Kudos to Randy May of the Free State Foundation for his outstanding op-ed in the Washington Times today: “Voiding the Constitution: FCC rules could counter free speech.”

  • Randy’s must read piece explains why net neutrality rules would perversely accomplish the exact opposite of what net neutrality proponents claim.
At core net neutrality proponents are trying to advance the preposterous notion that competitive broadband companies, the biggest enablers of free speech in the country, are somehow more of a threat to Americans’ free speech than the Federal Government, which, unlike broadband companies, has extensive potential coercive power to limit free speech, if not for the constraint of the U.S. Constitution’s First Amendment.

 

Recent revelations indicate that the seriousness of the FTC’s antitrust investigation of Google’s proposed acquisition of AdMob will be ramping up.

Only eight months ago, Google CEO Eric Schmidt claimed Google and Apple were not “primary competitors” when a shareholder asked Mr. Schmidt to step down from Apple’s board, because of an FTC antitrust investigation of Google for engaging in anti-competitive interlocking directorates per an AP story.

  • Only four months ago did Mr. Schmidt actually resign from the Apple board under pressure from the FTC.

While everyone is distracted by the front-page news of Google launching its own Google-manufactured smartphone called Nexus One, what I find most interesting is that Google outbid Apple for AdMob by paying an exceptionally-high “multiple of up to ~16.7 times sales, the sort of price rarely seen in takeover deals since the heady days of the dot-com boom” per Reuters reports.

The Wall Street Journal also reported some very interesting new information/insights relevant to the FTC’s Google-AdMob investigation:

  • “People familiar with Apple’s thinking say it wanted to acquire AdMob to profit off the advertising in some of the apps in its App Store.”
  • …”While Apple takes a 30% cut of any app that a developer sells through its store, it makes no money off free apps or their ads. Google, meanwhile, already has a footprint in the mobile-advertising arena.” [bold added for emphasis]
  • These people say Apple also tried to buy AdMob as a defensive measure to keep Google from learning details about its App Store. AdMob, which sells ads inside applications, has access to data about the mobile marketplace.” [bold emphasis added]

The question FTC antitrust enforcers and Apple should want answered is: “What did Mr. Schmidt know and when did he know it?”

  • Did Mr. Schmidt use any of his confidential knowlege of Apple’s strategic plans and priorities gained from his long-held Apple board seat in order to successfully guide Google’s M&A effort to bid for AdMob and/or to know how to outbid Apple?
  • Did Mr. Schmidt recuse himself internally from any Google-AdMob deal discussions given his deep confidential knowledge of Apple’s competitive position/interests? And is there a record of any such recusal?
  • Did Mr. Schmidt have any inside knowledge or information about how to strategically and “substantially lessen competition” from Apple to Google in mobile advertising?

Given the FTC’s ongoing investigation of Google-Apple interlocking directorates, its current preliminary investigation of Google’s proposed acquisition of AdMob, and recent reports of Apple’s serious interest in acquiring AdMob, the FTC appears to have a legal obligation to conduct a second request with civil investigative demands (CIDs or subpoenas) to determine if Mr. Schmidt’s Apple board seat conferred Google any confidential and/or improper inside knowledge/information to enable Google to foreclose competition from Apple in mobile advertising?

The Google-AdMob plot thickens.

 

The foundation of American Democracy for over 200 years has been respect for the U.S. Constitution and the rule of law. The advent of the mainstream Internet in the 1990’s created a new and exceptional medium for free expression, much as telephone, radio, movies, TV, faxes, dial-up, email, texting, etc. have created new technological mediums for free expression.

  • The argument that the Government must regulate broadband providers in order to preserve 200 year-old First Amendment rights is disingenuous, duplicitous, and dystopian.

Current justifications for new net neutrality regulations to implement a “21st Century First Amendment” via three votes by un-elected FCC commissioners as net neutrality proponents like Marvin Ammori advocate, could not be a more radical assault on America’s real institutions of democracy.

If net neutrality supporters really cared about advancing American Constitutional Democracy, they would respect that the U.S. Constitution is designed to prevent Government tyranny of the people by creating powerful institutional checks and balances, a Bill of Rights, and definitive processes to change laws or amend the Constitution.

  • The same Net neutrality proponents who urged Congress for the last four years to quickly pass net neutrality legislation have conveniently changed their tune and are saying legislation is no longer required because they believe they have 3 FCC votes.
    • An important reminder to the FCC: Amending the Constitution to make it more technologically current would still require more than three votes by un-elected officials at an independent agency.
    • Per Article V of the U.S. Constitution, ratification of a new amendment takes a two-thirds vote of both the House and Senate and an affirmative vote of three quarters of the states.
  • It is hard to get more radical than advocating for the bypass of core Constitutional processes including Congress’s sole Constitutional power to legislate.

In sum, the specious argument that net neutrality is First Amendment 2.0 will not stand after it passes through the America’s Constitutional processes.

  • Three un-elected FCC commissioners may vote any way they want.
  • However, for their decisions to enjoy the legitimacy of our Democracy and Constitutional processes, their decisions ultimately must be accountable to the checks and balances of the Judiciary and Congress.

Regulations, like elections, have consequences.

 
Google’s CEO Eric Schmidt told Forbes: “Our model is just better.” “Based on that, we should have 100% share” — per Forbes cover story: “When Google runs your life.”

This is a remarkably ill-advised admission when Google is:

  • Seeking FTC antitrust approval to buy the leading mobile advertising marketplace and direct Google competitor Admob;
  • Seeking DOJ and court approval of the Google Book Settlement;
  • Seeking to avoid FTC privacy regulation and congressional privacy legislation;
  • Seeking to gain special treatment and an exemption from the FCC from pending net neutrality regulations supposedly designed to address anti-competitive behavior.

 

I strongly recommend Barbara Esbin’s excellent PFF white paper that systematically debunks many of the core assertions of net neutrality proponents.

Barbara’s clarity of thought, and her reasonable and well documented analysis proves that so many assertions of supposed “fact” made by net neutrality proponents simply can not withstand close scrutiny.

 

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