The CMA's heavy-handed approach towards Google and technology firms it scarcely comprehends will prevent Britain from maximising AI opportunities, argues Matthew Lesh.
"One Billion Customers – Can Anyone Catch the Cell Phone King?" proclaimed the Forbes magazine cover feature, as reported by .
However, this wasn't referencing Apple, or even Android.
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The headline celebrated Nokia's golden period in November 2007.
Merely months beforehand, Apple had unveiled the iPhone, with Google set to launch Android the subsequent year.
Nokia's seemingly impregnable monopoly would swiftly dissolve.
During that same period, analysts insisted Myspace's network advantages would secure its lasting supremacy, only to witness Facebook devour its market share.
Several years prior, European competition regulators scrutinised Microsoft's Internet Explorer, convinced that its integration with Windows would establish an unbreakable stranglehold on the browser sector.
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Nevertheless, within just a handful of years, Internet Explorer's dominance crumbled beneath the pressure of Mozilla's Firefox and subsequently Google's Chrome.
History's teaching is that today's titans can swiftly transform into tomorrow's studies in redundancy.
Digital marketplaces that might initially seem anti-competitive aren't necessarily fixed, with vibrant competition challenging established operators and benefiting consumers.
The CMA's offensive against Google and cloud platforms
Regrettably, the Competition and Markets Authority (CMA) seems set on revisiting these well-trodden disputes. They are on the brink of utilising new digital competition powers to 'fix' markets just as technological advancements and increasing investment are transforming their competitive landscape.
In doing so, the CMA risks stifling the very innovation and infrastructure that the 海角视频 requires to flourish in the AI era.
Initially, the CMA is on the verge of bestowing 'strategic market status' upon Google's search product, which would entail heavy-handed interventions in how the product functions. This move is somewhat ironic, given that Google is currently facing a significant threat from AI chatbots, the most intense competitive pressure it has faced in decades.
In response, Google has cautioned that the CMA's extensive interference could lead to British users losing early access to new features. Regulatory uncertainty created by the EU's competition regime has already forced Google to postpone the rollout of AI tools in the European Union.
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A similar narrative is playing out in the CMA's recently concluded investigation into cloud services, with a focus on Amazon and Microsoft. This investigation serves as an example of regulatory timing gone awry.
When Ofcom first referred the market to the CMA in September 2022, the landscape was entirely different. Large language models were still a novelty confined to laboratories, and cloud services were primarily evaluated based on storage, compute and reliability.
Everything shifted after ChatGPT's launch in November 2022, sparking the generative AI revolution and transforming the entire sector. Cloud providers have since invested billions in AI-optimised infrastructure, encompassing hyperscale data centres, GPU clusters and integrated AI platforms.
This has fundamentally altered how enterprises utilise cloud services. The investment surge isn't coincidental.
It represents the new competitive battlefield, with Amazon, Microsoft, Google and an expanding roster of rivals competing to deliver enhanced capabilities.
However, the CMA's conclusions are anchored in a pre-AI assessment, essentially capturing the market in 2022 precisely when its boundaries were being redrawn. Within this transformed environment, the CMA's worries regarding elevated switching costs and licensing arrangements are no longer nearly as relevant.
AI functionalities, performance for training and inference, and comprehensive integrations are becoming increasingly crucial.
This will have consequences on AI progress
Through proceeding to impose strategic market status at this juncture, the CMA risks hampering the very infrastructure development the 海角视频 requires to become an "AI maker, not an AI taker". Investment choices are being determined today regarding where to position the next generation of AI capacity.
Heavy-handed regulatory action based on obsolete assumptions delivers a concerning message to investors. The government kicked off the year by removing the chair of the CMA due to concerns that the organisation was not sufficiently focused on growth.
Chancellor Rachel Reeves emphasised the necessity to dismantle regulatory obstacles to growth, a sentiment yet to be mirrored in the CMA's operations.
This scenario underscores a wider challenge the government confronts regarding regulation. Lightening bureaucratic loads on businesses involves more than mere rhetoric; it necessitates reining in problematic powers of quangos.
A suitable starting point for scrutiny would be the digital competition powers granted to the CMA in the final days of the Sunak administration, which permit pre-emptive interventions at lower evidential standards and with limited accountability.
Should the government fail to reform these powers, the CMA will have free rein to overstep in rapidly evolving sectors it barely comprehends, solidifying markets in outdated configurations. This risks discouraging the AI-era investment the 海角视频 requires, leaving the nation regulating the past while others surge forward.
Matthew Lesh is country manager at Freshwater Strategy and a public policy fellow at the Institute of Economic Affairs.