Takeaways from the FCC’s Open Internet Further Inquiry
September 2, 2010
What have we learned from the FCC’s wise inaction this week, in deciding to not vote to declare broadband a Title II telephone service before the election, and to ask more questions in a further Open Internet regulation inquiry about specialized and mobile services?
#1 Stakeholder collaboration/negotiation works. The FCC apparently now better recognizes that the open industry collaborative dynamic that has been so consistently successful in resolving most every other major Internet issue over the last couple of decades, can also succeed in appropriately resolving the FCC’s Open Internet concerns now — if only given the time and flexibility to negotiate a workable outcome.
#2 Apparently net neutrality is not the popular populist political issue it has been touted to be. The September-October period before an election is when the real political rubber meets the road.
- If net neutrality was the true populist winning issue with the grass roots (i.e. voters) — that the extreme left has long-claimed it to be — they would be running on it hard in this election season.
- Tellingly, the FCC’s political assessment to delay deciding these controversial issues until after the November election — combined with the obvious political assent of the extreme left as evidenced by the totally uncharacteristic muted rhetoric of FreePress — speaks volumes about the real politics of net neutrality nationally.
- It appears that the extreme left (FreePress, Moveon.org, Public Knowledge et. al), which have been pushing absolute net neutrality and Title II regulation of broadband, now recognize that their political strategy of demonizing business — i.e. arguing that Big Business is a worse threat to America than Big Government — does not work in a listless economy that is not creating jobs or encouraging private investment.
#3 The FCC is not confident a Title II broadband declaration would be found legal or constitutional. The FCC clearly did not want a WWIII-scale request for a stay and full legal challenge to a potential FCC 3-2 declaration deeming broadband a Title II regulated telephone service.
- The FCC also clearly did not want to trigger a high profile legal challenge that would argue publicly that an FCC broadband Title II declaration would:
- Cause irreparable harm to the economy, jobs, the Internet, innovation, and investment;
- Be a clear constitutional infringement of freedom of speech and a takings of property without just compensation; and
- Be an arbitrary and capricious Government action that was not supported by the FCC’s legal authority or by the facts.
#4 The net neutrality movement is balkanizing. A big reason why net neutrality has been such a contentious issue is that those demanding “it” don’t agree among themselves about what “it” is that they really want.
- As the issue has matured and different stakeholders have been smoked out over almost four years of contention and negotiation, the once supposedly monolithic net neutrality movement has been exposed as a rag tag collection of corporate special interests and an ever-evolving smorgasbord of harebrained policy demands from the extreme left.
- It is noteworthy that the original members of the ItsOurNet coalition (the predecessor to the Open Internet coalition) — Google eBay-Skype, Amazon, IAC, Microsoft, and Yahoo — have all balkanized to some extent and are largely going their own way pushing their own flavor of net neutrality that serves their own individual self-interests.
- The serb-croat-like fissure caused by Google breaking ranks and trying to propose a reasonable legislative compromise on net neutrality — fractured the Open Internet coalition facade of unity and unleashed an astonishingly venomous and extended political temper tantrum from FreePress and Moveon.org.
In sum, a lot has happened since the FCC first announced its Open Internet proceeding eleven months ago and the extreme left began demanding Title II regulation of broadband shortly after that.
- Simply, what is becoming clearer as the dust begins to settle on all this, is that the Internet’s tried and true record of successful collaboration and negotiation to resolve the Internet’s many issues, continues to work here in resolving the issue of Internet openness.
- If the FCC continues to allow stakeholders the time and flexibility to work this issue out, the tried and true Internet record of collaboration can and will produce the optimal Open Internet outcome for all involved.
FOR IMMEDIATE RELEASE
September 1, 2010
Contact: Scott Cleland
703-217-2407
FCC Chairman Appropriately Endorses Case-by-Case Open Internet Approach
WASHINGTON – Scott Cleland, Chairman of Netcompetition.org, released the following statement regarding the FCC’s Further Inquiry into the Open Internet proceeding.
- “It is very encouraging that the FCC Chairman’s further inquiry got the big picture right in stating: ‘…enforcing high-level rules of the road through case-by-case adjudication, informed by engineering expertise, is a better policy approach than promulgating detailed, prescriptive rules that may have consequences that are difficult to foresee.’”
- “That being said, it is perplexing why the FCC goes on to ask specific regulatory questions that appear designed to “promulgate detailed, prescriptive rules.” The whole point behind a “high-level…case-by-case adjudication” approach is to promote innovation and investment by not trying to divine and proscribe every conceivable concern, in advance, for the innovation-laden areas of specialized and mobile services.”
