Mark Jamison
The Federal Trade Commission (FTC) and a group of states have reportedly launched an investigation into Meta’s Oculus unit. Oculus is Meta’s virtual reality (VR) headset that customers can use to access metaverse spaces and play 3-D online games, complete workout routines, construct personal workspaces, and host meetings. So far, the FTC and states are not publicly commenting on the investigation, according to news reports.
At present, Oculus is the most popular VR headset, making up about 35 percent of headset sales in 2021, according to Steam’s Hardware Survey, followed by Valve Index with about 15 percent. According to reports, the FTC and states consider Meta’s 35 percent of sales to be a dominant market position that the company is using to squash competition. Apparently, the regulators are concerned that Meta sells its Oculus headsets at lower prices than competitors’ and favors its own apps in the Oculus app store.
via Twenty20
There are at least three basic problems with the aforementioned investigation. First is the incoherence of claiming dominance in an emerging and rapidly changing market. Dominance implies that a company has enduring control of a market and is protected from competition.
No one controls VR devices and entry is wide open. As the popular technology review site CNET says, “VR is a technology that’s still in flux,” and today’s devices will soon be outdated. CNET is also expecting a lot of new headsets in 2022, including one from Apple. This is hardly a situation in which a company can hold enduring control.
Another basic problem is that Meta’s strategy of keeping prices low for devices and profiting from future purchases is a standard business practice. Gaming companies sell consoles at a loss so they can profit from games and online sales. This is known as the razor-razorblade model and has also been used for mobile phones and printers.
A third problem is that any actions the FTC and states would take would effectively be regulating the metaverse long before it is clear how metaverse spaces will work, and developers are experimenting with numerous financial models. Non-fungible tokens are playing increasingly significant roles, but their functions vary. Some providers (but not all) use play-to-earn incentives to entice users, and these approaches vary as well. Microsoft Teams has a metaverse version called Mesh that is free, but some underlying Teams features involve monthly fees. Given this experimentation, any regulatory intervention is likely to suppress innovation.
There is also extensive experimentation in metaverse governance. In all instances, developers set rules and define the boundaries of what users can do, but these rules and boundaries vary. Many developers place users in decentralized autonomous organizations (DAOs) that provide self-governance. The policies and rules for DAOs vary, and a superior model has yet to emerge. It remains to be seen whether traditional governments can play effective roles in metaverse oversight given the evolving nature of its governance, and that users and developers come from multiple countries.
The states and the FTC should devote their scarce resources to more productive pursuits. Not only is it far too early to know if there are competition problems in the metaverse, but the investigations appear to largely focus on the opinions and complaints of disgruntled competitors. This is what happened when the House Judiciary Committee’s antitrust subcommittee investigated Big Tech. This contributed to the outcomes appearing largely political and lacking in substantive foundations. Hopefully the metaverse investigation will wrap up soon so that customers — not government regulators — will drive the metaverse’s development.
Courtesy: (AEI.org)
