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The GoogleNet Playbook & Zero Pricing – A Special Report
Submitted by Scott Cleland on Tue, 2014-11-18 20:59
GoogleNet is Google’s vision to leverage its proliferating dominance by offering global, near-free Internet-access, mobile connectivity, and Internet-of-Things connectivity via a global, largely-wireless, Android-based, “GoogleNet,” that is subsidized by Google’s search and search advertising dominance and by “open Internet” zero pricing of downstream Internet traffic.
A near-free global GoogleNet would be much like the Google Playbook which offers Android, Maps, YouTube, and others’ content for free globally, to disrupt and commoditize competitors in order to maintain and extend its search and search advertising dominance throughout the economy.
Why the GoogleNet Playbook matters competitively is that it is Google’s new disruptive strategy to disintermediate and commoditize physical-world industries’ direct relationship with their customers (like ISPs, energy utilities, automobile manufacturers, big-box stores, banks, package delivery services, realty, and their networks, vehicles, inventory, ATMs, credit cards, appliances, devices etc., just like Google has been disintermediating and commoditizing the paid content, app and software industries’ direct relationship with their customers.
Tellingly, Google explains that Google proper is mostly about digital bits in the virtual world i.e. computer science and Internet technologies, whereas its next generation GoogleX research lab is mostly about atoms in the physical world, i.e. physical objects like driverless cars, satellites, drones, networks, devices, sensors, etc.
In a nutshell, this analysis spotlights: Google’s much-underappreciated, global-connectivity plans -- GoogleNet; how GoogleNet neatly fits into the Google Playbook; and how zero-price-defined net neutrality is necessary to subsidize and accelerate Google’s grandiose ambitions to broadly extend its dominance of the virtual world into the physical world.
This analysis first applies the Google Playbook of “open-dominate-close” to GoogleNet’s global connectivity ambitions.
Next it shows how GoogleNet neatly ties together Google’s unique technology vision, company mission, “serial-moon-shot” ambitions, and its core beliefs in digital information commons cyber-ideology, and abundance economics.
Next, for the first time, it charts the much-underappreciated, exceptional comprehensiveness of GoogleNet’s progress: from the Google’s dominant Android mobile operating system, to Android devices, satellites, high-altitude balloons, drones, dark fiber, undersea cables, data center construction, server-points-of-presence, fiber broadband, wireless backhaul, WiFi mesh-networking, etc.
Then it explains the exceptional value and advantage of getting a government “net neutrality” industrial policy to ban the evolution of a two-sided free market for the large enterprise market, via permanently banning any charges for high-volume downstream Internet traffic under the guise of “no-fast-lanes” or no “paid prioritization” for the Internet.
The Google Playbook
First, under the guise of “openness,” Google offers free, or deeply cross-subsidized, products and services to induce fast mass adoption and “disrupt” existing business models. Second, Google proliferates its dominance based on promises of “openness.” Third, once dominant in the new cross-subsidized market, Google then closes its products/services and excludes competitors, so it can discriminate in favor of itself.
To put this in perspective, this analysis explains and documents how GoogleNet is Google’s strategy to eventually dominate global Internet access and connectivity for mobile and the Internet-of-Things, much like I explained and documented Google’s anti-competitive strategy to extend its dominance to YouTube in my Google-YouTube’s Internet Video Distribution Dominance analysis last year.
GoogleNet’s Technological Vision, Mission, Ambitions, Ideology and Economics
GoogleNet neatly ties together Google’s unique technology vision, company mission, “moonshot” ambitions, digital information commons cyber-ideology, and abundance economics.
Google’s Unique Technology Vision is summarized by Google Chairman Eric Schmidt in his recent book: “How Google Works.”
Page 11: “Three powerful technology trends have converged to fundamentally shift the playing field in most industries. First, the Internet has made information free, copious, and ubiquitous – practically everything is online. Second, mobile devices and networks have made global reach and continuous connectivity widely available. And third, cloud computing has put practically infinite computing power and storage and a host of sophisticated tools and applications at everyone’s disposal, on an inexpensive pay-as-you-go basis.”
