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Net Neutrality’s Masters of Misdirection

On net neutrality, we have all been tricked by the masters of misdirection.

For many years Google, Facebook, Amazon, and the Internet Association have deftly misdirected the media’s and government’s attention away from their unaccountable market power, discriminatory models and practices, and real consumer protection problems, towards the potential for discrimination by legacy-regulated, competitive, broadband providers.

The masterful misdirection becomes painfully obvious when one looks at the facts.

First, it’s the supposedly “competitive” Internet “edge” that is hyper-dominant and hyper-concentrated, and it is America’s broadband industry that is the most competitive in the world.

America has at least three dominant distribution networks, Google for information with over 90% search share; Amazon for ecommerce with over 70% share of households given its 90m Amazon Prime members; and Facebook for social with over 60% share of all Americans. None of the three largest broadband providers have more than about 30% share of the combined wireline-wireless broadband market.

The public data shows that the top three Internet companies, Google, Amazon and Facebook are over seven times more concentrated than the top three offline companies, Walmart, Apple and Berkshire Hathaway, and that the top ten Internet economy companies are ten times more concentrated than the top ten offline economy companies.

And the public data show that Google and Facebook capture over 95% of all digital advertising growth, the apparent key content monetization engine of the future.

Second, it is the “edge” platforms that have long called for FCC rules to prevent ISPs from favoring one application over another.

Tellingly it is Google that has successfully mass-discriminated in favor of its apps over others more than any entity to extend its PC search dominance to mobile search dominance. In its Android contracts with manufacturers and carriers Google tied use of Android to requiring default use of Google search, and the prominent inclusion of at least 15 Google apps. No surprise, Google’s non-neutral app discrimination via contractual tying has enabled Google to capture 19 of the top 25 Android apps downloaded over a billion times.

In October 2016, ProPublica exposed that Facebook enabled advertisers to illegally exclude users by race, which is illegal discrimination under the Fair Housing Act, and in November 2017, ProPublica documented Facebook is still enabling advertisers to illegally exclude users by race.

In addition, as  a leading network where people get news, like being the top news source for over 60% of millennials, congressional hearings exposed that Facebook’s network favored highly-profitable, viral fake news and fake ads in the 2016 election.

Amazon is America’s number one: direct online retailer, and online platform retailer and fulfillment provider for most of its competitors.

Amazon operates its dominant U.S. distribution network non-neutrally, because its core business model and growth strategy depend on systematic network discrimination against its direct competitors to succeed, i.e. self-dealing Amazon’s goods and services ahead of its competitors. If Amazon was not so dominant this would not be a problem.

However, Amazon has the top 90m of America’s 125m households as members of Amazon Prime. Over five million suppliers sell through Amazon Marketplace, with 100,000 sellers earning at least $100,000 a year.

Over half of online product searches start on Amazon’s network. And Amazon’s network captures over half of all ecommerce revenue growth, while comprising over 43% of all consumer online spending. This means Amazon’s network is non-neutrally discriminating in favor Amazon’s retail interests over its 5m supplier competitors’ interests which sell through Amazon Marketplace.

Third, if one needs any more evidence that Google, Facebook, Amazon, and the Internet Association have deftly misdirected the media’s and government’s attention away from their unaccountable market power, and discriminatory models and practices, look no further than how “paid prioritization” became the top priority of Google, Facebook, Amazon and the Internet Association to get added to the list of “net neutrality” must haves in the 2015 Open Internet Order, in addition to no blocking, no throttling, and transparency.

No paid prioritization, or “no fast lanes,” had nothing to do with net neutrality and everything to do with price regulation, i.e. a permanent price of zero for Amazon, Netflix, Google, and Facebook’s outsized   downstream bandwidth usage, a de facto, multi-billion dollar, hidden subsidy fully paid for by the American consumer.

Note in 2010, Public Knowledge filed net neutrality comments with the EU, that said this about paid prioritization: Question: “What other forms of prioritization are taking place? Do content and application providers also try to prioritize their services? If so, how—and how does this prioritization affect other players in the value chain?Answer: Yes, content providers enter into paid peering arrangements with broadband access providers, or use content delivery networks. These arrangements do not raise net neutrality concerns…”

Even FreePress agreed paid prioritization was not a net neutrality violation because it said: “Sometimes this interconnection of traffic is unbalanced, and fees are paid, while at other times, the traffic going back and forth is roughly equivalent, and there is no money exchanged. But the point here is that there is a financial structure in place at every point in the network. If Verizon feels it is losing money by receiving traffic on its network, then it should revisit its peering and transport agreements."

In sum, on net neutrality, we have all been tricked by the masters of misdirection: Google, Facebook, Amazon, and the Internet Association.

They’ve masterfully misdirected the media’s, consumer groups’ and the government’s attention from their rigged winner-take-all game, where they, as the only unregulated sector in the economy, successfully, maximally-used regulatory-arbitrage against their only potential competitors, and in successfully misdirecting most everyone’s attention, were then able to concentrate over seven times more than the offline economy, and devour the outsized lion’s share of all Fortune 500 revenue growth and market capitalization growth.

They played us all like a fiddle.

Hopefully, we all will learn from the old adage: “Fool me once, shame on you. Fool me twice shame on me.”

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google.

 

Q&A One Pager Debunking Net Neutrality Myths