Microsoft

In my digging around to find out if Microsoft would be rejoining the ItsOurNet.com pro-net neutrality coalition, I have learned enough that strongly suggests to me that Microsoft may not be rejoining ItsOurNet now that the AT&T merger is complete.

Why I believe this is that I heard Microsoft is telling both sides behind-the-scenes -- the ItsOurNet crowd and the NetCompetition crowd -- the same story.

• A Microsoft Rep is telling others that they are not for net neutrality, but that they do share some of the concerns that pro-net neutrality companies have.
• More specifically, where Microsoft reportedly parts company with the ItsOurNet coalition is over the whether the modifiers "just" and "reasonable" are used in mandating non-discrimination by broadband carriers.  
• Microsoft reportedly believes that there should be no "unjust" or "unreasonable" discrimination by broadband carriers, which is similar to the traditional seventy-year old common carrier language found in Sections 201 and 202.
• The ItsOurNet coalition is taking the harder line that the non-discrimination requirement should be an unambiguous ban like the 11 year-old language found in Section 251(c)(3) that does not have any qualifiers like just or reasonable.
• (It is important to note that the 251(c)(3) language that ItsOurNet is holding firm to get, is precisely the 1996 Telecom Act language that was most fought over at the FCC and in the courts -- and that ultimately had to involve the Supreme Court -- twice. The 251(c)(3) language proved to be some of the most controversial legal language and mandates ever in the history of telecom in the U.S.)  

This take on Microsoft's new position makes sense to me for three reasons.

Today I asked some of the folks that are members of ItsOurNet.com why their site has been down for a week. All tried to downplay the significance.

One said that they had changed vendors and that the site being down is not related to Microsoft withdrawing from ItsOurNet last fall. That rep went on to say that all the ItsOurnet folks are focused on influencing the grassroots, and that they will be working more closely with SaveTheInternet and FreePress because there may not be the need for both websites.

• I expressed my surprise that the ItsOurNet companies thought that SaveTheInternet would allow them to join SaveTheInternet as a member given that they have a disclaimer on the front page of their website that states: "No corporation, trade group or political party funds the SaveTheInternet campaign."  
• Either the ItsOurNet rep I talked to was misinformed about SaveTheInternet's publicly disclosed representation that they don't take funds from corporations (which would include them), or there is more coordination going on under the public disclosure radar than either side is disclosing or representing to the public.
• Since Common Cause is a member of SaveTheInternet and has been a vocal opponent of corporate "astro-turfing" I guess that the online giants have not gotten the "memo" that they are not supposed to say in public that they are closely coordinating their grass roots efforts with SaveTheInternet. 
• Oh I forgot, advocating a corporate position against net neutrality is "astro-turfing," but a ItsOurNet-SaveTheInternet "quiet" cooperation with corporations would be "grass roots." Bad guys astroturf. Good guys grass root. Oh I got it.    
• In my review today of the multitudes of coalition member links that are part of the SaveTheInternet coalition:
• It is interesting to note what a couple call themselves: one is a blog called "I Hate Bush" and another is a blog called the "democratic underground."
• I guess somebody didn't scrub the list very well to maintain the facade of bipartisanship SaveTheInternet tries to represent.
• Dozens of "small businesses" are also listed as coalition members.
• (I was amused that SaveTheInternet does not consider "small businesses" to be a corporation." Maybe they in fact are not contributing money, but it would be interesting to hear their explanation to the IRS of why a small business is not a "corporation.")

Another ItsOurNet member rep, Alan Davidson, Head of Google's Washington's office, told me today that he did not know why the website was down and said the fact that he didn't know about it being down for a week was evidence that Google is not the "puppet master" behind-the-scenes of the net neutrality movement that they are made out to be.

According to Investors Business Daily, a new study by Click Forensics said that 14.2% of all clicks to paid search ads, or one of every seven ad clicks, are fraudulent. Google and Yahoo are disputing the study.

• Click Forensics CEO, Tom Cuthbert said: "Click fraud is getting more prevalent, easier to commit and more difficult to catch and identify."

It seems the dominant search gatekeepers, Google with 47% share and Yahoo with 28% share, have a serious integrity issue at the heart of the search engine advertising business model.

