more back and forth with Techdirt on Google fleecing American Taxpayer of $7 billion

I want to thank Mike Masnick for his good comment to my blog post. This post is part of a string responding to Mr. Masnick's criticism of my original blog post entitled: "Google unabashed about gaming FCC auction process to fleece the American taxpayer of $7 billion."

I accept his gracious apology for starting his original critique with an ad hominem attack and I in turn want to apologize to Mr. Masnick for incorrectly assuming that he was on Google's side when he says he has no side -- I take him at his word.

• Understanding that blogging has a different and more combatative style, Mr. Masnick probably did not realize that his closing employed yet another ad hominem attack in saying I was pulling "a typical lobbyist trick," it would be more fair and straightforward to just say that I pick and choose the argument that suits me best.
  • In response, I thought that was sort of the point of a debate, to choose the argument that best makes one point. If so, I am guilty of attempting to put my best argument forward.
  • Second, on the substance of the criticism that I am dancing between legal and economic arguments which suit me best and not answering... I will repeat my main point again in a way that may be more clear.
    • I view the legal and economic views as completely inseparable, because I am actually making an integrated legal/economic argument that because the law set up the economics of the auction in the way that it did, that's the operative set of economics, not the set of "should be" economics that others wish the auction was about.
    • I am not arguing that there there is no value other than dollars to the U.S. Treasury. My whole point is that Google ignored and manipulated the "value due to the taxpayer" under law and FCC rules -- and  I have a serious problem with that.
    • With all due respect, others may try to change the subject about what I am saying or not saying but I will hold firm in not letting others put words in my mouth or mischaracterize my core argument -- Google fleeced the American Taxpayer based on the law and the rules of the auction -- in my opinion.
• Let me also point out an additional ad Hominem attack in the comment that Mr. Masnick may not have been aware that he made -- that I take things out of context because of who pays my bills.
  • Once again, this is such a common blogging charge against anyone who disagrees with the politically correct tech line that Mr. Masnick may not even be aware that it is in fact just another type of ad hominem attack.
  • By pointing out in a derogatory fashion what I have honorably and fully disclosed, its an ad hominem attack designed to impugn me personally and not address the logic and merit of the argument. I am Chairman of NetCompetition.org, which represents broadband companies on net neutrality -- anyone can see the point of view and philosophy I represent by looking at the mission and goals of NetCompetition.org.  http://netcompetition.org/index.php/go/about-us-mission/
  • In plain english, that link shows the perspective from which I am coming. To imply that the only reason that I would forward an argument was because I was paid to do it, is an ad hominem attack that a free market advocate cannot personally share the philosophical free market views of those commercial entities that they represent.
    • I make these free market arguments because I believe them and they forward the mission and beliefs in the mission statement to which I referred to above.
• While this next comment in no way applies to Mr. Masnick, many people who disagree with me, don't respect my constitutional right to free speech, while on the other hand claiming net neutrality is needed to protect free speech on the Internet. Sorry for that pertinent aside and impertinent dig -- that is not directed at you Mr. Masnick.   

Let me address another falacious criticism of my argumentation at the beginning of Mr. Masnick's thoughtful comment. The charge is that I take "things out of context to make one side look good."

• First, I have and will continue to fully disclose who I represent as I did above.
• On the Internet, this debate tends to be very one-sided because so many people in the tech industry have a tech parochial view of government, regulation and Washington.
• When I come at these questions from a different point of view than the tech industry -- that of the broadband industry -- it is almost by definition, out of the parochial tech "context."  
• I don't take things out of context.
  • I put things into the context of the broadband industry perspective, a perspective which I fully disclose. 
  • Once again, other try to get me to concede in this debate to agree to their first principles that we should not have a free market Internet but a government-mandated open Internet that favors the tech industry over the broadband industry. 
  • I wasn't born yesterday and I recognize arguments couched in "putting it in context" to be code for "I expect you to unilaterally surrender and adopt the tech side's point of view." Not gonna happen. Wouldn't be prudent.   

