Congress

Curt Monash in his blog suggests a "third way" for net neutrality to go -- applying regulation to the "JeffersonNet" or "bandwidth-light" parts of the Internet while not applying it to the "EdisonNet," the more "communications-rich" applications where regulation would be an impediment.

• Others have picked up on this thread, Slashdot, and Computerworld, intrigued with the middle way or third way thinking.
• Before people get carried away that there is merit in this wishful thinking thread of discussion -- lets add a dose of reality.

With all due respect, the "middle way" thinking is seriously flawed because it assumes a compromise between views with equal merit.

• Fast forwarding to a compromise of what or how much the Internet is regulated assumes the case has been made for any new regulation of the Internet.
• That case has not been made at all.
• Net neutrality is a pathetic ragtag collection of buzzword-blackmail assertions, unsubstantiated allegations and bogus claims.
• Sure the net neutrality side would like to compromise because they have lost in every official and legal forum they have raised the issue.
• Sure they would like to compromise because that would give desperately-needed validation to a bankrupt idea that is on the ropes.
• Sure they would like to get the proverbial "camels nose under the tent."

In order to talk net neutrality compromise, net neutrality proponents have to make the case that they have legitimate concerns to begin with.

Listening to the House and Senate Democrats in yesterday's congressional hearings say "there can be no debate" "or dispute" that the U.S. is falling behind in broadband, when House and Senate Republicans, expert witnesses and the Administration were debating the validity of that very point directly before them, indicates that this "debatable point" is the exact type of "assessment of the facts" for which the Congress created the GAO to sort out.

Congressional Democrats appear to be embracing the findings of the OECD on broadband as gospel when the OECD has obvious competitive motive to put EU countries in the best light and the U.S. in the worst light.

I always knew Moveon.org was a powerful political force, but I just learned how powerful -- Moveon.org was the second largest Political Action Committee (PAC) in the US in 2006, according to the Washington Post "In The Loop" column by Jeffery H. Birnbaum.

• Moveon.org, with its 3 million person email list, was the second-largest PAC with $27.7 million, after Emily's List at $34.1 million. Political MoneyLine was the cited source. 

Moveon.org's political clout combined with its zealousness for promoting net neturality regulation and the front-loaded 2008 political process mean net neutrality will likely remain on the "techcom" political agenda as a key issue for the foreseeable future -- despite getting repudiated by the House, Senate, Supreme Court, FCC, FTC, NTIA, Maryland, Michigan to only name the most prominent forums that rejected regulating the Internet.

It is very interesting and ironic that when Former FCC Chairman Reed Hundt was at the FCC he strongly advocated that "Spectrum Flexibility will Promote Competition and the Public Interest" in an article in IEEE magazine with Greg Rosston in the December 1995 issue.

• "...we must stop over-regulating commercial uses of licenses for spectrum use."
• "...in the digital age, innovation is far to rapid for anyone to predict accurately what the best use of the spectrum will be five years from now."
• "The Commission should require that market failures be clearly shown and any restrictions on flexibility narrowly targeted to deal explicitly with the failure."

While I often disagreed with then FCC Chairman Hundt when he diverted from promoting market-based competition by picking winners and losers through hyper-regulation, I must commend Mr. Hundt's logic and policy explained in detail in his IEEE monograph in 1995.  

• Its too bad that he no longer appears to support that pro-competition and pro-taxpayer stance anymore.

Ironically now, Mr. Hundt would financially benefit greatly, if the FCC rigs the 700 MHz auction to lower the value spectrum by requiring a license holder agree to net neutrality.

• The taxpayer would be the biggest loser if the FCC decides to restrict and heavily regulate some of the 700 MHz spectrum up for auction with net neutrality.

The primary impetus behind the 1993 Democratic Congress that passed the law requiring spectrum auctions is that the taxpayer was routinely being fleeced by the FCC granting spectrum by other processes than auctions.

Google turned in another awe-inspring financial performance in 1Q07. Pick your news report for the basics. All you need to know is revenue growth was up 63%. Wow!

