Antitrust

George Ou's good post yesterday on "Being Rational on Text Pricing" rightly takes to task the complaint that text messaging should be priced at marginal costs and ignore total costs, upgrade costs, or competition. It also prompts me to join in to address the issue.

Lets get to the quick here. 

The folks arguing for text pricing to be based on marginal costs are trying to politically redefine traditional economics in the datatopian Chris Anderson vision of the "economics of abundance" -- that because the marginal cost of computer processing, storage, and bandwidth are getting increasingly small -- the price should be free!

• I call this political thinking that "information wants to be free" and the "economics of abundance" school of thought -- simply -- uneconomics.
• It ignores the real world, real economics, the reality of private property, market forces of incentives and disincentives, etc.  

Does anyone think that the infrastructure that enables the instantaneous reliable delivery of roughly a billion text messages every day wherever one happens to be -- costs basically nothing to pull off and thus should be free?  

There's been scant analysis of how the Google Book Settlement process has been altered going forward given recent major developments:

• The "hornet swarm" of objections to the Google Book Settlement, and 
• Google's recent preemptive concessions on:
  • Privacy at the the urging of the FTC; and
  • Competition under pressure from competitors and the DOJ. 

To date the discussion of outcomes has been largely binary, will Federal District Court Judge Chin approve or disapprove the proposed Book Settlement?

Why did it take a high-profile FTC letter to Google for Google to finally make public a simple privacy policy for their be-leaguered Book Settlement after privacy has been a major Book Settlement issue for months?

• For that matter, why did it take a high-profile public shaming by Saul Hansel of the New York Times (here & here) for Google to just put a link to its privacy policy on its home page, which is industry standard practice and required by California law?

The increasingly obvious answer is that Privacy International was on target in concluding that Google is actually "hostile to privacy."

However, it is more than that, as this eight-month, fifteen part privacy vs. publicacy series can attest.

With the German Government just the latest angry hornet joining the growing swarm of opposition stinging the Google Book Settlement, how did Google's book digitization initiative go so wrong? 

If one listened to Google, their problem is two-fold:

• First, it is just a bunch of Luddite ingrates who are too small-minded to grasp Google's magnanimity to humankind and world knowledge.  
• Second, without competitors spreading misinformation, there would only be a world chorus of gratitude.

As I have asserted many times before in this blog, Google is its own worst enemy.

• Google reflexively looks everywhere but inward when determining the origin of its external problems. 

So how did such an angry swarm of opposition engulf the Book Settlement making it increasingly unlikely to be approved by the Court?  

"The settlement as it exists now is absolutely silent on user privacy" said Angela Maycock of the American Library Association at a Google Book Settlement panel per the San Francisco Chronicle.

• This should not be surprising because privacy is simply the flip side of the anti-competitive concerns surrounding the Book Settlement.

I posit that privacy protections were not included in the Book Settlement for two big reasons -- the first reason is more privacy related and the second reason is more competition related. 

First, Google is a big adherent of the Web 2.0 movement that believes that transparency is a more important value than privacy.

Analysis of the potential pitfalls of wireless innovation regulation is a necessary complement to the FCC's upcoming Notice of Inquiries into wireless competition/innovation and the DOJ's review of wireless competition, in order to ensure policymakers get a balanced view of the big picture.  

What are the Top 10 Pitfalls of Wireless Innovation Regulation? 

#1 Pitfall: Losing focus on universal broadband access.

"Wireless innovation" appears to be the latest rebranding iteration of "net neutrality" and "open Internet" as the net neutrality movement searches for more mainstream support of their views. 

Google's latest defense of its Book Settlement in Europe has provided an illuminating window into Google's own cultural-self-awareness of Google's dominant market power over books/content.

In August 23 New York Times:

• “We believe that we are helping the industry tremendously by creating a way for authors and publishers to be found,” said Santiago de la Mora, Google’s head of printing partnerships in London.

• “Search is critical. If you are not found, the rest cannot follow."

The strong implication from Google here is that authors were in proverbial "nowheres-ville" before Google "discovered," copied and indexed them -- proving that Google is the real value creator here... not the author of the content/book.

• Google is candidly acknowledging its unique and dominant market power over books because Google is the only entity in the world with the resources, the business model, the low opinion of the value of content on the Internet (it should be "free"), and the legal strategy to illegally copy literally millions of copyrighted books without permission.

What is more valuable the content or the search?

Vint Cerf, Google's Internet Evangelist, urged the FCC at a broadband workshop last week to regulate broadband networks as a utility like the electrical grid.

• I wonder if others spotted the irony in Google's "utility" regulation prescription for broadband.

Google's Mr. Cerf looks at the most competitive broadband market in the world, declares it inherently anti-competitive, and summarily prescribes... monopoly utility regulation for the entire broadband industry.

Meanwhile back at the Google Book Settlement ranch... Google has negotiated a de facto book search monopoly for itself in the Book Registry "utility" of the Google Book Settlement, without any regulation or Government oversight.  

First, antitrust's modern day Pinocchio claimed that competition is just "one click away," now Google is claiming that the notion that scale is important to search competition is "bogus."

• Google's Chief Economist, Hal Varian is pushing a preposterous, self-serving argument in CNET that scale is not important to search competition:
  • "...the scale arguments are pretty bogus in our view because it's not the quantity or quality of the ingredients that make a difference, it's the recipes. We think we're where we are today because we've got better recipes...  I also think we have a better kitchen..."

Why is Google's "bogus" claim bogus?

First, does Google think for a minute that antitrust enforcers' investigations have not assembled substantial evidence/quotes from Google itself about the importance of scale in search?

The core question at the heart of the DOJ's review of the proposed Yahoo-Microsoft search partnership is where else will competition to Google's increasing dominance come from, if not from the proposed Yahoo-Microsoft search partnership? 

The DOJ has deep and current expertise in this market given their investigation of the Google-Yahoo ad partnership last fall and DOJ's current investigation of the Google Book Settlement. The DOJ also appreciates the facts that: