Microsoft vice-chairman, president and chief legal officer Brad Smith. Photo / Getty Images
"We have to assume this is a decade that will bring regulation to technology much like the 1930s did for financial services," Microsoft president and chief legal officer Brad Smith said during an online briefing for the Herald and a number of offshore publications.
That decade saw sweeping reforms as the Roosevelt administration regulated share trading for the first time with the creating of the Securities and Exchange Commission, introduced deposit insurance, split retail and investment banking and dramatically expanded the powers of the US Federal Reserve.
"Big Tech" companies like his own, "need to assume a new level of self-responsibility, and adapt to a future where we recognise that regulation is not only inevitable but, in fact, has an important role to play," Smith said.
"And I think we all need to recognise that we live in a world that is larger than ourselves.
And certainly when it comes to countries like China and the United States, much larger than ourselves.
"And at the end of the day, we can do as much as the governments permit."
Smith made his comments during an online briefing to the Herald and various Australian and Asia-Pacific on September 10.
Four days later, he was promoted to vice-chairman - a board-approved executive position added to his existing titles.
(Microsoft's board retains its Kiwi connection, of sorts. The Seattle-based John Stanton - founder and chairman of 2degrees owner Trilogy has been a director since 2014. Stanton is also on the board of Costco. Smith, interestingly, has also been a director of Netflix since 2014.)
Of course, Microsoft has been here before.
In 1998, US Federal Judge Thomas Jackson ruled that Microsoft had violated parts of the Sherman Antitrust Act as it sought to use its power in the desktop to foil upstart internet competitors like Netscape.
His decision was that Microsoft be split in two, with one company controlling Windows and the other the rest of its software.
Microsoft eventually prevailed after several years of appeals, but its legal war still proved a huge distraction at a time when the market was moving from who controls the desktop to who controls the web, and mobile devices. By the time the smoke cleared, social media, search engines and a resurgent Apple were the Next Big Things.
So, this isn't Microsoft's first time at the regulatory rodeo, or indeed Smith's. He was the software giant's deputy general-counsel, then general counsel during its legal wars of the late 1990s and early 2000s.
But this time there are a number of factors that are quite different. And, as Smith pitches it, they play to his company's favour.
Today's regulators are looking not just at potential abuse of market power, but assessing Big Tech's impact in a range of areas from artificial intelligence to cybersecurity to privacy to open data to environmental sustainability and challenges to democracy in an era of misinformation and hate speech.
Smith didn't reference his company's previous regulatory fights, but he did outline that there are now multiple areas of focus for market regulators, and that big regulatory moves are now happening outside the US and EU.
And many would also point to another key difference, and one that perhaps underpins why Smith comes close to cheerleading for regulators' current efforts: While Microsoft is doing very well, thank you - it's the world's second most valuable publicly-listed company (behind Apple) with a market cap of around US$2.25 trillion, or roughly 20 times NZ's GDP) it's now doing well across the board, from consumer software to gaming and cloud services.
It doesn't have any one product or service that's in regulators' crosshairs in the manner of Apple and Google's app stores, Google's domination in search, or Facebook's sway over social media.
Smith highlighted recent moves by Japanese regulators and South Korean lawmakers to force Apple and Google to allow app developers to point people to alternative payment methods - allowing them to potentially skirt app store commissions of between 15 and 30 per cent.
"For anybody who's really following what is happening around the world, you could say the two most significant developments in the last week were in Tokyo and Seoul," Smith said.
"That's really at the forefront of new steps to address issues like app stores - in one case, through a traditional regulatory mechanism, the Japanese Fair Trade Commission, in another case, through an entirely new law, the Korean parliament.
"I think that is a reflection of what we are going to continue to see, we're going to continue to see it across Asia, we're going to continue to see it in the rest of the world, we're going to continue to see it in more fields."
(Shortly after Smith's briefing, a US judge ruled that Apple must provide App Store clients with the ability to direct customers to alternative payments within 90 days. The decision is subject to possible appeals, and came in a case brought by Fortnite maker Epic Games, which failed in several other key areas.)
South Korea's law change still needs to be signed by President Moon Jae-in, who is expected to sign it this week - but Epic on Friday went ahead and filed a lawsuit against Apple in South Korea to test the new legislation. In Japan Apple reached a settlement with regulators earlier this month to allow App Store clients to link to external websites.)
