Antitrust

In stark contrast to their opposition to the Google-Yahoo ad agreement, the American Association of Advertising Agencies (the 4As) is now urging the DOJ to quickly approve the Microsoft-Yahoo search agreement because they "believe that Yahoo! and Microsoft's proposal to combine their technologies and search platforms is good for advertisers, marketing services agencies, web publishers, and consumers."

• This letter is powerful evidence that the advertising industry remains deeply concerned about Google's dominance of search advertising, and welcomes the prospect of a more viable search advertising competitive alternative -- i.e. the proposed Microsoft-Yahoo's search agreement.

The much under-appreciated trend is how rapidly much of the Internet is effectively being supplanted by "GooglesNet," given that Google's data-centers uniquely and constantly capture and store current copies of the Internet's roughly trillion web-pages. GooglesNet is not transparent and is increasingly becoming a closed dark fiber shadow of the "Open Internet."

Reuters reports that Twitter is in talks with Google and Microsoft about "licensing its data feed to the companies search engines."

If a Google-Twitter agreement materializes, surely the DOJ will want to review any proposed Google-Twitter agreement for antitrust issues.

Given that the apparent justification for new formal net neutrality rules is that fifteen-year policy has failed and that the market is unable to ensure consumer choice, the FCC will need to justify with facts that broadband providers indeed have market power to exercise anti-competitively.

Kudos to Larry Darby of the American Consumer Institute for his excellent and illuminating comparative financial analysis of the market power and profits of broadband companies vs. Internet companies. From his post: 

Google's increasing bottleneck control over digital info distribution is currently the leading threat to Internet competition and user's competitive access to the information of their choice. While many generally appreciate Google's growing Internet dominance, they want to better understand how Google increasingly dominates the distribution of digital information.

• To explain this Google anti-competitive problem succinctly and visually, I have produced a one-page chart PDF that shows how distribution competition for digital information -- that supplies digital information to Internet consumers -- is being squeezed between Google's search advertising monopoly selling power on one side and Google's wholesale info access monopsony buying power on the other -- creating growing info-opoly control over digital information by Google.

The antitrust problems that emerge from this increasing monopoly/monopsony Google bottleneck control are two-fold:

• It anti-competitively forecloses competition among digital info distributors; and
• It anti-competitively lessens the quality, integrity and diversity of digital information for consumers.

Most have not appreciated the full scope of Google's increasing bottleneck control over digital information, because they did not understand how Google's wholesale dominance of both the "selling" of information via advertising and the "buying" of information via indexing makes Google the world's dominant broker of information.

Both the FCC and FTC Chairmen appear to be suggesting that the current fifteen-year competition policy experiment in law to promote competition and reduce regulation in communications will ultimately fail -- requiring new preemptive common-carrier-like nondiscrimination regulation of ISPs to preserve a free and open Internet.     

• In his September 21st speech, FCC Chairman Julius Genachowski's first reason justifying the need for preemptive new FCC net neutrality regulations was limited ISP competition:
  • "One reason has to do with limited competition among service providers. As American consumers make the shift from dial-up to broadband, their choice of providers has narrowed substantially. I don’t intend that remark as a policy conclusion or criticism -- it is simply a fact about today’s marketplace that we must acknowledge and incorporate into our policymaking." 
• FTC Chairman Jon Leibowitz, in a 10-4-09 letter to the editor of the Washington Post in response to the Post's editorial, "The FCC's Heavy Hand," said:
  

Regulate down for all not up for some is the excellent core message of the Wall Street Journal's op-ed "Google Exceptionalism," which spotlights the slippery slope toward Internet regulation of selectively applying new net neutrality regulations to only some "networks" predicated on fairness.

The WSJ op-ed helps focus the debate on what has helped make the Internet so successful --the bipartisan Internet policy statement in the 1996 Telecom Act that it is the policy of the United States  "to preserve the...competitive free market... Internet... unfettered by Federal or State regulation." For fifteen years, bipartisan consensus has resisted the siren song of some to regulate or tax the Internet, and in turn this bipartisan consensus has allowed the Internet to flourish.  

The WSJ op-ed also helps focus the debate on the perils of abandoning regulatory restraint toward the Internet based on neutrality/fairness.

The FCC Chairman's proposed rules to preemptively regulate a segment of the Internet to preserve an open Internet, risks reversing the current successful dynamic of fairly "regulating down" with less regulation rather than unfairly "regulating up" with more regulation for some. 

DOJ's 28-page Statement of Interest to the Court responsible for deciding the fate of the Google Book Settlement speaks volumes. 

First, it ensures the current proposed settlement is effectively dead.  

• It is hard to conceive a U.S. Federal District Court Judge approving a settlement, which the United States Government indicates may be illegal under three completely different bodies of law (class action, copyright and antitrust), and also may be per se illegal in multiple different ways.

Second, despite the DOJ's encouraging tone in the press release, the DOJ statement itself set a very high bar for the parties to overcome. Substantively, the DOJ is insisting on radical changes in the settlement that practically would gut the unique and self-serving going-forward public benefits of the deal for the parties.   

• In a nutshell, the DOJ's is effectively urging the deal be radically pared back from covering:
  • ~All books -- to just books-in-print (a fraction of the seven million books Google has copied);
  • U.S. and foreign works -- to just U.S. works;  
  • Scanning and all derivative uses -- to just scanning and snippets;
  • Retrospective and prospective impacts -- to retrospective and heavily-scaled-back prospective impacts; and  
  • Just the parties who get special public benefits -- to enabling most outsiders to share equally in the settlement's public benefits. 

Third, it raises the question if there is still a basis for the parties to settle, because the DOJ recommended fixes fundamentally and substantially limit what the parties can extract from the settlement.

With due to credit to "Ripley's Believe it or Not!^®," so much odd and bizarre is happening in Washington in the "name" of "wireless innovation" and competition that the topic calls for its own collection of: "Believe it or Not!^®" oddities.

Skype co-founder Niklas Zennstom, the co-founder of illegal-music-downloading site Kazaa, who had to avoid entering the U.S. because of copyright-infringement liability... is now seeking a U.S. court injunction to shut down eBay's Skype for alleged copyright violations!

My latest Google antitrust white paper, "Googleopoly IV: The Googleopsony Case," is the first antitrust analysis which connects-the-dots between Google's search advertising selling monopoly and Google's information access buying monopoly or "monopsony" by explaining and documenting how Google is harming competition in digital: news, books, broadcasting, artwork, documents, and analytics; and harming consumers seeking quality digital information that is not free.