Corporate Welfare

This post responds to Techdirt's, Mike Masnick, who came after me for my post of Friday in which I estimated that Google fleeced the American Taxpayer out of $7 billion in the latest FCC auction. 

• I commented on Mr. Masnick's post last night (#18) and Mr. Masnick quickly posted a response (#19) claiming my adding my "two cents" to the comment string about me -- was not enough in his judgment. 

So lets start with Mr. Masnick's retort to my assertion that most of the comments were just ad hominem attacks and not based on the merits of my charge that Google fleeced the American Taxpayer. Mr. Masnick replied that he and Derek used their names and why did I not respond to them.

Martin Geddes of Circle ID challenged my estimation methodology in reaching that Google fleeced the American taxpayer for $7 billion.  

With all due respect to Mr. Geddes, first his analogy of taking "a tasty apple, a yummy banana and a mouldy pear, is simply not analogous here. One doesn't pay $4.7b for a "mouldy pear." The regulations did not make the spectrum itself bad to eat, but simply restricted the use of the spectrum or in Mr. Geddes example how someone would be allowed to eat a good pear. People will pay less for a fruit if they are restricted on when and how they can eat it. 

Second, Mr. Geddes suggests I am confusing the American taxpayer with the American public. I most certainly am not. I am recognizing that there is a very specific law, the 1993 Budget Act, which effectively defines that the American public is the American taxpayer because the purpose of these spectrum auctions are to reduce budget deficits. One may not agree with how the law defines the American public in this instance, but that opinion doesn't change that it is the operative law here.  

My estimate in my blog was trasparent and simple so everyone could see how I got my figure.

• The important point here is that Google fleeced the American taxpayer of several billion dollars, was it $7b? $5?b $9b? $3b? -- it depends on the estimating method.
• My estimating method was straightforward, transparent, logical, simple and easy to understand. 
• I stand by it until someone else comes up with a more defensible estimate.    

Many have broadly swallowed Google's "spin" that Google really "won" by losing the 700Mhz auction -- without digesting the serious implications of Google's public admission.   

• So needy to convince everyone that Googlers, yet again, proved themselves to be the smartest people alive, Google hasn't realized that they have unabashedly admitted to de facto gaming and manipulating an official Government auction statutorily-created to fully reward taxpayers for commercial use of public airwaves. 
• Miguel Helft of The New York Times has the best coverage of Google's actions in the auction in his article: "An Auction That Google Was Content to Lose." 
  • “Our primary goal was to trigger the openness conditions,” said Richard Whitt, Google’s Washington telecommunications and media counsel."
  • The article goes on to explain its nonsensical bidding strategy of bidding against itself: "For much of the first week, Google gradually topped its own bids. With no competitors emerging, anxiety grew."  

So what's wrong with what Google did?  

First and foremost, Google's flagrant manipulation of the auction rules and process fleeced the American taxpayer out of at least $7 billion, by my estimate.

Two leading proponents of net neutrality, believe the push for net neutrality is akin to FDR's pushing for the "New Deal," which was the penultimate Big Government, wealth redistribution effort in U.S. history.   

We learn this candid admission of true beliefs from the Washington Post, which today lionized Ben Scott, the amiable leader of activist organization Free Press, in an article entitled: "Net Neutrality's Quiet Crusader."  

• "Scott's kindred spirit at the FCC might be Democratic commissioner Michael J. Copps, also a student of history who recently read a biography on Franklin Delano Roosevelt. Scott and Copps recently bonded over the book, drawing comparisons between the New Deal and net neutrality."

• ""There have been policy moments in the past when the market has been shaped by decisions made in Washington -- radio in the 1930s, television in the 1950s and cable in the 1980s. That moment is now for the Internet," said Scott..."

Let's review the history here that Mr. Scott waxes nostalgically about. Radio in 1930's, TV in the 1950's, and cable in the 1980's -- was about Washington "shaping them market" by regulating these technologies and businesses much more than they were before. 

