The pace of development of generative artificial intelligence (AI) is moving faster than anticipated. Although there was unalloyed enthusiasm for a couple of months, essential issues surrounding accuracy, bias, security, and regulation are now emerging. Observers note that officials in Germany and Italy have scrutinized or even banned ChatGPT because of security and privacy concerns. Additionally, regulators in the United States are becoming more skeptical.

Blanket regulations on specific applications of AI models may seem appealing to constrain markets, but Bill Gates recently pointed out that regulation “won’t solve [its] challenges.” The better way for regulators to ensure AI development and deployment is safe, transparent, and producing real-world benefits is to keep markets robust by scrutinizing AI partnerships that lack transparency and other arrangements that try to prevent fair competition. The approach ideally sought is an innovative, transparent, and competitive marketplace that is capable of bringing life-changing technology to the masses in safe and responsible ways.

Microsoft’s partnership with OpenAI is an example. Microsoft recognized OpenAI’s potential long before the resounding success of ChatGPT’s public launch. However, Microsoft’s deal with OpenAI in 2019 was not a typical financial investment. The initial billion dollars from Microsoft came mainly in the form of Azure credits, a de facto subsidy that led to OpenAI being built exclusively and rent-free on Microsoft’s cloud.

While this partnership has created deep ties between Microsoft and OpenAI’s technology infrastructures and sets a clear path to a technological walled garden, the agreement presents pressing questions for regulators. Why should this partnership not be viewed as a deft move to create a subsidiary relationship while avoiding antitrust scrutiny? If so, should the Federal Trade Commission step in immediately to examine the impact on the competitive landscape? Is telegraphing a walled-garden strategy enough to warrant investigation and potential action by regulators today to forestall future harm?

Digital technology over the past 40 years has followed a consistent cycle. A long period of slow, incremental evolution culminating in a threshold moment that changes the world. This pattern led to the World Wide Web in the 1990s, mobile phones in the 2000s, and is happening today with AI. As AI prepares to enter a new phase of broad adoption and revolutionary technologies, the most significant risk that technology itself cannot solve for will very likely be anti-competitive business practices.

Large, first-mover companies will try to lock up foundational technologies and use market power to create a long-term advantage. Microsoft wrote the playbook with the bundling of Internet Explorer into Windows and now appears ready to rerun that familiar play. If OpenAI cannot run its most advanced models efficiently on non-Microsoft platforms, society will lose out. Foundational technologies must be available on equal terms to innovators large and small, established and otherwise.

Companies should be encouraged to succeed by using and building on foundational technologies. This approach is based on innovation and competition that creates products that benefit customers and society at large. There is no incentive for one company to act as a gatekeeper and to hoard foundational technology, limiting innovation from its competitors. If regulators stand by, we may invite other AI walled gardens to form, limiting interoperability and stunting innovation. This scenario is what modern antitrust policy aims to prevent.

An optimist might object and point out that the early pathway for foundational technologies is notoriously difficult to predict. No one can prove at this moment that new entrants and open-source alternatives won’t reduce OpenAI’s lead or even get out ahead. But if that hopeful view is incorrect, going backward to undo the harm will be tougher, bordering on impossible.

Modern innovation often requires making massive bets. It’s one thing for a giant company to invest billions in a startup with long-term research and development programs. It’s different to shape the investment into a captive relationship with a just-emerging foundational technology whose application could lead the innovation environment for decades.

Regulators should question the policies that guide AI ethics, fairness, and values. However, one of the most effective ways to advance those goals is to ensure a broad, diverse, and competitive marketplace where the key foundational technologies are open for equal access. That means taking steps now to prevent “walled gardens” from being built in the first place. Regulators should step in now and ensure that the Microsoft-OpenAI partnership is not merely anti-competitive activity under a clever disguise. Otherwise, a single company’s profit could be set up to prevail over what promises to be a world-changing threshold moment.

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