Calling Facebook a Utility Would Only Make Things Worse

Facebook is ubiquitous, yes—but we shouldn't put it on the same regulatory plane as telecom giants.
Facebook is ubiquitous yes—but we shouldn't put it on the same regulatory plane as telecom giants.
Facebook is ubiquitous, yes—but we shouldn't put it on the same regulatory plane as telecom giants.WIRED/Getty Images

Facebook is massive. Six million advertisers use Facebook's vast data holdings to perfectly target ads reaching more than 1.4 billion daily (and 2.1 billion monthly) active users, amounting to almost 40 percent of the global internet population. That enormous user base forms a castle wall around Facebook’s core ad business, because few other companies can promise the same level of return for ad spends.

It's trendy this month to call on the US government to rein in Facebook. But the government doesn't quite know how to treat the giant blue-branded company: Is it a media conglomerate or a platform? One phrase that keeps being tossed around: "Facebook should be treated like a utility." The idea is that the use of Facebook has become effectively essential to modern life, and therefore it should be regulated just like water or electricity.

Let's get this right: Facebook is not a utility. It is an app. It may be a dominant app. It may even be exercising monopoly power unfairly. But it is not a utility, and muddying the definitional waters this way will only help the real utilities—like Comcast, Spectrum, AT&T, Verizon, and CenturyLink—avoid genuine oversight.

Utilities are things, physical networks, that public utility commissions regulate: electric, gas, communications, water, and wastewater, mostly. These commissions typically ensure that utilities provide reasonably priced, adequate, and efficient services to customers, while allowing the companies involved to recover their costs plus a fair return to their investors. These physical networks are considered to be "affected with the public interest." They often have franchises from the government that give them benefits like special rights of access to rights-of-way in exchange for their promises to serve. Companies selling access to the internet over their existing lines were on the list until about 2004; after a brief deregulatory swerve, the FCC put them back on the list in 2015.

President Franklin D. Roosevelt specifically marked communications services as a utility in 1934, when he recommended the creation of the Federal Communication Commission: "I have long felt that for the sake of clarity and effectiveness the relationship of the Federal Government to certain services known as utilities should be divided into three fields—transportation, power and communications," he wrote. FDR knew about utilities: He had been attacked by the electrical companies when he pointed out their "lies and falsehoods" and persuaded Congress to pass laws breaking up electrical trusts and requiring public utility commissions to actually serve the public interest when regulating electricity.

Now, Facebook is providing a service to its users (subscribers) and customers (those 6 million advertisers). But, at least in America, it is not also providing the physical transport networks that carry Facebook messages. People can #deletefacebook and still live respectably. It's much harder to do that without basic transport, power, communications, water, and sewer services. Because Facebook is not a physical, tangible network and is not on the same level of necessity as a "real" utility, it isn't one.

What is it though? I think of Facebook as a kind of cable TV channel, an interactive ESPN of friends and connections. It has lots of clout and lots of content for each user that no other network would necessarily have. And Facebook has a secret strength that ESPN doesn't: People love being connected to their friends, and they'd all have to decamp en masse and join another network to make you feel just as connected. This network-based exclusivity is a major source of Facebook's appeal for advertisers and users alike.

Is Facebook using that dominance unfairly? It's hard to say. And it might be an unwise use of government resources to mount a years-long antitrust claim against the company. Like ESPN, which has lost a bunch of subscribers disillusioned with either the NFL, the high price of sports bundles, or both,, Facebook is gradually losing its power in America. People in their twenties aren't enthusiastic about it, users are slowly spending less time on its platform each day, and its image has been further damaged by the Cambridge Analytica fallout—which may cause some of its major advertising clients to spend less on ads.

On the other hand, Facebook is not going away quickly: At the end of last month, MoffettNathanson pointed out that Sheryl Sandberg had said that Facebook's "top 200 advertisers make up less than 25 percent of the company's advertising." So even if a few big advertising names do exit, there are 6 million reasons for the company to keep making money. And even if Americans overcome the emotional switching costs of exiting (the burden and sadness of no longer being able to see pictures of their friends' kids, for example), there is enormous headroom remaining for Facebook in China and India, where the markets are huge and a lower percentage of people are online.

So perhaps some form of words should be adopted in America governing what Facebook tells its users about its business model and how Facebook treats their data. (I'm confident that those words will make it harder, paradoxically, for smaller businesses to do what Facebook does; large companies always find a way to wield "behavioral," nonstructural regulations so as to serve their interests and doom potential competitors.)

But the real evil here would be to put Facebook on the same regulatory plane as Comcast, Spectrum, AT&T, Verizon, and CenturyLink. Those five companies would like nothing more than for everyone on Capitol Hill to confuse the two spheres of "application" and "carrier" and try to pass some special broadly worded legislation ineffectively covering "net neutrality" and "privacy" for both worlds.

Why? Because then the carriers could stave off the greater risk (from their perspective) of being regulated as utilities under existing communications law. That labeling was what the Obama FCC called for in 2015, and what the Trump FCC has reversed; but the law is still there and ready to be used by the next administration. We need to hang on to the power to use that statute when the pendulum swings back toward reasonableness.

Go ahead, fulminate about Facebook. But don't consider "utility" regulation as a fix. You'll only be helping those other guys.


Fixing Facebook