8. The Continuing Power of Third Party Payer Businesses

In Chapter 7, we saw the enormous power and profit that can be gathered when online gateways operate as Mandatory Participation Third Party Payer Systems. We’ve seen how difficult it is for companies that become dependent upon these MP3PP gateways to escape their grasp or to limit what they pay to the gateway operators. In this chapter, we see that even the perfect efficiency and perfect transparency promised by the Internet do not limit the power of these MP3PPs. MP3PPs are even more powerful than they were before the net, because they are even larger. They are potentially even more dangerous. We see that even MP3PPs that initially appear safe, moderate, and temperate in their demands have the ability to become exploitive. And we explore one of the greatest sources of danger, which occurs when MP3PP gateway operators expand into additional lines of business, and use their control of a critical gateway to destroy competitors and limit consumers’ ability to choose. Online gateways add value for users, Party-1, which is why they are able to attract users. As MP3PP gateways become more valuable to users, their ability to charge Party-3 (sellers) increases, and they switch from value creation to value harvesting.