Hardware subscriptions are a bad idea for human society. The business model must be challenged and subject to public and parliamentary debate.
This is from The Intersection column that appears every other Monday in Mint.
A few weeks ago Bloomberg’s Mark Gurman reported that “Apple Inc. is working on a subscription service for the iPhone and other hardware products, a move that could make device ownership similar to paying a monthly app fee…The program would differ from an installment program in that the monthly charge wouldn’t be the price of the device split across 12 or 24 months. Rather, it would be a yet-to-be-determined monthly fee that depends on which device the user chooses.”
I had previously posted a gist of my discussions with my colleagues here.
Wall Street analysts and management consulting firms have been championing such a business model for some time, but my intuitive reaction upon reading the news was one of horror. And after further reflection and debate with my colleagues, I have no reason to change my mind: Hardware subscriptions are a bad idea for human society. The business model must be challenged and subject to public and parliamentary debate. Public policy must exercise abundant caution and insist on regulatory safeguards.
This is not an overreaction. We have over two decades of empirical evidence to show that information economy business models lead to a few companies acquiring massive global market-political power, and using that to stifle competition even if the industry itself has few entry or exit barriers. A future where a handful of big global companies own the phones, laptops, modems and servers that everyone requires to participate in any activity is a lot worse than even today’s world where “you must be on WhatsApp and Facebook!” If the tech oligarchs don’t like you, your company or your government, they can hit the kill switch and your fancy new smartphone becomes a useless piece of glass, metal and silicon. Is it not what they did to the Russians?
Now the scenario where a corporate decision halfway around the world bricks hundreds of millions of smartphones in India is certainly far-fetched, even if it is very much within the realm of possibility. But there are good reasons to be wary of hardware subscriptions at less drastic but no less consequential parts of the spectrum.
Avinash Mani Tripathi, an economist at Azim Premji University, explained to me that hardware subscriptions are a response to “durable goods monopolist problem”. Ronald Coase had conjectured that the durability of the goods limits the market power of the manufacturer because its current and future products compete with each other. Renting out iPhones, instead of selling them outright, is a way for Apple to reduce competing with itself. “It seems,” Tripathi says “Apple is moving from strategic obsolescence to subscription, a more efficient way to extract profits.
That may be good for Apple. However, ownership of the means of production and participation are the bedrock of economic freedom and liberal democracy. There is a strong correlation between ownership societies, economic prosperity and egalitarian culture. A landless peasant in the agrarian age was poor and subservient to the feudal zamindar. In the industrial age, Communists and socialist regimes that prevented individuals from owning machines ended up poor and unfree. Information Age societies that deny individuals the capacity to own essential hardware and software will fare a lot worse. If you are merely renting a phone from the manufacturer, then the owner can dictate what you can and cannot do with it. Economic freedom and the power of innovation shifts away from individuals towards tech oligarchs.
Elon Musk’s attempt to take over Twitter is indicative of the stakes. There are valid concerns that his personal view of free speech and censorship can influence global politics. And in their response to the takeover bid the Twitter’s board of directors said that they would determine their course of action based on the “best interests of the Company and all Twitter stockholders”. It is not at all surprising that they forgot about the interests of users or society.
That is why human affairs in the information age must not be left to the design choices and business models of technology companies. They certainly deserve a say, but not at the expense of citizens and democratic governments. What liberal democracies around the world need is a cautious and deliberate way forward, not a thoughtless techno-deterministic route where we end up, willy nilly, in a Hotel California.
Technology policy is dynamic, challenging, technical and thus confusing for policymakers and the general public. Yet once we place economic freedom as the touchstone, things become a whole lot clearer. In addition to resisting hardware subscriptions, desirable policies are those that promote repairability, opening up app stores and proscribing hardware-software lock-in techniques. Economic freedom will also ensure that India’s vibrant tech and media industries will not be beholden to tech oligarchs. Western democracies are already considering legislation to protect consumer interests over Big Tech. India should be doubly alert.
With the Ukraine war, ensuring the availability of networks and devices during these politically volatile times has become a matter of national security. India should not allow tech oligarchs to become unaccountable and unavoidable gatekeepers the information age.
There are many more The Intersection columns here
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