Google and Facebook are revealing their ugly sides in Australia, bullying the country because it might force them to fairly compensate news organizations.

This comes as other countries are watching the drama and considering similar policies, to sustain news outlets essential to democracy.

A surprising champion of this regulatory effort is Microsoft, particularly Brad Smith, the company’s president.

Smith wrote in 2019 that defending democracy and sustaining journalism would be among tech’s top policy issues this decade.

That commitment is on full display in Australia, where Microsoft stepped in this month to support a government proposal that would force Google and Facebook to negotiate payment arrangements with news organizations.

Google threatened to pull its search service from Australia but relented after Microsoft engaged. Now Google is cutting deals with news outlets before the new policy is finalized.

Facebook also threw a fit. On Wednesday, it began blocking users and publishers from posting news items in Australia, “using a combination of technologies to restrict news content, and we will have processes to review any content that was inadvertently removed.”

Who knew Facebook had such technical and curatorial capabilities, after seeing so much misinformation and harmful content on its pages in recent years?

In contrast, Smith and Microsoft CEO Satya Nadella called Australia’s prime minister. They offered to fill in for Google if necessary and pay for news under the policy.

“We do think it provides a recipe not just for Australia but for many countries around the world, including the United States,” Smith told me last week.

Of course it’s an opportunity for Microsoft to goad a rival and ally itself with elected officials who buy lots of technology.

But it’s also a testament to the company’s values and Smith’s role as a global statesman, advocating for both Microsoft and policies that benefit communities where it operates.

I’m biased here, too. My view is the beleaguered news industry can use all the help it can get. That’s especially the case when trying to negotiate with dominant platforms, where there’s a gross imbalance of power.

I interviewed Smith to learn more about his advocacy, the Australian policy and how it could be emulated in the U.S. Here are excerpts, edited for length:

QUESTION: You’ve been talking about the need to sustain journalism and democracy for a while. What’s the genesis?

ANSWER: For some time we’ve appreciated that you can’t have a healthy community or a healthy country or any kind of healthy democracy without healthy journalism.

As I wrote in my blog, it’s hard to believe that Jan. 6 would have unfolded in the tragic way it did without the broad disinformation campaign that preceded it. Tens of millions of Americans genuinely disagree about who won the presidential election, yet the facts are clear and the courts have been consistent in their judgment of it. I think that speaks to what I call the two sided disease — one is the spread of disinformation on social media, and the other is the financial weakening of more traditional and independent journalism. All of this I think just highlights the problem in a more urgent way.

Q: Is Australia’s proposal a template for other sectors, besides news?

A: This is really about the importance of an independent and free press. The press plays a special role in democratic societies. I’m not prepared to say this should be applied to other categories of content. It does however point to the need for competition, including in the search market. Australia’s sort of proved that fact. Within 24 hours of our publicly endorsing the Australian proposal, Google was on the phone with the prime minister saying they would stay in Australia after all. A little competition does seem to go a long ways. If there was more competition in the search market, there would be a lot of benefits for many people, starting with but not ending with news publishers.

Q: You recently said antitrust cases are slow but you can “skip ahead” with legislative and regulatory changes. How might that happen in the U.S.?

A: Governments around the world are recognizing that it is easier and more effective and certainly faster to legislate a code that regulates competition than it is to bring a series of competition lawsuits. That doesn’t mean that the investigations and lawsuits will disappear — there is a role in many industries for them — but legislation is a ready alternative. One obvious step has already been proposed in the Congress, to create an antitrust exemption for news publishers to negotiate collectively with a company like Google. This is similar to one aspect of the Australian legislation. Its core obligation is a duty on certain tech platforms to compensate news publishers for the value platforms derive from the inclusion of news content. Congress and the administration should look at every aspect of the Australian law. Not every aspect may make sense for the U.S., but it would put us on a path of asking a lot of the right questions.

Q: If you create that exemption for newspapers, you could end up helping large publishers and leaving behind smaller, independent ones that cover most of the country. How do you overcome that?

A: I think that needs of small news publishers are a critical part of the overall equation. We need media pluralism and it’s clear that publishers hit the hardest in the U.S. typically have been small, local news publications. The Australian approach offers a piece of the solution but certainly is not a panacea. This needs to be pursued as part of a much broader strategy to strengthen local news in the U.S. The Seattle Times is almost a singular exception in the country today in terms of being a family-owned newspaper in a large media market.

We should consider multiple models. We should recognize that the value of news goes well beyond the amount of money generated through subscriptions and ads — news is a sector that isn’t just about economics, it is about this fourth leg of the stool for our democracy itself. And we should look at it through that lens. If there are other forms of public support or legislation or other types of public and private initiatives that are needed to restore a more healthy independent news sector in the U.S., we should put all of those ideas on the table.

Q: The Australian proposal puts the onus on platforms to say how news affects their value, versus the value of particular stories. Past suggestions focused on per-story transactions, when it’s really a service provided by newspapers that’s harder to value.

A: I think that is such an important aspect of this. One of the things that has surprised me about the reaction to the Australian issue is the number of people in the tech sector who complained it would break the internet by charging for each link. That is not what the Australian legislation does at all. Instead it, as you point out, puts a value on the overall service and in fact the Australian government just introduced amendments to make even more crystal clear that this is a lump-sum payment that would be made, say, annually based on that kind of value. This is something we see at Microsoft — through our big search service, we see the value of having broad and fresh news content. It keeps people engaged because it’s part of what people are looking for and checking on in terms of going to a search page or a social media site.

Q: Do you know if the Biden Administration agrees with you? This seems key to its “healing division” message.

A: The issue is moving very quickly from Australia to other democratic countries and the rest of the world. It’s clear to us this issue has grabbed the attention of people in Washington, D.C., so there will be an opportunity for more discussions. From our perspective, it’s encouraging that the new administration is focused on advancing civility, advancing a broader understanding of common facts and appreciating the role that the press plays in our democratic process. I’m hopeful we’ll have officials both in the White House and in Congress interested in learning more and ultimately embracing some of these ideas. Its certainly a path we will seek to encourage as a company.

Q: In a 2019 blog post, you said 95% of Microsoft’s revenue is from democracies. Does that contribute to the company’s focus on sustaining democracies and journalism?

A: I think we’re grounded in the fact that we are present and play oftentimes a significant role in so many countries and capitals globally. One of the things we’ve seen is the challenges to democracy over the last several years, another has been the challenges for journalism. We’ve seen the connections between these two, so I think it is our market presence that gives us this window on the world, so to speak.

The tech sector is one of the great beneficiaries of the democracies that exist in the world today. Technology is a creative industry, so much of what we do is about enabling people to pursue their own passions and ambitions. Microsoft as a company has long focused on helping people develop their ideas, learn about the world, share their ideas with other people — so all of these things weave together to give us I think a real sense of conviction about the importance of journalism and it’s connection to democracy.

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