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May 2010

Why deregulated broadband is in the public interest

"The chairman of the Federal Communications Commission has indicated he wants to keep broadband services deregulated" reports Cecilia Kang of the Washington Post.

  • If accurate, this is outstanding news.

    Keeping broadband deregulated is in the public interest because it:

Why Google's Search Ad Monopoly is Understated

Google's core search advertising monopoly is understated substantially by many for several reasons.

1. Most cite second best source: Media reports tend to report the most frequent and publicized ComScore 65.1% retail market shares for Google in the U.S., not the more accurate and comprehensive Hitwise 70% retail market shares in the U.S. that the DOJ/FTC rely upon, (because Hitwise's sample size is much bigger than ComScore's.)

2.  Most don't cite total share: Media reports almost never use Google's total market share because they almost always miss or forget to add in Google's wholesale share of searches to its retail share of searches.

Google misled investors about AdMob antitrust risk -- Google agreed to 23 times normal deal "kill fee"

New evidence suggests Google blatantly misled public investors about its own assessment of the antitrust risk involved in Google acquiring AdMob.

On Google's webpage on the AdMob acquisition, in the Q&A section, Google said at the time of the acquisition:   

  • Question: "Do you have any concerns about regulatory approval?"
    • Answer: "We don't see any regulatory concerns with this deal..."
  • (At the time, Precursorblog posted that Google was clearly misleading people about the antitrust risk the deal faced.)

Now we learn from a Bloomberg/Business Week story:

  • "Google CEO Eric Schmidt was so intent on buying AdMob that two people with knowledge of the deal say he agreed to pay a "kill fee" of around $700 million if the deal failed to close for some reason, such as an antitrust motion from the Justice Dept." 

It is important to put this $700m AdMob deal "kill fee" in perspective.

There's no "Title I 1/2"


May 5, 2010                                                                                           

Contact:  Scott Cleland




“There’s no Title I ½”

FCC Understating Systemic Risks of "Third Way" -- Why It's a Disaster Waiting to Happen

The FCC is vastly understating the systemic risk involved in the FCC's radical "third way" regulatory surgery to the Internet, the communications sector and the economy.

  • The FCC's proposed "third way" is an elaborate public relations facade that disguises huge problems and fatal conceptual/practical flaws that will become painfully obvious over time.
  • The FCC's proposal is long on politics and soothing rhetoric, but short on real world practicality or legitimacy; it predictably will ultimately collapse under its own weight, complexity and hubris -- unfortunately leaving exceptional carnage in its wake.
  • Simply, this proposal is too inherently contradictory and mind-numbingly complex, and too big not to fail.
  • This analysis will explain why it is a disaster waiting to happen; it's not a matter of if, but when the "third way" will collapse on itself.

I.  Why this "third way" is a disaster waiting to happen:

The best way to understand what is going on here is to think of the Internet as a brain and the FCC's "third way" proposal as brain surgery to fundamentally rewire how the Internet brain operates at its most basic level.

Debunking that U.S. is falling behind on broadband -- see great Hoewing post

Kudos to Link Hoewing of Verizon Policy Blog for his excellent post systematically eviscerating New America's Foundation's fact-challenged attempt to argue that the U.S. is falling behind on broadband.

Facts are powerful and that's why net neutrality and Title II supporters like New America Foundation and their FreePress/Public Knowledge allies avoid facts like the plague.

The facts are overwhelmingly on the side that the U.S. is a world broadband leader.





FCC's Achilles Heel on Broadband Third Way Approach

The Achilles heel of the FCC's announced "Third Way Legal Approach" for regulating the Internet is that it is simply not credible.

Incredible claim #1: The third way "does not involve regulating the Internet."

The Atlantic smooches Google in cover story

Whatever the Atlantic's national correspondent Mr. James Fallows calls his Atlantic cover story: "Google: Inside the company's daring plan to save the news (and itself)," it can't be journalism.

It was one of the most vacuous 12-page puff pieces I have ever read. Like Jeff Jarvis described: "It doesn’t break a single new nugget of news." It was the literary equivalent of a puppy jumping up incessantly to lick the face of the person in closest proximity. 

How ironic is it that a journalist, that made a point of telling the reader that he taught journalism for several years, wrote the functional equivalent of Google PR brochure extolling all the good Google has done for journalism/newspapers -- with no journalistic critical thinking or balance.   

It is hard to fathom that in twelve pages there were:

FTC's Google-AdMob Antitrust Checklist

Many are missing the forest for the trees in jumping to the conclusion that the two-week extension in the FTC's review of Google-AdMob means the FTC is reconsidering the FTC's staff recommendation to block Google-AdMob as anti-competitive.

  • Google is cleverly trying to misdirect the focus off Google being the actual #2 in-app mobile advertiser, which is buying the actual #1 AdMob market leader, by talking up the potential competitive advertising threat of a distant #3 player Quattro being bought by non-advertising company Apple. 
To see the big picture and understand the likely outcome here that the FTC will block Google-AdMob, its helpful to run through the FTC's likely Google-AdMob checklist decision process.  

1. Are Google and Admob competitors? Yes.

  • By their own admission they are actual direct horizontal competitors.

2. Is the market highly concentrated? Yes.

  • Google is the #2 in-app mobile advertising provider with ~25% share and is seeking to buy #1 AdMob, which has ~50% share. See here & here

3. Are there barriers to entry? Yes.

  • Online markets are widely known to be characterized by first mover advantage, network effects, and the scale and scope advantages of inventory, distribution, audience, and client base.

4. Does Google have market power? Yes.

Why FCC faces such skepticism on Title II assurances

There are many valid reasons why industry is highly skeptical of the FCC's many rhetorical assurances that nothing bad will happen from the FCC's planned regulation of broadband for the first time as a Title II common carrier service.

First, in response to the Comcast court decision, the FCC is hastily gambling away the benefits of broadband's proven "solid business foundation," in its longshot bet to win back an unproven "solid legal foundation" for the FCC.  

  • The FCC apparently is ignoring that restoring the FCC's legal "status quo" comes at the expense of the broadband industry's long-time status quo of being unregulated and the consumer's status quo of enjoying the benefits of a market driven Internet "unfettered by Federal and State regulation."  
  • Despite employing all the soothing words the FCC thinks the industry wants to hear, industry is much more interested in actions than words, as actions are what affect their businesses -- not words. 
    • Simply, industry is increasingly watching what the FCC does rather than what it says.
  • The fact is industry is not reassured that nothing bad will happen to them, because the FCC has announced it plans to apply the most onerous foundational common carrier regulations on the broadband industry for the first time without any defensible justification or legal authority to do so. 

Second, the assertion that there has never been an instance of FCC "un-forbearance," is no assurance, because the FCC has never before reversed an entire sector's regulatory status before either. 


Q&A One Pager Debunking Net Neutrality Myths