Smith said get ready for more of the same. "I think critically, we're going to continue to see it with more governments talking with each other, and at least in many ways, on an informal basis, coordinating with each other."
He said his company was ready to assist governments and regulators worldwide.
Cynics will see Smith making a virtue out of necessity, given none of his company's online platform have the lock on users' attention enjoyed by Apple's App Store or Google Play (not that Microsoft's bottom line has suffered).
But whether it's merely a measure of how much the landscape has changed since 1998, he nevertheless pitches Microsoft as the Big Tech that can be relied on to boost economic growth without smothering competition.
"We're trying to ensure that something like Azure and all of our services, and Windows itself, operates as an open platform that drives digital transformation for others. We advance open data initiatives. And we avoid creating the kinds of bottlenecks that I think are often of concern to regulators.
"So much of the concern in the marketplace really focuses on companies that are not only platforms but also as aggregators [and] operating as a gatekeeper. And you see us avoiding that by creating an open platform."
We will see more of Microsoft here next year, as it opens two giant server farms in Auckland as Azure regional data centres - which will make it the first of the Big Three in cloud computing (Microsoft, Amazon and Google) to break ground here rather than serve NZ from Sydney.
The budget is undisclosed (other than that it's above the Overseas Investment Office's $100m threshold) but is likely to equal or exceed the $300m that half Infratil-owned CDC is spending on twin data centres in Hobsonville and Silverdale.
And Smith said the new data centres would be central to his company's latest push.
"If you look at our company, what we're clearly doing in Asia-Pacific and around the world is embarking on a rapid expansion of more and more data centers. We're very focused on the public cloud, as really, in the infrastructure of the 21st century, on which so much else can be built."
In a small-world scenario, the first of Microsoft's two data centres in Auckland's northwest is just a stone's throw from the country's first Costco (and 2degrees is just finishing off a new office, so Stanton would have three sites to visit as a director if he visited Auckland again in the near future).
The area's rural fringe is rapidly changing from strawberry fields and horse paddocks to data centres and big-box retail but, in Microsoft's case at least, it will retail a "green" aspect.
Smith said, "We are running our data centres and all of our cloud services and operations, with the goal of being carbon negative as a company by the end of the decade, [in part] by getting all of our data centres worldwide to zero by the middle of this decade."
While our Government's largely lean-back approach to Big Tech did not earn a mention, Smith noted that what's become a signature year in Big Tech regulation kicked off with, "the Australians moving forward with their new law to address what they saw as an imbalance between social media and traditional journalism" - a reference to Scott Morrison's government forcing Google and Facebook to pay for news, after a front-foot stoush that saw the search giant temporarily remove Australian mainstream news media sites from results, and the social media platform make a hamfisted attempt to remove Australian news content (it had to back-down after a PR own-goal as it inadvertently blocked law-enforcement, emergency service philanthropic and other non-news pages as well).
The ACCC in Australia is, frankly one of the most sophisticated competition agencies in the world," Smith said. (Our Commerce Commission has not matched the ACCC's raft of court action against Big Tech companies, preferring to keep its perennial 'watching brief'.)
It's still possible the Microsoft vice-chairman's enthusiasm will be dimmed by events.
Last month ACCC (Australian Competition and Consumer Commission) chairman Rod Sims called for tougher tests governing acquisitions particularly by Google, Apple, Facebook, Amazon and Microsoft whom he said were "serial acquirers".
On September 8, it was made public that Microsoft wants to buy Brisbane-based video editing startup Clipchamp - its first down-under acquisition since it bought Wellington cloud computing software firm Green Button in 2014.
Simms said his agency was awaiting more information from Microsoft.
Smith, who spoke to media just as the potential takeover had been made public said that was "a conversation we expected to have" and, from his point of view, he saw it as a straightforward one on a transaction he thought would add to consumer choice rather than diminish competition.
"Some [think] that many acquisitions in technology do service customers," he said.
"Let's just take the issue of the day. I think if Microsoft has the opportunity to add a great video editor to its services. That's not a space where we're big today. That's a space where others are big today. I think it's a vibrant market.
"We could always spend the money to build a new video editor. But if we can acquire a strong company that happens to be in Brisbane, I think we can move faster, we can bring those services to people around the world more quickly."
And how 2024 stacked up.