Competition

Today's WSJ article: "MySpace pact with Google hits a snag" is a helpful reminder of the competition double standard and hypocrisy of net neutrality proponents Google and eBay.

Google the dominant search gatekeeper with 47% share and rising is the world's leading Internet access technology. They have a pact with Myspace, one of the fastest growing sites on the planet that would pay MySpace's News Corp. $900m for placing Google's search on MySpace.

• While this business practice is perfectly legal and above board, it is precisely the type of business arrangement that Google has outrageously mischaracterized as "discrimination" and is seeking to make illegal for its broadband competitors.

 Meanwhile, the pact is supposedly hung up because MySpace would still like to have a "discrimnation" deal with eBay too, where MySpace users could use post eBay auctions on their MySpace page. But Google only likes "discrimination" that is in its favor.

Listen to a priceless quote from the WSj article today:

• "Google isn't likely to favor any deal that promotes eBay services that compete with their own."
  • Yep that sums it up Google's real belief in "neutrality." 

How does Google explain their attempt to "block, degrade and impair" eBay's ability to easily reach Myspace consumers is not precisely the net neutrality "discrimination" problem that they want to ban?

I have attached the link to Esther Dyson's important interview on net neutrality.

• Her real life experience and leadership in dealing with ICANN and government regulators is worth paying attention to.
• Esther is very widely respected in the Internet community and always thoughtful in her approach to problems.
• She has even been dubbed the "Internet High Priestess".

Wired has an interesting article on how Microsoft's new Vista operating system has had to make some tough and restrictive design calls that some could misread as "discriminatory".

• The Wired article by Michael Calore, explains how Microsoft restricts or "cripples" users ability to use virtualization technologies to get certain content and how Microsoft's Defender will search for spyware and in some cases automatically delete applications.
• it looks as if Microsoft has legitimate business reasons for this blocking, degrading and impairing of certain content and applications.  

Why this is relevant to net neutrality and Microsoft is that:

• Microsoft has 90% share of the Internet browser market which is a potential Internet access technology bottleneck and gatekeeper that net neutrality proponents conceptually fear;
• Microsoft as explained in this Wired article is clearly exercising its freedom to:
• discriminate against users to force them to buy a higher priced product if they want to do certain things; and
• design its product and service as it sees fit.
• Microsoft clearly wants to preserve its right to differentiate and to control its product/service, something we at NetCompetition understand and support.

 Why this is relevant to Microsoft's departure from ItsOurNet is that Microsoft evidently understands that regulation can be "unreasonable" and "unjust" as I explained in a previous post.

The evidence continues to pile up that Google is well on its way to achieving a 50% share of the search market, a significant antitrust threshold where a company is considered "dominant" and subject to "stricter scrutiny" for potential anti-competitive practices.

• Google's ~50% market share is highly relevant to the Net neutrality issue because:
• Search is now the leading Internet access technology, and
• Google's national and international scale and market share dwarf the potential gatekeeper role of any U.S. broadband player.

Microsoft's recent earnings call showed how badly Microsoft is doing in search.

It seems asking the U.S. Congress for a huge corporate welfare gift in net neutrality legislation is not enough to satisfy Google's insatiable appetite for special interest gifts from the government.

• According to the Charlotte Observer, as picked up by Google Blog, Google, one of the most profitable and fast-growing companies in U.S. history, won't bless the state of North Carolina with their presence unless the State would give Google "secret" tax breaks to the tune of $89 million.

Seems like this is a real pattern for Google. 

I was pleasantly surprised and very pleased that FCC Chairman Martin proactively released a proposed order that would reclassify wireless broadband as a Title I information service, as reported in today's Comm Daily. This order, which looks to have the support of the Republican majority, would continue to harmonize the regulatory treatment of all the major modes of broadband.

• The FCC has already classified cable modems, DSL and BPL as unregulated info services.
• Given the robustness of wireless competition in the U.S., reclassifying wireless broadband as an info service should be a no-brainer.
• The FCC should also do another order to classify satellite broadband as an info service as well.

Why this is relevant to NN is that the expert agency overseeing competition in this market segment is concluding that there is sufficient competition to not require common carrier-like regulation.

• The U. S. has three times more WiFi hotspots than any other country and more facilities-based wireless broadband investment and deployment than any other nation in the world through Verizon, AT&T, Sprint and T-Mobile. Moreover,  Sprint and Clearwire are also beginning to build national WiMax networks.
• Wireless competition is robust, clearly warranting an info services classification.  

