Economy

I've long thought there was a big untold story about Google, essentially a book all about Google, but told from a user's perspective, rather than the well-worn path of Google books told largely from Google's own paternal perspective.

• (You can buy the book, Search & Destroy Why You Can't Trust Google Inc. at www.SearchAndDestroyBook.com, Telescope Books, Amazon, Kindle, Kindle Apps, Barnes & Noble, The Nook, and The Nook Apps.)

Given that Google is the most ubiquitous, powerful and disruptive company in the world, it seemed logical to me that users, and people affected by Google, had a lot of important and fundamental questions about Google that no book had ever tried to answer in a straightforward and well-defended manner.

The House's rejection of the FCC's December Open Internet order 240-179 is just the latest in an ongoing high-profile accountability gauntlet for the FCC's unauthorized, unwarranted and unjustified net neutrality rules.

• While the wheels of democracy, public accountability, and the rule of law can turn slowly, they do turn steadily.
• And from what we have seen so far, the FCC's out-of-the-mainstream, over-reach effort to regulate the Internet for the first time, has been pummeled in our Government's accountability process gauntlet to date, and it can be expected to continue to be pummeled going forward.

The Net Neutrality Accountability Gauntlet:

First, the President's January Executive Order, "Improving Regulation and Regulatory Review" to seek the "least burdensome" regulations, was a big post-mid-term election political pivot by the Administration to be more sensitive to business, economic growth and job creation concerns.

• Through the new lens of the President's Executive Order, the FCC's pre-mid-term-election-mindset net neutrality rule making has been viewed as badly out-of-focus with the renewed bipartisan interest in economic growth and job creation.

The FCC's Open Internet order should be ripe for review and "fixing" given President Obama's pledge in his SOTU speech last night:

• "To reduce barriers to growth and investment, I've ordered a review of government regulations. When we find rules that put an unnecessary burden on business, we will fix them."

Clearly the FCC's preemptive bans, restrictions and economic/price regulation of competitive broadband providers based on scant and weak evidence of any real problem to solve, obviously place "an unnecessary burden on business" and the Administration should "fix them."

As I explained in my previous detailed post: "Why FCC's Net Regs Need Administration/Congressional Regulatory Review," the FCC's Open Internet order violates the President's pledge for regulations to:

To promote "America's free market," President Obama today ordered a government-wide review of regulations that "make our economy less competitive," in order to take us "toward a 21st century regulatory system."

Here is the case for why the FCC's December Open Internet order deserves to be atop of the Administration's regulations to review for abolition.

• (This regulatory review analysis is also highly relevant and applicable to Congress' review of the FCC order under the Congressional Review Act.)

First, the FCC's new Internet regulations violate the President's goal of a "21st century regulatory system" by applying "outdated" 19th century common carrier regulatory thinking and approaches to the previously un-regulated, and flourishing 21st century Internet. (Para 68)

Second, the FCC rules violate the President's goal of avoiding "excessive, inconsistent, and redundant regulation."

We learned today that Google has the lowest foreign tax rate of the top five U.S. tech companies, an eyebrow-raising 2.4%, and that Google "cut its taxes by $3.1b in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda," per an outstanding investigative expose by Jesse Drucker of Bloomberg.

This exceptional tax dodging feat, while reportedly technically legal, nonetheless raises some important questions that no one has yet asked Google.

Google announced it is working on an economy-wide Google Price Index, but has not decided whether to make it public, per Google Chief Economist, Hal Varian, who spoke at the National Association of Business Economists conference this week.

• This development has under-appreciated implications for insider trading and also spotlights how Google's online dominance of market-relevant information suggests market failure and a new potential systemic vulnerability to the integrity of global capital markets.

I.  Insider Trading

In March, Google CEO Eric Schmidt said: "One day we had a conversation where we figured out we could just try and predict the stock market... and then we decided it was illegal. So we stopped doing that."

Now any hedge fund (or market regulator not born yesterday) understands that if Google is actively working on a Google Price Index, Google has not stopped trying to use its uniquely comprehensive and timely, repository of sensitive market information to predict information highly useful to predicting the stock market.

The SEC/CFTC report on the May 6th "Flash Crash" helps confirm that automated index trading technology was a contributing cause of the 2008 Financial Crisis and why recent financial reforms are not enough to address the ongoing destructive systemic vulnerability that automated index trading technology increasingly poses for financial markets going forward.

The link is here to: "Googleopoly VI -- How Google is Monopolizing Consumer Internet Media and Threatening a Price Deflationary Spiral and Major Job Losses in a Trillion Dollar Sector" -- It is a 41 page PowerPoint presentation with 18 pages of pictorial analysis.

Below is the Executive Summary: (The PDF link is here.)

Executive Summary

Googleopoly VI – Seeing the Big Picture: How Google is Monopolizing Consumer Internet Media

And Threatening a Price Deflationary Spiral & Major Job Losses in a $Trillion Sector

By Scott Cleland* President of Precursor LLC, September 13, 2010

If Congress and the Administration truly are focused on lowering unemployment and creating jobs, one of the easiest things they can do is tell the FCC to not kill potentially tens of thousands of jobs by preemptively regulating broadband Internet access to address a non-existent problem.   

Kudos to the American Consumer Institute for an excellent study on the job-killing impact of a net neutrality industrial policy which would effectively chose competitive broadband companies as job losers and much smaller and less job-intensive netopolies as winners. (See summary of study here.)

It is amazing that with one hand, the FCC is working on a National Broadband Plan to allegedly help the nation advance economically, while its other hand is totally working at cross-purposes economically -- pushing proposed net neutrality regulations that would kill jobs.

We will learn in the coming weeks/months whether the FCC appreciates the real world around them, a fragile economy, persistent high unemployment and underemployment, and less investment, or whether they operate in a bubble imagining that their actions can only have positive effects on the economy and not negative ones.

We also will see if the FCC cares about the economy, jobs, and unemployment, or if they view themselves as independent of, and shielded from such real world concerns.