The link to the FCC’s Further Inquiry proceeding is here.
NetCompetition.org is a pro-competition e-forum representing broadband interests. See www.netcompetition.org.
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Had a good hour Net Neutrality debate on NPR station WFAE
September 1, 2010
NPR/WFAE host Tim Collins of Charlotte Talks hosted a very good hour-long radio show on net neutrality this morning featuring CDT’s very able Andrew McDiarmid, promoting net neutrality/Title II regulation, and me opposing formal net neutrality/Title II regulation.
- It was a fresh and informative overview for the average listener.
- The podcast link is here. Please add comments if you wish.
What those who follow this blog would find most amusing, was my defense of Google from the sand-blasting it has gotten from the extreme left for its attempt with Verizon to be constructive in trying to find a workable framework/compromise on net neutrality for the FCC.
Google: Looking Out for #1 on Net Neutrality — Analyzing its Competitive Implications
August 11, 2010
Google’s self-interested proposal with Verizon on net neutrality legislation publicly spotlighted to many for the first time, Google’s Machiavellian manipulation of Washington for competitive advantage, i.e. proactively seeking regulation of Google’s competitors while ensuring Google remains unfettered by any regulation.
- Net neutrality activists are now shocked, shocked, that after five years of brilliantly portraying the starring role of the too-good-to-believe “don’t be evil” corporate organizer and benefactor of net neutrality, that Google ultimately would just take care of itself, and prove that net neutrality was simply a shrewd means to an end — best positioning Google to dominate Internet information distribution.
- The movement’s most lovable lambkin, has been unmasked as a capitalist wolf in sheep clothing.
This piece will analyze: why Google surprised everyone; what’s in this for Google; and why many like Skype, eBay, Facebook, and the TV business, should be very concerned with Google’s Machiavellian positioning here.
Let’s deconstruct the Google-Verizon net neutrality proposal from Google’s perspective.
Most have completely missed the most important thing Google wanted out of this proposal — asymmetric regulation — that “The FCC would have exclusive authority to oversee broadband Internet access service, but would not have any authority over Internet software applications, content or services.” [Bold added] Translation: The FCC can oversee them, but not Google.
- At core, as a search monopoly that routinely discriminates non-neutrally in favor of Google-owned content over competitors’ content and that publicly opposes search neutrality, Google negotiated that all competitive broadband providers, who have been operating neutrally, should be subject to a mandatory net neutrality enforcement regime, but monopoly Google, which has long been operating non-neutrally, should be exempt.
- Moreover, Google negotiated in the proposal that all competitive broadband providers, wireline and wireless, should be subject to mandated transparency, but that the Google’s monopoly black box search engine/ad auction should not be subject to mandated transparency.
- Asymmetric access to information — everything should be open and transparent to Google, but Google’s opaque search discrimination should not have to be open and transparent to others — is central to maintaining Google’s artificial comparative advantage and ongoing dominance.
- There is no greater advantage in any game than requiring one’s opponent to follow the rules, while exempting oneself from following the rules.
Did you wonder why Google agreed to net neutrality for wireline, but not for wireless? There are very good Machiavellian reasons for Google’s epic net neutrality flip.
First, Google has just recently become supremely confident that it is now firmly on path to lock up the mobile ad market — so why regulate your own next big growth market?
Consider all that has happened in just the last three months.
- In the last two months, the activation rate of Google Android handsets has doubled from 100,000 a day to 200,000 a day according to Google.
- In less than two years, Google’s monopoly-search-subsidized/free Android operating system is now the fastest-growing mobile operating system in the world by far, activating ~200,000 Android handsets a day, meaning Google is on path to overtake Apple and RIM in mobile market share in only its first few years in the market.
- Now Google owns 98% share of the mobile search market per Statcounter.
- In late May, the FTC granted Google an open field to dominate the mobile advertising market, by inexplicably approving Google’s acquisition of AdMob, instantaneously increasing Google’s share of in-app mobile advertising from 25% to 75%!
- On top of that, Google appears confident that the FTC is watching Google’s back, given that the FTC is investigating Google’s only potential major in-app mobile competitor, Apple (which happens to be a new entrant to the mobile ad market only this year), to make sure Apple can’t challenge the FTC’s ceding of mobile advertising market to Google.
- Google CEO Eric Schmidt is so confident that Google has already locked up mobile, that he recently bragged to Fortune: “If we have a billion people using Android, you think we can’t make money from that?”
