Congress

Business Week's cover story is: "Is Google too Powerful?" is exactly the question a major publication that thinks ahead should be asking. 

Business Week has done everyone a favor in posing this cover question because it will get folks looking at Google in a new way -- as the dominant antitrust concern of the market place in the decade ahead, like Microsoft was in the 1990's, AT&T was in the late 1970s/early 1980s and IBM was in the 1950s.

Mark my words, the words "Google" and "antitrust" will be heard much more frequently together -- in the years ahead -- as Google has gone from 35% to 50% market share today in a couple of years and is on path inexorably towards 60-70% share in the next few years.

• This means that the Google "audience" already the largest in the history of the world, at almost a half billion people, is on path towards a billion people worldwide in just the next few years.
• That unprecedented concentration of power in the "all-content" market is enough to give anyone the willies.
• Why the word antitrust will be used more and more concerning Google is also that Google is extremely aggressive and arrogant in buying market share (Dell, AOL, Myspace, YouoTube etc.) and is pursuing many market strategies that have the ancillary benefit of destroying many of their potential competitors business models.
• Google can gloss over their behavior for now, but evidence of their potentially anti-competitive strategies will grow and the already huge chorus of injured parties will grow to a deafening roar in the years ahead.    

While it is clearly debatable if Google is too powerful today...

I sincerely hope that everyone who cares substantively about the net neutrality issue, on either side of the debate, reads the new 2-1/2 page "Economists' Statement on Network Neutrality Policy" by the AEI-Brookings oint Center for Regulatory Studies.

• This joint statement is a brief and easy read,  and is among the clearest, most reasonable, and value-added statements I have seen on the subject.
• It should not be surprising then that it is written jointly by some of the best and most respected regulatory economists in the country.

We are still waiting to read a cogent, well-reasoned and supported piece of work that supports the policy of Net neutrality. All we have gotten is assertions, hypotheticals --virtually no facts or analysis from the other side.

The Future of Music has created a supposed new "coalition" "Rock the Net" to promote net neutrality by banding together music groups who have been suckered into fearing that the Internet will somehow be taken away from them -- without net neutrality legislation.

This is not about policy or legislation.  

This is a cheap publicity stunt.

"Rock the net" is basically a bad "lip synching performance" by music groups singing liberal Moveon.org's pre-canned song.

• No musician at their Rock the Net press conference showed any understanding whatsoever of the net neutrality issue or how musicians might be threatened without NN legislation. 
• They just "lip synched" Moveon.org's lyrics. 

"Lip synching" is the perfect metaphor for the supposed net neutrality grass roots "movement" overall.

Google-YouTube like to spin that the billion-dollar copyright law suit from Viacom and the new online venture by NBC-Newscorp is just about "negotiating."

• Don't believe it.
• This is not simply a negotiation over "price;" it's all about video competition and the viability of video business models going forward. 
• Google-YouTube are the video networks biggest competitive long term threat, not their natural "business partner."

What's really going on is Google-YouTube is trying to disintermediate all video content and network companies.

• Google believes it has a more efficient monetization mechanism for advertising than any of the current or traditional models.
• So Google is making a play to effectively insert itself in between content players and their existing customers so that Google controls the monetization of the customer relationship -- not the content company.
• In other words, Google believes its Youtube "distribution network" as Google CEO Schmidt calls it, is superior to the content networks of NBC, CBS, Viacom, ABC-Disney, Fox-NewsCorp among others.
• What this really is about -- is competition, not negotiation.
•  Google wants to steal the video content players audience from them and in the online space they have largely succeeded to date.
• According to Nielsen/NetRatings for February, YouTube had 42m audience, Google Video had 21m audience and the next three largest, AOL video, MySpace video, and MSN video, each only  have 12-13m audience a piece.

Make no mistake. Google already has built the largest "audience" of any "network" in the world -- ever.

The most relevant part of the FCC launching a Notice of Inquiry (NOI) into the net neutality issue was FCC Bureau Chief Tom Navin testifying that no one has formally complained about blocking and no one has formally petitioned the FCC on the matter. 

• In other words, there is no there there.

The FCC is launching an NOI to cut through the hysteria and misdirection and finally get the facts on the record.

• The NOI is basically the FCC saying its "put up or shut up" time.
• Make your case or go away.

While I don't think this bogus and completely unsubstantiated issue is even worthy of an NOI, I can understand why the FCC would want to launch an NOI to ensure that no one can say the FCC is not taking this issue seriously.

The most important development for a free market Internet in the last several weeks was the FCC's  5-0 decision March 22nd to declare wireless broadband an unregulated information service.

• In laymans terms, the FCC officially and unanimously declared that net neutrality is NOT required for wireless broadband going forward. 

Why is this a big deal?