Mr. Schmidt then lays out the implicit vision for GoogleNet: “Today, access to these technologies is still unavailable to much of the world’s population, but it won’t be long before that situation changes and the next five billion people come on line.”
Simply, GoogleNet is Google’s global vision of a fully-integrated network of digital information, connectivity and computing power that combined is “10x” better than the existing Internet.
Mr. Schmidt continues: “we are entering what lead Google economist Hal Varian calls a new period of ‘combinatorial innovation.’ This occurs when there is a great availability of different component parts that can be combined or recombined to recreate new inventions. … Today the components are all about information, connectivity and computing.”
The genius of this insight is why Google can be more “innovative” than anyone else simply because they dominate, or will dominate, most of the necessary fundamental component parts of “combinatorial innovation” long term: information, connectivity, and computing.
Mr. Schmidt recently told the CBC: "The concept of having every human reachable by every other human is an extraordinarily valuable thing." He is echoing Metcalfe’s Law of network effects which posits that “the value of a telecommunications network is proportional to the square of the number of connected users of the system” -- per Wikipedia.
Simply, Mr. Schmidt and Google get that its dominance in search, search advertising, Android, Maps, YouTube, and Chrome, grows with more users.
Google’s Mission & Ambitions: If one thought Google’s mission “to organize the world’s information and make it universally accessible and useful” was grandiose, they have already achieved most of it in just fifteen years, as I documented recently in my Google’s WorldWideWatch of the WorldWideWeb analysis that charted the vastness of Google’s Internet empire and data hegemony for the first time.
What is the effective “mars-shot” to scale Google’s ambitions “10x” beyond the mere “moonshot” of organizing the world’s information? When the FT recently asked Google CEO Larry Page if Google’s mission statement needed updating, he responded: “I think we do, probably. We’re still working that out.”
Just two years ago, Google CEO Larry Page lamented that “We're still 1 percent to where we should be…what I'm trying to do is… really scale our ambition.”
Given all of Google’s GoogleNet-related acquisitions and activities that will be documented later in this analysis, it appears that Mr. Page’s mission is actually expanding to something like this: “Inter-connecting everyone, every “thing,” and the world’s information over one universally accessible and useful cloud computing GoogleNet.” Or as Google simply calls it internally: “The Google computer.”
Google’s Cyber-ideology: No one can fully understand the boundlessness of Google’s ambitions without understanding why Google CEO Larry Page promised shareholders in his 2004 Founder’s letter that: “Google is not a conventional company. We do not intend to become one.” He promised that because he knows Google is driven by a very different ideology than most of the world would recognize.
Google’s mission and ambitions are not merely technological but also very political, a natural outgrowth of its codism cyber-ideology of a digital information commons where “information wants to be free.” For those who are struggling to understand Google’s geopolitical world view see: a detailed explanation of the Codism movement of which Google increasingly is the de facto global leader, in “What Is the Code War?”
“Abundance Economics” is Key to Google’s Dominance: Google is the world’s largest adherent to the theory of abundance economics, where because the marginal cost of computing, storage, and bandwidth approaches zero, whatever is on the Internet should be free or no cost to use. Abundance economics generally ignores the reality of fixed and total costs and property rights, because they don’t support their notion and aspiration that the economics of abundance have supplanted the traditional economics of scarcity.
The penultimate for abundance economics and a digital information commons would be dominating the three biggest disruptive technological trends of universal and near-free: data-accessibility, connectivity, and computing power.
Simply, Google’s CEO Larry Page singularly gets the implications of digital hyper-centralization – omni-scale wins.
Whoever gets first-mover advantage of combining data-aggregation, connectivity, and computing power wins – its winner-takes-all.