As expected proponents of net neutrality ignore facts that don't push their anti-business, big government point of view. When the FCC broadband report is replete with powerful evidence that broadband competition and penetration are increasing impressively, NN proponents don't like the message so they shoot the messenger.

Comm Daily today quoted a Public Knowledge spokesperson who said:  the FCC numbers were "invalid" and that he wouldn't even "go there" what trends or developments the group sees in the report because it is "measuring a world that does not comport with reality."

Evidence continues to mount that the broadband sector is increasingly competitive and that it is not the permanent cable/DSL "duopoly" that net neutrality supporters claim. The FCC just released its biannual report on high speed of broadband adoption and the new evidence showing more competition is powerful.

The most important takeaway from the FCC's report is that 58% or 7.9m of the 11.0m total broadband adds over the first six months of 2006 were wireless broadband -- NOT DSL or cable modem.  That's not how a "permanent DSL/Cable duopoly" behaves -- is it?

In my digging around to find out if Microsoft would be rejoining the ItsOurNet.com pro-net neutrality coalition, I have learned enough that strongly suggests to me that Microsoft may not be rejoining ItsOurNet now that the AT&T merger is complete.

Why I believe this is that I heard Microsoft is telling both sides behind-the-scenes -- the ItsOurNet crowd and the NetCompetition crowd -- the same story.

• A Microsoft Rep is telling others that they are not for net neutrality, but that they do share some of the concerns that pro-net neutrality companies have.
• More specifically, where Microsoft reportedly parts company with the ItsOurNet coalition is over the whether the modifiers "just" and "reasonable" are used in mandating non-discrimination by broadband carriers.  
• Microsoft reportedly believes that there should be no "unjust" or "unreasonable" discrimination by broadband carriers, which is similar to the traditional seventy-year old common carrier language found in Sections 201 and 202.
• The ItsOurNet coalition is taking the harder line that the non-discrimination requirement should be an unambiguous ban like the 11 year-old language found in Section 251(c)(3) that does not have any qualifiers like just or reasonable.
• (It is important to note that the 251(c)(3) language that ItsOurNet is holding firm to get, is precisely the 1996 Telecom Act language that was most fought over at the FCC and in the courts -- and that ultimately had to involve the Supreme Court -- twice. The 251(c)(3) language proved to be some of the most controversial legal language and mandates ever in the history of telecom in the U.S.)  

This take on Microsoft's new position makes sense to me for three reasons.

Today I asked some of the folks that are members of ItsOurNet.com why their site has been down for a week. All tried to downplay the significance.

One said that they had changed vendors and that the site being down is not related to Microsoft withdrawing from ItsOurNet last fall. That rep went on to say that all the ItsOurnet folks are focused on influencing the grassroots, and that they will be working more closely with SaveTheInternet and FreePress because there may not be the need for both websites.

• I expressed my surprise that the ItsOurNet companies thought that SaveTheInternet would allow them to join SaveTheInternet as a member given that they have a disclaimer on the front page of their website that states: "No corporation, trade group or political party funds the SaveTheInternet campaign."  
• Either the ItsOurNet rep I talked to was misinformed about SaveTheInternet's publicly disclosed representation that they don't take funds from corporations (which would include them), or there is more coordination going on under the public disclosure radar than either side is disclosing or representing to the public.
• Since Common Cause is a member of SaveTheInternet and has been a vocal opponent of corporate "astro-turfing" I guess that the online giants have not gotten the "memo" that they are not supposed to say in public that they are closely coordinating their grass roots efforts with SaveTheInternet. 
• Oh I forgot, advocating a corporate position against net neutrality is "astro-turfing," but a ItsOurNet-SaveTheInternet "quiet" cooperation with corporations would be "grass roots." Bad guys astroturf. Good guys grass root. Oh I got it.    
• In my review today of the multitudes of coalition member links that are part of the SaveTheInternet coalition:
• It is interesting to note what a couple call themselves: one is a blog called "I Hate Bush" and another is a blog called the "democratic underground."
• I guess somebody didn't scrub the list very well to maintain the facade of bipartisanship SaveTheInternet tries to represent.
• Dozens of "small businesses" are also listed as coalition members.
• (I was amused that SaveTheInternet does not consider "small businesses" to be a corporation." Maybe they in fact are not contributing money, but it would be interesting to hear their explanation to the IRS of why a small business is not a "corporation.")

Another ItsOurNet member rep, Alan Davidson, Head of Google's Washington's office, told me today that he did not know why the website was down and said the fact that he didn't know about it being down for a week was evidence that Google is not the "puppet master" behind-the-scenes of the net neutrality movement that they are made out to be.