• The FCC legally cemented the policy precedent of regulatory parity -- for broadband de-regulation.
• The FCC applied the Supreme Court's seminal "Brand X" de-regulatory ruling that declared cable modems an unregulated info service (2002) -- to all other mainstream broadband facilities, DSL (2005), BPL (2006) and now wireless broadband (2007).      
• The legal facts of the FCC reiterating the same policy and technology parity logic repeatedly over several years creates a powerful phalanx of deregulatory legal precedent that future regulators will be hard-pressed to reverse piecemeal.
• If a future FCC Chairman, say a Commissioner Copps in a potential Democratic Administration, wanted to apply Carterfone-like regulations to only wireless, that FCC ruling would likely be ruled in court to be arbitrary and capricious because it singled out wireless and treated that broadband technology much differently than other analogous broadband technologies: cable modem, DSL and BPL.
• To be fair and legal, the FCC would have to apply new regulations in a technologically-neutral way.
• What the FCC decided is that wireless is NOT different in a policy or legal sense.
• This makes it much harder to legally and politically justify any eBay-Skype petition for Carterfone rules for wireless.
• The savy observer will appreciate that this FCC ruling effectively moots the eBay-Skype petition to apply Carterfone rules to wireless.
• I fully expect people will continue to talk about wireless Carterfone rules.
• However, when they have to talk about it in the context of the FCC's Notice of Inquiry into NN, they will find it extremely difficult to justify that wireless is different and requires special rules.

Well done FCC!  Great de-regulatory box out!

Google made news recently by adopting new privacy measures, which puts a spotlight on a real big public policy disconnect.

What I find most interesting about Google and the subject of privacy, is the glaring incongruity of these facts:

1. Google, as the dominant search engine with ~50% of the market, arguably has more and deeper private and intimate information on American consumers than any other company in America;
2. Google has among the weakest privacy policies of any major corporation in America;
3. Google is not subject to any specific privacy regulations or regulator like other similarly situated major corporations that have lots of sensitive consumer information -- like financial services firms and communications companies.

Let me put that more simply:

Only 40% of European Union homes have Internet access and only 16% have broadband, according to EC Consumer Protection Commissioner Meglena Kuneva who spoke yesterday at the Digital World Conference in Berlin.

• Those lagging numbers are in stark contrast to America's performance where 70+% of American homes have Internet access and 45+% have broadband according to FCC data.

NN proponents have tried to manufacture that there is a broadband crisis in the U.S. and that we are falling behind the rest of the world. It just isn't true.

• That's why I wrote the commentary "America's Unique Internet success" in the Washington Times a couple of weeks ago, in order to debunk this fabrication designed to create a reason for the Government to intervene in the broadband marketplace.
• America has a great broadband policy and strategy -- its called competition and deregulation!
• And it works!
• The Internet is the single greatest deregulation success of all time.
• And the U.S. has substantially more facilities-based broadband competition than any other nation in the world.

Google has no sense of when to keep their mouth shut, because their corporate arrogance and cluelessness appears boundless. 

I could only shake my head at the headline in Comm Daily today prompted by a Google official speaking at a Washington conference.

• "Internet, Google will Sway 2008 Elections: Company Executive" (p.4 Communications Daily 3-16-07)
• "Google sees itself as a force in a political race that could hinge on making the best of Web and other tools, Google Vp-Global Communications Elliot Schrage said Thurs. at the Politics Online conference in Washington."
• "Candidates are starting to see the Web's power, Schrage said: "Already candidates and campaigns are spending tens of thousands on adwords campaigns alone." The company invited declared Presidential candidates to its offices to "talk technology and policy" and will post videos of the talks if candidates permit it, he said. Google is trying to "make services easier to use" through a "special sales and political team dedicated to helping political camps, he said."" 

Generally company's are more responsible and circumspect about bragging about their own company's ability to influence or "sway" and election. The U.S. Government takes Federal Election laws seriously and is attuned to ensuring the electoral process is not manipulated in any way.

Net neutrality is not only a domestic issue but also a policy weapon some Eurocrats see as a way to undermine American competitiveness to Europe's advantage.

• Make no mistake, NN has a powerful competitiveness, trade and foreign policy dimension.
• Keeping the Internet free of regulation and promoting competition and the deployment of new technologies are critical to maintaining America's competitiveness.
• Other nations are begining to see the NN concept as a clever way to slow down U.S. innovation and "level the playing field" through regulation to improve their competitive position relative to the U.S.
• Some of the more socialist-minded nations like France are beginning to see that they can advance relatively, if they can slow U.S. innnovation down -- with "competition" restrictions that favor the EC and relatively disadvantage the U.S.

Why I wrote my commentary, "America's Unique Internet success" in the Washington Times a couple of weeks ago," was to drive home this important insight that America truly is unique when it comes to the Internet!