• Derek Brown of Cantor Fitzgerald said in the Washington Post today:
• "I am basically convinced that no company in history has put up the type of finanical performance that Google has put up from a growth and financial perspective for as long as they have done it."
• It's hard to disagree with him. There is no other example.
• They are a jugernaut.
• What I questioned in my recent 10-page analysis of the Google-Doubleclick merger, was whether all of that success is legitimate given rampant click fraud and Google's systematic theft of its core inputs -- copyrighted content.

Let me translate some of the earnings call:

Today's WSJ editorial page hits the free-market nail on the head once again in its lead editorial: "The Spectrum Game"; it's about the FCC's upcoming decision on how to auction the 700 MHz of spectrum that is considered by the market to be "the Riviera beachfront property" of all spectrum potentially available.

• WSJ: "... Like Mr Hundt, they know such conditions [like net neutrality] might scare off auction competition and increase the chances of Frontline grabbing the licenses for a song."

WSJ understands this is the most valuable spectrum the FCC has ever auctioned.

• Naturally this valuable spectrum has spawned a cottage industry of policy entrepreneurs who want to figure out a way to divert the billions of dollars due the American taxpayer under the law -- to their companies' coffers. 
• They try to justify this multi-billion wealth transfer from the American taxpayer to companies by saying it would forward a "popular" net neutrality mandate, a social-engineering policy which Congress specifically rejected mandating only last year.    

I hope the FCC is wise enough to see through this net neutrality spectrum scam, and not effectively bypass Congress' authority by effectively legislating corporate spectrum entitlements unauthorized by Congress.

To guard against charges that there is an-under-the-table transfer of billions of dollars due the American taxpayer under the law, the FCC needs to be completely transparent and upfront about the implications their decisions have on auction proceeds.

The news of Google acquiring Double-Click prompted me to spend a good part of my weekend analyzing the competitive implications of this seminal proposed acquisition for the future of the Internet.

My analysis focused on answering the following key questions of interest:

• What is Google's real competitive endgame with DoubleClick?
• Why is this acqusition likely to pass antitrust muster?
• Why will Google increasingly dominate Internet search?
• What other anticompetitive behaviors by Google position Google to dominate Internet advertising?

Summary of my conclusions:

It seems that having ~90% gross proift margins, a $145b market capitalization, and one of the highest-flying stocks in the market is just not enough resources for Google.

• Egads! They certainly don't have any money to pay more for upgrading Internet capacity for video! Ick!

Not surprisingly, Google CEO Eric Schimdt's has come up with yet another creative new answer for who should pay for upgrading Internet capacity for video --  the American taxpayer! Certainly not Google! 

• Internetnews caught Schmidt proposing the government effectively pick up Google's tab for using the Internet more than any other company.

• "Schmidt thinks the government should pay more of the rising [Internet] infrastructure costs. "We didn't ask for private citizens to pay for the highway system up front," he said. He said it would be "great" if the U.S. government recognized the advanced position other countries have in providing greater broadband access to their citizens as a competitive threat leading to further investment here."

• It's not surprising that Google wants to stick it to the taxpayer. Throughout the net neutrality debate, Google has supported the position that the consumer should pay for the upgrade of the Internet and not websites like Google.

Cost avoidance and sticking it to the taxpayer is part of a pattern for Google. 

MultiChannel News has a great write up of a tough speech on net neutrality by David Cohen, Executive Vice President of Comcast.

• “When you cut through the rhetoric, what they [Google, Yahoo] want from the federal government is new regulations that would guarantee them below cost-access to the broadband networks that carry most of the Internet content in this country,â€? Cohen said in a speech to the World Affairs Council of Philadelphia.

Kudos to Mr. Cohen for taking the gloves off and saying what needs to be said.

As we recently modified and updated the Netcompetition website to make it even easier to use and work with, we decided to take the little ant fable flash on net neutrality we produced, and that has been exclusively on our site for awhile, and post it to YouTube in order to broaden the audience.

Enjoy!

It's only a 1 minute 40 second flash.