Competitors can’t compete if Google’s proliferating dominance allows it to create an unmatchable, fully integrated, super-high-cost essential facility of one global client-server network (and proverbial Tower of Babel) – that is the only network where eventually one can go for the world’s information, universal Internet access and connectivity, and the lowest-cost computing power.
Tellingly, Google, a world leader in multi-language translation services, originally named its global Google Hangout video chat and video conferencing service “Babel.”
Moreover, Mr. Page gets that the Internet’s web-server-infrastructure is a basic client-server model that ultimately will turn out to have more in common with IBM’s mainframe dominance of the 1950s – 1970s than Microsoft’s dominance of the PC client-software largely in the 1990’s. (Note: The “server” in the traditional “client-server” model has morphed over the decades into a data center of hundreds of thousands of virtualized server-blades in globally-virtualized data centers that function like one unitary server or mainframe computer did in the IBM dominant era.)
And to force Google’s ideological position that information should be free, i.e. no cost, Google has been a most hostile entity when it comes to disrespecting users’ privacy rights and disrespecting others’ intellectual property rights.
And to commoditize cloud computing, take note that Google has precipitated a price war with Amazon’s AWS, cutting cloud prices 38% in 2014 alone, a price war that it already knows it ultimately will win.
The Evidence of the Exceptional Comprehensiveness of the GoogleNet Domination Effort:
A very big public indicator that GoogleNet is a real, urgent and major strategic priority for Google was in June when CEO Larry Page made Craig Barratt Senior Vice President for Access and Energy, on par with the SVPs for Android, Ads and YouTube per WSJ reporting.
Importantly, the dominant core or “spine,” on which GoogleNet is being built upon and around, is Google’s very-fast-growing Android mobile operating system, which already commands 85% share of global smart-phone shipments, 62% share of tablets, 93% share of mobile searches, and over one billion active users up from 538m in June 2013.
The Android mobile operating system is rapidly becoming the default operating system for much of the consumer Internet of Things marketplace because it the only one that is free and “open,” and because the smart-phone has become the default remote controller for: home networking via its Nest acquisition; for autos via its dominant Open Automotive Alliance; and for wearables among other categories of “things” in the consumer Internet of Things.
Google is clearly serious in being the first-mover to reach what Mr. Schmidt calls the Internet’s next 5 billion users coming on line from the developing world via its supply of a free mobile operating system, and its low cost Chrome-books, tablets, smart-phones, wearables and sensors.
To provide these next five billion Internet users free or near-free connectivity, Google is piloting three different technology approaches to offering a free global GoogleNet service.
Google bought Skybox Imaging for $500m and plans to spend $1-3 billion on “180 small, high capacity satellites at lower altitudes than traditional satellites” to enable two-way Internet access. Google also bought Titan Aerospace - which makes solar-powered, high-flying drones that Titan calls “atmospheric satellites” -- for Internet access to remote areas. And Google CEO Larry Page shared his ambitions that Project Loon “could build a world-wide mesh of these balloons that can cover the whole planet” to provide Internet access. Any one of these very different physical technologies could work, or be meshed together depending on which ones work best in what circumstance.
Since as early as 2005, Google has been buying massive amounts of dark fiber (i.e. fiber in the ground that has not been “lit” yet with optical devices on each end). After the tech bubble, which resulted in a global overbuilding of fiber networks, the fiber market bubble burst, which made dark fiber dirt cheap when companies like WorldCom, Global Crossing and PSINet and others went bankrupt.
This August Google invested $300m in a trans-Pacific undersea cable with Chinese, Japanese and Singaporean companies. This October, Google announced it was building a new U.S.-Brazil undersea cable system with Brazil to be completed in 2016. The trans-Pacific and Brazil undersea cables are Google’s third and fourth undersea cable investments.
