assess the fine, it means the companies are complying with established standards for safety and fairness.

But the law often prevents agencies from exerting strong control over targeted industries. For example, the Office of Enforcement at Federal Energy Regulatory Commission concerned with the safety and security of the US energy market. But under the 2005 law, the office cannot impose a higher civil penalty 1 million USD per day. For comparison, customer costs during the California electricity crisis of 2000-2001, driven in part by energy market manipulation, have been estimated at approximately 40 billion USD.

In 2022, the Office of Enforcement solve eight investigations violations occurred between 2017 and 2021 and resulted in fines totaling $55.5 million. In addition, it opened 21 new investigations. Clearly, the regulator’s ability to impose fines is not enough to prevent it in all cases.

From law to regulation

Congress writes legislation to create governing body and guide their actions, so that’s where any move to regulate social media companies begins. Since these companies are controlled by some of the wealthiest people in the United States, it’s likely that the laws governing social media will face legal challenges, potentially leading to the Supreme Court. And the Supreme Court now has a strong pro-business profile.

If a new law endures legal challengea governing body like Federal Communications Commission or Federal Trade Commission, or perhaps a newly created body, will have to write regulations establishing the roles and responsibilities of social media companies. In doing so, regulators should be aware that changes in social preferences and tastes can make these roles confusing.

Ultimately, the agency will have to create enforcement mechanisms, such as fines or other penalties. This will involve determining what types of actions are likely to prevent social media companies from behaving in a way that is considered harmful by law.

Given the amount of time it takes to set up such a system, we can assume that social media companies will grow rapidly, so regulators will likely evaluate a target. moving. In my view, even as bipartisan support grows to regulate social media, that will be easier said than done.

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