- Why so supremely confident? Google knows that Android gives Google two market power advantages that no one can compete with:
- First, hundreds of millions of Google-tethered personal GPS tracking computers/devices that automatically connect users most intimate/immediate intentions to locational opportunity that only Google can fully exploit (because Google has leveraged its search market power to dominate online mapping services); and
- Second, an Android operating system platform that Google can much more quickly and efficiently vertically enhance with more Google search-monopoly-subsidized products and services than anyone competitor could ever match because Google has exclusive access to the underlying usage data for supply and demand necessary to do so.
- (A little light bulb should be going off in the heads of potential investors in Skype’s pending IPO. Long term, with Google angling for no wireless net neutrality, Google obviously has Skype in its crosshairs and plans to leverage its eventual billion Android users to disintermediate Skype. Google has played Skype like a fiddle; Skype’s biggest competitive threat is not non-neutral competitive broadband providers, but a non-neutral monopoly Google effectively tying Google Voice to Android.)
- (Along this same train of thought, eBay’s Paypal should be squirming at the prospect that hundreds of millions of Google Android devices practically will be tied to, or better integrated with, Google Checkout, so that Google beats eBay’s PayPal in becoming the real global first-mover electronic wallet application.)
- (And Facebook should be worried about being headed off at the mobile social networking/gaming pass with a Mobile-powered “Google Me” based service that increasingly disintermediates Facebook with its mobile market power of superior locational awareness and functionality, and with usage data from Google-allied Zynga games, given that games are a strategic source of traffic (~30%) and monetization for Facebook.)
- (Skype, eBay, and Facebook should remember the anguished words of betrayal spoken by fellow former Google net neutrality ally, IAC/Expedia Chairman Barry Diller, who is getting badly disintermediated by Google with Google’s ITA acquisition:
- “I think it is disturbing that Google is moving into serving individual spaces, rather than being search neutral,” “It is a dangerous step because it is inevitably going to cause problems with customers and regulatory authorities,” per the FT.)
- Why does Google see no need for wireless net neutrality from their perspective? Duh. Why get in one’s own way? Why mess up a sweetheart situation?
Second, then why would it be in Google’s interests to impose wireline net neutrality enforcement?
Google has two grand schemes motivating its plans for the wireline infrastructure, cloud computing and Google TV.
- While broadband is currently an unregulated information service (unless the FCC badly overreaches this fall by declaring broadband Title II), Google is well aware that telecom and cable companies remain under key legacy regulations (like universal service and navigation devices) that are ripe for new arbitrage where Google can get regulators to hurt their competitors and help/subsidize Google.
- Shackling just wireline networks with net neutrality enforcement obligations, comes with the implicit assumption that wireline broadband networks are not competitive, have market power, and are not constrained by wireless broadband competition — assumptions that are not true, but are very helpful regulatory assumptions for Google to officially establish.
Cloud Computing: Google has long understood that wireline net neutrality was a fantastic way for Google to hugely pad their bottom line, by literally billions of dollars, by shifting most all the cost of their world-leading-bandwidth-consumption onto the backs of consumers and broadband providers.
- The ingenious and scandalous implication of the FCC’s open Internet regulations is that they specifically propose that consumers can be charged more for more usage, but that applications and content providers like Google cannot.
- The FCC’s proposed concept of net neutrality is and effective back-door ban on a two-sided market where big application providers, like the cloud computing operations of Google and Amazon, shift most all of the bandwidth cost of their bandwidth heavy services onto everyone but themselves.
- So the practical effect of wireline net neutrality for cloud computing is first to commoditize conduit/bandwidth to subsidize cloud computing of Google and Amazon, while conveniently impeding broadband providers from competitive entry into cloud computing because one price for application/content providers could foreclose wholesale/retail price differentiation.
- Suffice it to say, net neutrality is effectively a tech industrial policy that effectively mandates consumers and broadband providers implicitly subsidize cloud computing providers — massively.
- To cut to the quick, Google is angling for special FCC rules that would position Google TV as the first-mover, universal remote for cloud-based TV, effectively disintermediating all multi-channel video programmers over time.
- Simply, Google’s gambit for Google TV is to be what Google News is to newspapers and magazines. Their play is to be the users’ first/default interface that can collect all the user video viewing data, so they can be the only one that can effectively microtarget ads to TV viewers, all while paying nothing incremental to the conduit provider for bandwidth or to the content provider for their content, because Google maintains everything on the “open” “neutral” Internet is supposed to be free.