I often visit ItsOurNet.org to see if they have anything new. I also look to see if Microsoft has rejoined ItsOurNet like they said they would after the close of the AT&T merger. Well the AT&T merger closed a month ago and still no word from Microsoft.)

What is new and interesting is that the Itsournet.org official web site has been down since at least last Thursday and maybe longer -- meaning you can't even get to their previously public website -- without a user name and a password. It ominously says "authorization required." 

Now that the Democratic-controlled Congress is back in full swing, and now that a lot of cards have been put on the table, its helpful to take stock of where we are on the net neutrality issue. Below I provide: an overview, a Senate outlook and a House outlook. 

My bottom line analysis is that there is a very low liklihood of net neutrality legislation passing in this Congress, despite the hype.

• That said, I have seen nothing that would suggest that net neutrality won't remain a leading techcom issue in Washington for years to come.  

Overview:

Given that net net neutrality advocates really want a change in the law, they badly blew their golden opportunity last year to get net neutrality principles into law -- by wildly overplaying the moderately strong hand they had last year.

I debated Gigi Sohn of Public Knowledge again today at a Media Institute luncheon and was really surprised at her candor in saying that the net neutrality conditions imposed on AT&T were "extortion" that she was happy to be a part of it.

• Broadcasting and Cable Magazine's online edition picked up the exchange so the reporter must have been surprised by her candor too.

While I have debated Gigi several times and respect her highly as a very capable advocate for her positions, I was troubled that she was so open that the net neutrality conditions imposed on AT&T were "extortion."

There's new evidence today that Yahoo continues to stumble as Google continues to gain market share. Yahoo just announced meager 13% revenue growth for 4Q06, while Google announced at the end of the year that Google's revenue grew 86% during the same period. (That's over SIX times faster for those who care about those things!)

This is powerful additional confirmation that Google is quickly on path to reach 50% market share and beyond, a significant antitrust threshold of being considered "dominant" and warranting "stricter scrutiny" of its business practices for potential anticompetitive behavior.  I explained the broader significance of this "dominant" threshold in my blog yesterday.

An interesting and relevant antitrust milestone is coming for Google -- maybe as soon as this year -- Google is poised to pass the significant 50% market share "dominant" threshold in antitrust.

• In April of 2005, Google had 36.5% share of searches, according to ComScore.
• As of December 2006, Google had 47.3% share of searches, according to ComScore.

This is relevant because when Google exceeds 50% market share, the antitrust "rule of thumb" is that Google will be considered by antitrust authorities to be a "dominant" company.

Bret Swanson in his WSJ editorial over the weekend "The Coming Exaflood" provides a real service to the net neutrality debate -- he forces the discussion to focus more on how we must deal with the coming explosion of demand for capacity on the Internet.

• In a phrase, Swanson is saying to the net neutrality crowd: "It's the capacity stupid!"

Net neutrality is a classic liberal big government idea that is all about trying to carve up the pie of today to be more fair, while assuming that somebody else will always make more pie for them to carve up. 

• As Milton Friedman so eloquently said: "there is no free lunch" no matter how much people want to "assume" it.
• Somebody must build and pay for a faster Internet to handle the explosion of traffic produced by video, and soon HD video.
• Swanson persuasively forces the reader to think through the massive increases in demand that we already know are "in the pipeline" that require more investment to create a higher capacity Internet.

The insanity of the net neutrality position is that its advocates assume future capacity will be there magically. That capacity will be there, only if there is a functioning marketplace that allows those private network operators that carry the traffic that comprises the Internet are able to earn a return on their investment in new Internet capacity. Otherwise, the Government will have to tax and spend to subsidize it. There is no free lunch.

The insanity of the online giants' position with ItsOurNet, is that they believe they should get a free ride and that the consumer should have to shoulder the entire cost of increasing the capacity of the Internet.

Kudos to Dave Farber and Michael Katz on their very persuasive and compelling Op Ed in the Washington Post opposing net neutrality. I strongly endorse their perspective and wisdom.

I feel great kinship with their point of view. There is no problem here. And there is a lot of harm and unintended consequences that can result from preemptively regulating the Internet.

Like David and Mike, I am well aware of the potential problems that market power could have. I have a long and public record of standing up to monopoly behavior that I viewed as out of bounds. But I am also a fact and analysis person. The facts and the analysis show this is a competitive marketplace becoming even more competitive in the future.