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Going Head-To-Head: Fierce Competition In Today’s Tech Sector

In recent weeks, members of Congress and anti-tech crusaders have called for stringent antitrust action against leading tech services in the name of protecting competition. During the House Judiciary Committee hearings on digital markets, witnesses and Members of Congress praised big tech companies for enabling startups, providing free tools that consumers love, and innovating new products and services to constantly stay ahead of their competitors.

Experts agree that the tech industry is as competitive and dynamic as ever.

For innovators, data does not function as a barrier to entry — and its value is often overstated, argued Dr. Roslyn Layton of the American Enterprise Institute. “I think we’re overrating the value of data overall because, as a person who worked in the analytics industry, I had interfaced with [2,000 companies]. After time, the data degrades. And if you are an innovator, it’s less interesting for you to get a platform’s data. If you’re going to innovate, you want to do something new and different. So data portability as kind of the answer to heal all ills, I think, is overrated.” 

Today’s digital markets are dynamic for firms and consumers alike, resulting in high levels of R&D and continual product evolution, as noted by Geoffrey Manne of the International Center for Law and Economics. “In digital markets it is not unusual for one or a few large, innovative firms to arise in perfectly healthy, competitive markets. And this is so for good reason: Unlike firms in more traditional industries, competition among technology firms typically turns on product performance rather than price. Instead of competing on price to capture each sliver of a static market, online competitors develop new products and services that often simply supplant the alternatives. As a result, online and similar high-tech markets exhibit extremely high levels of R&D, continual product evolution, frequent entry, almost as frequent exit—and economies of scale.”

— “In reality, digital platforms compete vigorously in a different and more competitive market—the ‘market for eyeballs,’ perhaps—and arguably none is truly dominant, at least not for long. At the same time, the competition for users’ attention is constantly evolving.” 

“The possibilities for future competition” in tech are underestimated, argues Bret Swanson of the American Enterprise Institute. “The dominant companies of an era always look invincible at the time. Sometimes these companies remain dominant — as Thompson points out, America’s three early-20th century auto industry leaders are still the big three today. But the list of seemingly obvious monopolies that later went bankrupt is also long (and humorous). And the possibilities for future competition in the tech industry are underestimated.” 

Opportunities for technological innovation and competition are robust, highlighted Dr. Roslyn Layton of the American Enterprise Institute. “In the end, I’m optimistic because the market we’re talking about today is maybe a third of our national economy, the other 70 percent of our economy is where our opportunities are. That is where the data revolution has not come, that is where we have the opportunities to grow, where we can transform lagging industries in health and transportation. So the important part is if we want these kinds of new companies to emerge, we have to and we want to replace the status quo. We have to make sure that we don’t kill it in the cradle by regulation that stops the innovator at the gate.”

A strong technology sector fosters innovation and opportunities for development; success is shared. 

Today’s competitive digital markets put society’s productive resources to their “highest and best ends,” highlights Thomas A. Lambert of the University of Missouri School of Law. “Experience has taught us that market competition is the best way to secure low prices, high-quality goods and services, and product variety. Not only do competitive markets benefit consumers, they also ensure that society’s productive resources are put to their highest and best ends. The goal of antitrust, then, is to promote consumer and societal welfare by ensuring that markets remain competitive.”

Zoom has seen quick revenue growth, amounting to 169% in Q1, thriving in the pro-consumer tech sector, as described by Jordan Novet in CNBC. “Zoom reported revenue growth of 169% from the previous year in its first-quarter earnings report on Tuesday, and nearly doubled its revenue guidance for the full year… The company had 265,400 customers with more than 10 employees at the end of the quarter, up 354%. The growth rate in the prior quarter was 61%.”

— “‘[The] competition is good for consumers’, said Eric Yuan, Zoom’s CEO.”

Competition in the United States begets technological innovation, notes Thomas A. Lambert of the University of Missouri School of Law. “The evidence, however, does not support the view that lax U.S. antitrust is reducing innovation. Eleven of the top sixteen global spenders on research and development are U.S. firms, and six of those… are ‘Big Tech’ firms that have been accused of acting like monopolists. Moreover, the U.S. is home to half (178 of 356) of the world’s so-called ‘unicorn’ companies—i.e., private companies valued at greater than $1 billion.”

Frequent disruption in the technology sector demonstrates the benefits of competition, driving innovation and investment, argues Geoffrey Manne of the International Center for Law and Economics.“High-tech industries are often marked by frequent disruptions or paradigm shifts rather than horizontal market share contests; and spending on innovation and investment are important signals of competition, which comes from the continual threat of new entry down the road—often from competitors who, though they may start with relatively small market share, or may arise in completely different markets, can rapidly and unexpectedly come to overtake incumbents.”

Learn more about how growth helps all Americans

Hostility to innovation and technology diminishes the incredible Internet-enabled opportunities that leading tech services provide: empowering consumers, driving prices down and increasing choice, and providing platforms to help entrepreneurs grow their businesses. It has given us a golden era of entertainment, knowledge, and everything from fashion startups, to booming mom and pop stores, to the latest app.

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