"Google does not reap the benefits of significant network effects because its search algorithms are centered on the analysis of links, and operate essentially the same way whether one person or six billion are using it." -- said Randall Stross in his Digital Domain column today in the New York Times. 

George Ford of the Phoenix Center has penned another incisive analysis about the real world impact of net neutrality and the FCC's Proposed Open Internet regulations.

• "Sabotaging Content Competition: Do Proposed Net Neutrality Regulations Promote Exclusion?" is an important read for anyone seeking a substantitve understanding of the impact of the FCC's proposed rules.
  • George Ford and Michael Stern's core conclusion: "...the proposed net neutrality rules of both the FCC and Congress... can actually promote such exclusionary behavior. That is, the incentive to monopolize is greater under net neutrality."

  The Phoenix Center's profound insight here got me thinking, (which is always my highest compliment) so let me share my takeaways building on their conclusion; takeaways that show why net neutrality is such an intellectually and economically bankrupt concept.

  • First, not only is net neutrality "a solution in search of a problem," but the FCC's proposed "solution" would make the net neutrality "problem" they allege worse than the status quo!

The discussion at the Federalist Society about former U.S. Solicitor General Greg Garre's excellent legal analysis  (that the FCC does not have the legal authority to promulgate Internet traffic rules), surfaced what I believe to be yet another insurmountable barrier for the FCC to overcome -- beyond the litany of legal barriers outlined by Mr. Garre.

• FCC reclassification of broadband as Title II common carriage would practically force the FCC to redefine competition in a way that would be arbitrary and capricious. 

Let me explain. 

Public Knowledge's Gigi Sohn laid out  the counter argument to Mr. Garre's analysis that the FCC could reclassify broadband as Title II by simply revisiting the basis for the FCC's 2002 decision and overturning it as wrong on three counts:

1. Information services and telecommunications services are no longer necessarily intertwined;
2. Facilities based competition has not arrived;
3. Consumers are no longer protected. 

Ms. Sohn added this about what the FCC could do: "They just have to give a reasoned explanation. They don't actually have to show that the new decision was better than the old decision." -- per Washington Internet Daily.

Kudos to Larry Darby of the American Consumer Institute for his outstanding new study on the destructive effect of regulation on innovation. Please read it if you are at all interested in innovation.

The study debunks the views of some that government, regulation and regulators are somehow a font of innovation. 

After reviewing the relevant literature and evidence on the subject, Dr. Darby concluded that:

• innovation is naturally flourishing without government involvement or micromanagement;
• burdening broadband providers with new common carrier burdens would severely discourage innovation; and 
• limiting innovation in one part of the ecosystem would ultimately diminish innovation in the entire Internet ecosystem.

At core, the new notion floated by some that more FCC regulation would encourage innovation is nonsensical and unsupported by any literature or evidence.

The big takeaway here is that new "Mother may I" regulations, which effectively require some market participants to get FCC approval for their innovations, in order to protect or advantage others' innovations, is not innovation policy. It is old-fashioned industrial policy where government picks market winners and losers. This is a policy approach long proven to grossly underperform market-based policies.

Click here to read The Onion's latest satire about  Google's privacy invasion problems. Its hilarious just like the Onion's other satire video on Google's "Opt-out Villiage."  

• Why it is so poignant and funny scary is that Google has all this private information on everyone and is increasingly integrating it for real, just as this recent article from the Register shows. 

If you enjoy these satires, please check out more at the GoogleMonitor.com humor section. Enjoy! 

It appears Google impetuously over-reacted to the big cyber-security breach of Google and a reported ~30 other companies. Google alone publicly blamed China and only Google publicly pledged to stop censoring search results in China in retaliation.    

What is the evidence that Google impetuously over-reacted here?

First, Forbes reported: "Researchers Call Google Hackers 'Amateurs' -- A new report says the attack on the search giants network was far less sophisticated than it has claimed." Specifically:

• "A great play is being made about how sophisticated these attacks were," says Damballa's vice president of research Gunter Ollman. "But tracing back the attacks shows that they were not sophisticated, and that the attackers behind them have a history of running multiple botnets with a variety of tools and techniques," many of which, he says, were far more rudimentary than Google or the cybersecurity industry has portrayed."

People incorrectly assume that because of Google's popularity, brand and reputation for innovation, that Google is  secure and cutting edge on cyber-security -- when in reality they are not.

Will the FTC strictly enforce antitrust laws in its review of Google's AdMob acquisition? Google-Admob is a watershed decision for the FTC given that:

• Google recently blew off the DOJ's serious antitrust objections to the pending Google Book Settlement;
• The EU opened a preliminary investigation of antitrust complaints against Google from companies in the UK, France and Germany; and
• The DOJ had to play backstop to the FTC and block the Google-Yahoo Ad Agreement, less than a year after the FTC incorrectly assumed in their 4-1 approval of the Google-DoubleClick deal that:
  • Yahoo and others would provide sufficient competition to Google; and
  • Google acquiring DoubleClick would not "substantially lessen competition" or tip Google to a monopoly.    

A recent New York Post article: "FTC inclined to approve Google's acquisition of AdMob" states the deal "may just squeak by federal regulators."

Progress and Freedom Foundation President Adam Thierer is one of the very best free market minds on all things Internet. 

Please take the time to review Adam's outstanding five-part case against net neutrality regulation that he pulled together for his debate with FreePress' Ben Scott at Catholic University's recent annual FCC confab in DC.

I always learn something from talking to Adam, or from reading his work, which is my highest compliment.

• You will learn something too from Adam's thoughtful and cogent case.

Google announced it was under preliminary investigation by EU Antitrust authorities due to several antitrust complaints filed against it, and it began to frame its antitrust defense against the charges.

• How well do Google's top ten antitrust defenses hold up to scrutiny?  

  1.   "This kind of scrutiny goes with the territory when you are a large company." (Julia Holtz, Google's Senior Competition Counsel, Google Policy Blog post) 

  • No. Over 99% of the Global Fortune 1000 are "large," but are not under antitrust investigation for monopolization.
  • This kind of antitrust scrutiny occurs to a very select few companies -- only companies that serially act anticompetitively. 

  2.   "We've always worked hard to ensure that our success is earned the right way -- through technological innovation and great products, rather than by locking in our users or advertisers, or creating artificial barriers to entry." (Julia Holtz post)

Don't miss Digital Society's Bret Swanson's outstanding op-ed in the Huffington Post that spotlights the huge disconnect between the White House's top priority of creating jobs, and the FCC's Open Internet regulation plans that are obviously big net job killers. 

Common sense dictates that heavily regulating a healthy and economic broadband sector with unnecessary and intrusive restrictions and red tape will destroy profits, investment and tens of thousands of good-paying jobs.