In short, Google’s self-serving and Machiavellian vision of an open Internet and net neutrality is a world of free bandwidth and content that Google alone is positioned to monetize effectively. As Google CEO Eric Schmidt famously signaled in 2006: “Our goal at Google is to have the strongest advertising network and all the world’s information.”
- The Wall Street Journal and the Financial Times figured out late that the Google News disintermediation effect is a Google game of competitive death by millions of cuts, so they have finally erected paywalls to fight back against Google’s Machiavellian rigged game.
- Many authors and publishers have figured out very late that Google’s disintermediation of books in the Google Book Settlement is a Google rigged competitive game of death by a millions of cuts.
- The question is now whether all professional video producers, programmers and providers fully appreciate that Google TV represents a-tried-and-true Google competitive game of death by a million cuts.
- Just this summer at the famed media mogul confab at Sun Vallley, Google CEO Eric Schmidt was smug about the prospects of Google TV, per the WSJ:
- “While playing up Google’s cooperation with the media business, Mr. Schmidt did highlight one area where Google and other media companies don’t yet see eye-to-eye: its recently announced Google TV service which allows users to watch cable and online programming through one interface. While Mr. Schmidt said companies at Sun Valley had told him they were interested in the idea, he felt they didn’t quite understand the product.”
- “While playing up Google’s cooperation with the media business, Mr. Schmidt did highlight one area where Google and other media companies don’t yet see eye-to-eye: its recently announced Google TV service which allows users to watch cable and online programming through one interface. While Mr. Schmidt said companies at Sun Valley had told him they were interested in the idea, he felt they didn’t quite understand the product.”
- Just this summer at the famed media mogul confab at Sun Vallley, Google CEO Eric Schmidt was smug about the prospects of Google TV, per the WSJ:
While net neutrality activists/allies have long swooned in the rapture of Google’s cool and romantic net neutrality embrace, they are now coming to their senses and beginning to fathom how deeply Google has played them, used them and moved on.
Google’s only looking out for #1…
Verizon-Google Net Neutrality Proposal Takeaways
August 9, 2010
Verizon and Google’s announced net neutrality legislative proposal is a significant new development with at least a couple of significant implications.
Takeaways:
First, it is even more clear that the FCC should give the legislative process time to play out on net neutrality.
While this is a legislative proposal of only two of the many major stakeholders in the net neutrality debate, it still sends a strong signal to Congress and the FCC that the stakeholder negotiating process — that has been occurring over the last several weeks — holds real potential for substantive progress and resolution, if the FCC is patient and gives the process the appropriate time and breathing room to play out.
- In the absence of any market problem — and with both this fresh evidence of progress in stakeholder negotiations and a strong majority of the Congress writing the FCC that they prefer a legislative solution over preemptive FCC action — the FCC should respect Congress’ prerogatives and let the legislative process play out.
- If the FCC were to rush ahead and unilaterally and hastily preempt Congress’ role this fall — with a declaratory ruling that effectively would legislate that broadband be regulated as a monopoly telecom service for the first time — the FCC would expose that they are more interested in an opportunistic power grab and asserting FCC policy supremacy, than in resolving this issue most effectively and constructively for the Nation overall.
- Moreover, if the FCC proves hostile to Verizon and Google’s proposed building block framework, and continues to prematurely give up on the stakeholder negotiating process, it will be speak volumes about the FCC’s real endgame here.
- In supporting a legislative proposal where: “The FCC would enforce consumer protection and non-discrimination requirements through case-by-case adjudication, but would have no rulemaking authority with respect to those provisions” [bold added] — Google is signalling that the FCC’s current plan to self-assert sweeping regulatory authority over broadband via a Title II declaratory ruling is a non-starter.
- Moreover, Google proposes to allow due discrimination on broadband and to allow the FCC to decide that some types of prioritization of Internet traffic would not be considered discriminatory.
- Furthermore, Google proposes to allow wide latitude for reasonable network management and to exempt “additional online services” from the new non-discrimination requirement.
In short, Verizon and Google appear to have changed the overall dynamic with their announcement, showing that stakeholder negotiations and the legislative option may be viable and should be given time and support to further develop.
- Those who don’t want a negotiated compromise, but seek a heavy-handed edict from the FCC, like FreePress, will surely push the FCC to go it alone, ignore Congress, and abandon the potential for a much more broadly negotiated settlement of this mess — that will only get messier if the FCC rushes to usurp both Congress’ and the Court’s authority.
