Founder and CEO of CodeLathe (creators of FileCloud and AirSend), driving the company’s overall strategy and execution.
When the newly formed White House Competition Council met in September, their agenda for their first meeting focused on airlines, hospitals and right-to-repair on farm equipment. It made for a nice warm-up for a group focused on promoting an economy with more transparency, choice and savings for customers, but one of the most significant issues still lies ahead: creating an environment where startups operate on equal footing with established companies.
Tech startups, in particular, grab headlines by raising millions of dollars and creating new products and services that capture our imagination. But they still fight an uphill battle with industry giants, who enjoy huge market share with very little competition. It’s a stark reminder that one short acronym, GAFAM (Google, Amazon, Facebook, Apple, Microsoft), covers a vast swath of the tech industry.
The biggest firms have been accused, for example, of using their dominant position to squeeze smaller players out of the market. The big guys can also afford to take losses by selling at deep discounts, making it easier to take away market share from scrappy competitors. In addition, bigger companies can copy any innovation not sufficiently protected by copyright and claim it as their own.
The contrast hits consumers as well and is particularly stark with basic operating systems, where Microsoft has built an insurmountable advantage over the past 30 years. Tech industry research analyst firm Gartner estimates that Windows holds 83% market share for personal computers. If a significant security flaw hits Windows, billions of customers could be affected.
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When a breach of computer security now affects every single business, the stakes are too high to leave the responsibility in the hands of a single company. A real atmosphere of competition in this area would help startups succeed while making larger enterprises better.
A group of 12 former U.S. security officials emphasized this particular point about the effect a lack of competition could have on our country’s position as the global technology leader in a recent letter to Congress. Two areas that could see a boost from the U.S. Innovation and Competition Act (USICA) are semiconductors and telecom, which are slated to get a $54 billion investment from Congress. This makes it a good time to look for subsidies for these industries.
To create a more level playing field across all technology sectors, the government should consider establishing a Competition Policy, similar to what exists in Europe. The EU policy “encourages efficiency and innovation and reduces prices” while recognizing that “to be effective, competition requires companies to act independently of each other, and subject to the pressure exerted by their competitors.”
In crafting a policy for the U.S., the council could address one of the reported shortfalls of the EU approach, which doesn’t fit well with the current digital landscape. A report called “Unlocking Digital Competition” said it sees “greater competition among digital platforms as not only necessary but also possible — provided the right policies are in place.”
There’s no need for a deep dive into a regulatory framework — some simple rules around equal access to markets, balanced choices between going public and remaining private and the aggregation of data should provide a solid foundation. A failure to act could lead to a loss of jobs and the weakening of the startup economy.
In his executive order that created the Competition Council, President Biden wrote, “A fair, open and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups and consumers.”
Now is the time to help startups achieve equal footing with their larger competitors to bolster innovation for all.