In the last few years Google has globalized its GoogleNet investments in its Internet infrastructure. Google led the world in data center cap-ex with about $28b from 2006-2014. It now has 1,400 global server points-of-presence in 140 or 68% of the world’s countries per USC research that mapped Google’s global serving infrastructure. Google-YouTube also reports that it has localized YouTube on servers in 61 countries in 61 languages.
Add this entire fiber infrastructure together and it suggests Google already has assembled its own de facto private Internet backbone that handles traffic that could rival the traffic routed by a Tier I backbone provider.
Google has also invested more than any entity to create the only proprietary global Internet “phone/address book” of Internet addresses, the functional, economic, and market power equivalent of the old Bell system phone book and yellow pages, but this time for the whole world and all devices with an Internet address. In 2012, Google claimed to be the world’s leading domain name service (DNS) resolver handling 70b requests daily. Google also offers a Cloud DNS service.
Google is also experimenting with various local ISP access technologies.
The best known is Google Fiber which has build-outs in Kansas City MO/KS, Provo UT, and Austin TX. Google has also targeted nine metro areas and 34 cities for more 1 Gigabit local access build-outs: Nashville TN, Phoenix AZ, Portland OR, Raleigh-Durham NC, Salt Lake City UT, San Antonio TX, San Jose CA, and Atlanta GA.
Here it is important to discuss Google’s various technological solutions and efforts to create a free large-scale, WiFi-based cloud network to disrupt and ultimately replace paid-ISP service.
It is important to note that Google’s new SVP for Access and Energy Craig Barratt is from a wifi-wireless chip background and not a traditional ISP background of any kind. It is also important to note that Google publicly reminds us “We don’t make money from peering or collocation,” because Google makes its money from advertising.
The lesser-known effort to Google Fiber was Google’s acquisition of Alpental Technologies, which is a 60MHz wireless technology that can provide wireless connections of up to a mile at potential speeds of seven Gigabits a second. The founders describe Alpental’s technology as “self-organizing, ultra-low power gigabit wireless technology” that can extend the reach of fiber to create WiFi networks.
A potential game-changer here is that the Alpental technology, leverages a new Android application, probably a peer-to-peer approach, which automatically transfers a user to its WiFi hotspots whenever they come in range, an operational attribute similar to seamless handoffs on wireless cellular networks.
Google is also working with Ruckus Wireless “trialing a new software-based wireless controller that virtualizes the management functions of the Wi-Fi network in the cloud… The end result would be a nationwide — or even global — network that any business could join and any Google customer could access,” per Gigaom.
This analysis of Google’s global GoogleNet plans would not be complete without mentioning the potential for a Google acquisition of, or partnership of some kind, with SoftBank’s Sprint.
Google does not need to acquire a company to reap most of its integration benefits. Google Chairman Eric Schmidt uses the term: "merge without merging." The web allows you to do that, where you can get the web systems of both organizations fairly well-integrated, and you don't have to do it on an exclusive basis."
Something could be afoot at Sprint with Google. To start with, Softbank and Google have long had exceptionally close leadership ties and aligned interests – documented in detail here.
It is unlikely that Softbank’s CEO Son would have been able to poach Google’s Chief Business Officer, Nikesh Arora, to be SoftBank’s Vice Chairman, and it is not likely that Google would have paid Mr. Arora his full-term bonus that was not due to him contractually upon his departure, if there was not something else going on in this close strategic relationship.
Last April, Amir Efrati of The Information reported that Google was talking to wireless providers about an MVNO wholesale relationship to provide Google with wireless services. In that context, it is noteworthy that Mr. Arora just joined Sprint’s board.
In addition to close ties between Softbank and Google, Sprint needs rescuing or a big long-term wholesale contract, and Google could do that and put Sprint’s woefully-underutilized, and massively-WiFi-compatible spectrum holdings to work better and more fully than any other entity could.
In short, no other entity is as serious and determined as Google to create a global de facto shadow Internet of global information, connectivity, and computing -- soonest.