Per Reuters, Google's board is recommending that its investors vote against a shareholder proposal from the New York City Employee Retirement System that asks Google to commit to abiding by Net Neutrality.

• Why would Google, which avidly supports:
  • All pending net neutrality legislation in Congress;
  • the Save the Internet and Open Internet coalitions which were created to promote net neutrality;
  • Open access/Net neutrality rules for wireless in the FCC's 700 MHz auction;
    • oppose living by the same rules as it wishes to apply to its competitors?
• Why would Google avidly support the FCC's net neutrality principles, which explicitly apply to: "network providers, application and service providers, and content providers", but not agree to apply them to Google itself? 
  • Is Google somehow claiming that as the world's dominant search engine access point to the Internet that Google somehow does not fit under the highly inclusive FCC definition of "application and service providers"?  

Bottom line Questions:

Enough of Net neutrality activists' hypocritical sanctimony over freedom, free speech and democracy! It is sickening.

Net neutrality activists claim to support freedom, free speech, and democracy, but they really don't in practice.

First, let's look at the recent activist whining from FreePress/SaveTheInternet about how the FCC network management forum at Harvard was somehow hijacked by Comcast sympathetic attendees or who these activists have derisively called "seat fillers."

Chairman Markey's newly introduced net neutrality bill should more aptly be called "The Google Welfare Act of 2008." 

• Google was quick to applaud introduction of the Markey bill on its blog and in a fawning call with reporters. 
• Google's standard line was that "this bill is not about Google but about the next Google."
  • When anyone says something is not about "me" but about the next incarnation of "me" you can be pretty sure it really is about the "me."

Let us cut through all the platitudes, spin, fluff and distractions in this bill of which there are many. Let us also remember the useful phrase: "the truth, the whole truth and nothing but the truth."

• Proponents of the Markey bill are indeed telling the truth that the bill does not formally or explicitly mandate FCC net neutrality regulations.
• Unfortunately they are not telling "the whole truth and nothing but the truth," because the real world impact of the crux of this bill would be to trigger a cascade of new regulations of the Internet in order to comply with the U.S. policy change in this bill.

Why would the Markey bill trigger a cascade of new Internet regulations?

The ascension of Google's CEO Eric Schmidt to Chairman of the the Board of the New America Foundation puts a helpful spotlight on Google's activist agenda in Washington and the cozy relationship between Google and the New America Foundation.

It's important to note that the New America Foundation is one of the two organizational parents of the "information commons" movement -- in that it coauthor-ed the "Saving the Information Commons" manifesto in 2002 with Public Knowlege, which laid the policy groundwork for a more communal Internet, where Internet infrastructure and digital content are supposed to be "open" "commons" or communally-owned by everyone.  

Google is one of the biggest proponents of this "open Internet" ideology where "open" is a codeword for "communal." The Information commons movement has conveniently defined the Internet commons as the property of others that they don't think that they should have to pay for ... e.g. communications companies' networks and content companies' content. (They conveniently have excluded Google from the commons obligation, apparently as long as Google preaches "openness" for everyone else...)

Please don't miss the new NetCompetition.org one-pager I produced on the politics of net neutrality.

I make the case that net neutrality is:

• A fringe issue and a factional business dispute;
• Not sound Democratic policy; and
• Not sound Republican policy.

I made it available at the Internet Caucus event today.   

http://netcompetition.org/Why_Net_Neutrality_is_Not_a_Mainstream_Issue.pdf

The big question for investors is why?

• Why has Google felt the need to rapidly build up a new lobbying operation in D.C. (rivaling Microsoft's in size) and why did Google just unveil, with great fanfare, its new cutting-edge office space in DC with a party that attracted 650 people and many VIPs?
  • What does Google know that investors may not?

Google's Regulatory Outlook:

Federal Trade Commission: 

Antitrust: