Sun | May 22, 2022

Editorial | Minister Morgan must watch the hyperscalers

Published:Monday | January 17, 2022 | 12:07 AM

We hope that Robert Morgan won’t suffer the misapprehension of several of his recent predecessors that his primary role as de facto information minister is to be the senior public relations officer to the Government and press secretary to the prime minister. There are people lower down the rung who do those jobs.

There are serious policy issues which should command Mr Morgan’s attention, not the least of which is the existential threat the global digital hyperscalers – the giant tech companies such as Facebook, Google and others – pose to Jamaican and Caribbean media, and its potential knock-on effect on regional democracy and economies.

These are matters this newspaper has previously warned the administration about without, apparently, anyone paying heed. Hopefully, Mr Morgan will pay attention to Professor Anthony Clayton, chairman of the Government’s Broadcasting Commission, for which he now has direct ministerial responsibility. Professor Clayton has recently been publicly raising similar concerns.

For the public, these tech giants, and their subsidiaries, are mostly easy routes to global information and entertainment, as well as platforms for doing business. Which they are. But as governments globally are increasingly recognising, and becoming concerned, that not only do the hyperscalers control much of the world’s data and information – covering most aspects of people’s lives – they are under little regulation. They wield enormous power without accountability.

Indeed, a major discussion in the United States is whether the tech giants should be subject to antitrust laws and broken up.

A major part of the success of these entities is their capacity to leverage other people’s content to generate mega audiences, data which are then employed to earn huge incomes and profits, mostly through the sale of advertising. Facebook’s global revenue in 2020 was nearly US$86 billion, and its net profit US$29.1 billion.

EARNINGS OUTSIDE OF US

Facebook, however, was a relative minnow compared to Google, whose 2020 income was approximately US$183 billion, of which over US$40 billion reached the bottom line. They were on course to do even better last year.

The hyperscalers earn a big chunk of their income outside of the United States, sucking away revenue from domestic media, without having to invest in many of the markets in which they operate.

In Jamaica, for instance, media companies hire staff and invest in content. These costs are paid primarily out of income from advertising. If the media make profits, they pay income taxes, which help to meet the country’s bills.

But the contribution of mainstream domestic media is more than taxes to the country’s fiscal accounts. A free and independent press, as Prime Minister Andrew Holness has acknowledged, is important to a country’s democracy. It facilitates discussion and debate, and encourages transparency in government, which impacts the quality of governance.

NO OBLIGATION TO REGION

Google and Facebook, and others, have no such obligation to Jamaica’s economy or democracy. Neither do they invest in robust domestic journalism. They, however, have access to domestic advertising markets, where they leverage their size and technologies to gobble up an ever-increasing portion of the spend. Even when hyperscalers place some of these ads on domestic platforms, the local company earns only a small portion of the revenue, notwithstanding that it is their contents that generate the traffic. Further, the hyperscalers pay no taxes on the income they earn in Jamaica, or other Caribbean jurisdictions. The same is the case in many other parts of the world. Neither are they in any other way accountable to the Jamaican or any other regional government.

These are issues Mr Morgan should have on his agenda, if he, like the prime minister, believes that a vibrant media adds value to Jamaica.

A year ago, over the objections of the hyperscalers, including muscle flexing by Facebook, Australia passed legislation requiring the big tech companies to negotiate payment for content with Australian media companies, failing which arbitrated rates would be imposed by a government arbitrator. Similar regulations have been emerging in several developed countries, especially in Europe.

Additionally, under new global tax rules, the hyperscalers may have to start paying income taxes in the countries where they earn the revenue, rather than shifting income to low-tax jurisdictions.

Of course, Jamaica, on its own, may find it difficult to regulate these global behemoths and have them pay their fair share on the incomes they earn in this market. A regional approach to the matter, as we have previously suggested, would make sense. In that regard, Mr Morgan should pursue the issue with his boss, Prime Minister Holness, to have it placed on the agenda of next month’s summit of Caribbean Community leaders.