Conclusion: GoogleNet Dominance Depends in Part on Net Neutrality Zero-Pricing
Google effectively defines net neutrality as a permanent Government-set price of zero for all downstream Internet traffic to the consumer.
Why Google has been the real power behind-the-scenes pushing for net neutrality zero-pricing is that Google dominates downstream Internet traffic to users.
Google’s cloud client-server model -- of ad-serving, video streaming, software on demand, App downloads, and cloud-computing services – all involves sending vastly more downstream traffic to American and international users than those users send upstream to Google.
Consider Google-world-leading stats to grasp how much downstream Internet traffic Google alone generates, and how much users subsidize Google profits when Google does not have to pay for much of the costs of its Internet downstream traffic.
Per Deepfield research: 60% of Internet devices and users exchange traffic daily with Google’s servers; >50% of websites’ traffic involves Google analytics, hosting and ads daily; and ~25% of the Internet’s daily traffic is Google.
A billion users receive very bandwidth-intensive videos from Google-YouTube, maps from Google Maps, and content via Google’s Chrome browser. Google uniquely serves display ads to two million websites.
No other entity in the world generates this amount of downstream Internet traffic because Google alone controls five of the world’s six billion-user web platforms.
GoogleNet’s ambition to be the global multi-party-video-conferencing network via Google Hangouts, means that Internet users will help fund Google’s dominance whether or not they use Google’s services at all.
At core, zero-price-defined net neutrality provides Google a substantial anti-competitive advantage where they can shift their Internet infrastructure cost obligations to users and infrastructure providers and Google can then provide free or near free global connectivity as a way to disrupt, disintermediate, and commoditize physical-world industries’ direct relationship with their customers (like ISPs, energy utilities, automobile manufacturers, big-box stores, banks, package delivery services, realty, and their networks, vehicles, inventory, ATMs, credit cards, appliances, devices etc., just like Google has been disintermediating and commoditizing the content, app and software industries’ direct relationship with their customers via free cross-subsidized products and services.
The only way that Google’s Playbook works is if it can use “openness” as a way to offer free, or near-free, offerings that can drive rapid adoption and that keep Google’s operational costs lowest. Pushing for zero-price-defined net neutrality clearly fits this bill as it shifts most of the Internet infrastructure costs Google causes off of Google and onto consumers and potential competitors.
To sum up, a global GoogleNet that provides free, or near-free, universally accessible and useful Internet access and mobile connectivity, in order to offer more content, products and services for free that consumers currently pay for, enables Google to disrupt, disintermediate, and commoditize most all of Google’s potential competitors -- before they even know what hit them.
In a word, a global GoogleNet could become the quintessential essential facility.
Googleopoly Research Series
Googleopoly I: The Google-DoubleClick Anti-competitive Case – 2007
Googleopoly II: Google's Predatory Playbook to Thwart Competition – 2008
Googleopoly III: Dependency: Crux of the Google-Yahoo Ad Agreement Problem – 2008
Googleopoly IV: Google Extends its Search Monopoly to Monopsony over Info -- 2009
Googleopoly V: Why the FTC Should Block Google-AdMob – 2009
Googleopoly VI: Seeing the Big Picture: Google's Monopolizing Internet Media --2010
Googleopoly VII: Monopolizing Location Services – Skyhook is Google's Netscape –2011
Googleopoly VIII: Google's Deceptive and Predatory Search Practices – 2011
Googleopoly IX: Google-Motorola's Patents of Mass Destruction -- 2012
Googleopoly X: Google's Dominance is Spreading at an Accelerating Rate -- 2013
Googleopoly XI: A Satire: Grading Google's Search Antitrust Remedies in EU Test – 2013
Googleopoly XII: Google-YouTube's Internet Video Distribution Dominance – 2013
Googleopoly XIII: Let's Play Pretend: a Satire of Google's Second EU Search Remedy Proposal 2013
Googleopoly XIV: Google's WorldWideWatch over the WorldWideWeb [9-14]