Ownership Of Digital Devices Is Crucial For A Thriving Free Society

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.”

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 society. This 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 over-reaction. 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 may use 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” to be in society. If tech oligarchs don’t like you, your company or your government, they can hit the kill switch and your fancy smartphone becomes a useless piece of glass, metal and silicon.

A scenario where a political-corporate decision halfway around the world bricks hundreds of millions of smartphones in India is certainly far-fetched, even if it’s within the realm of possibility. But there are good reasons to be wary of hardware subscriptions in less drastic but no less consequential matters.

Avinash Mani Tripathi, an economist at Azim Premji University, explained to me that hardware subscriptions are a response to the “durable goods monopolist problem”. Ronald Coase had conjectured that the durability of goods limits the market power of a manufacturer because its current and future products compete with each other. Renting out iPhones, instead of selling them outright, may be a way for Apple to reduce competing with itself. “It seems,” said Tripathi, “Apple is moving from strategic obsolescence to subscription, a more efficient way to extract profits.”

That may be good for Apple and its shareholders. However, ownership of the means of production and participation is the bedrock of economic freedom and liberal democracy. There is a strong correlation between ownership societies, prosperity and egalitarian culture. A landless peasant in the agrarian age was poor and sub-servient to the feudal zamindar. In the industrial age, Communists and socialist regimes that prevented individuals from owning machines ended up poor, drab 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 ability to innovate would then shift 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, Twitter’s directors said they would determine their course of action based on the “best interests of the Company and all Twitter stockholders”. It is not surprising that they make no mention of 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, specialized and thus confusing for policymakers and the general public. Yet once we take economic freedom as the touchstone, things become a whole lot clearer. In addition to resisting hardware subscriptions, desirable policies are those that promote repairability, the opening up of app stores and also restrict hardware-software lock-in techniques. Economic freedom will also ensure that India’s vibrant tech and media industries will not be beholden to any 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 of this age.

Nitin Pai is co-founder and director of The Takshashila Institution, an independent center for research and education in public policy

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