Now Mr. Masnick you deserve to be rewarded for your patience by me getting to the substance.

• For the benefit of others, you said: "As for the substance of your response, you still do not explain how Google actually fleeced anyone. You complain about its bidding strategy, but it's still not clear how it was illegal or how it caused any actual problems in the auction."

• I thought I did in my original post, but let me elaborate further here out of respect for your patience and good will.

  • Public auctions, since they deal with the disposition of the public's property have many requirements that I believe Google violated  (at least spirit and it will be for others to decide if they violated them in letter.) Auction participants are required to be honest and forthright and not misrepresent their actions or intentions as a prerequisite for participating in the auction.

  • In this particular auction the FCC imposed the strictest bidding anti-collusion rules ever in order to ensure anonymity and hence maximize the price that the auction would generate -- for the American taxpayer -- the primary purpose of the spectrum auction per the 1993 Budget Act.

    • The basic purpose of the anti-collusion rules is to prevent a participant or participants from "fleecing the taxpayer" (those are my words) by behaving in an anti-competitive way or in a way that does not respect the intent of the rules. 

  • The first problem I had with Google's public letter pledging to bid $4.6 billion in the auction, if and only if, they got the regulations on the spectrum they wanted, was that it was suspiciously close to a policy "bribe."

    • The bidding hadn't started and they had made what everyone interpreted as the first bid in the auction before the  rules were finalized and with a bid committment that would be fulfilled after the rules were finalized.

    • Why this was suspiciously close to a policy bribe is that the FCC had a clearly known goal of trying to encourage a "third national broadband provider" to bid and win in the auction and they set up the 'C' block with big size spectrum chunks by geography to make it more appealing and doable for a new entrant to bid and win a national footprint to provide a "third national broadband provider" to the competitive mix in the marketplace. 

  • In practical effect, Google lobbied hard for special rules, (much like the much-maligned earmarks in Congress that occur outside of the normal process) to advantage themselves in particular. Now we learn from their careless and arrogant above-the-law attitude in talking to the New York Times that they had no real intention of bidding to win and becoming a "third national broadband provider" like they represented themselves to be.  They had an ulterior motive and plan that was at cross-purposes with maximizing the revenues the auction raised -- that is to encumber a competitor to suit their proprietary interests. 

    • What I am saying is that Google conducted itself under false pretenses, it also misrepresented itself -- but reserved just enough legal and political wiggle room to avoid fraud charges. 

    • So Beef #1 is that they improperly bid signalled.

    • Beef #2 is that they misrepresented themselves for proprietary benefit in a way that suppressed the competitive price that was ultimately paid -- shortchanging or fleecing the American taxpayer of $7 billion by my estimate. 

    • Beef #3 they conducted themselves in the auction in a misleading way that gamed the competitive bidding process and fabricated the illusion of competitive bidding, which had the effect of lessening the ultimate price in this auction for the "c" block -- shortchanging the American taxpayer of the revenues due them under the law and the FCC's rules. 

    • As we learned, Google successively bid against itself to simulate competitive bidding for their own purposes and not for the purposes of a competitive auction that benefited the American taxpayer. 

      • Mr. Masnick I doubt you would want to defend the ethics of Google's bidding against itself behavior. The only obvious explanation for Google successively bidding against itself repeatedly in small increments over time in an anonymous auction was to simulate the illusion of competition and mislead other bidders -- all to trigger the open access conditions and not win the auction and become a "third national broadband provider like they led the FCC to believe. 

      • Mr. Masnick, I don't think you would want to defend Google's ends-justify-the-means tactics in this auction, especially when it was the American public that was shortchanged by this less-than-forthright behavior in a public spectrum auction process. 

      • I am sure that many people that are for net neutrality or Internet openness don't think there is anything wrong with such ends-justify-the-means behavior if the ends are Internet openness. 

        • I personally am offended at Google's arrogant manipulation of this spectrum auction. 

        • This affair clearly was not Google's finest hour.    

        • I trust you will count the above explanation as "substance."