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Responding to criticisms of my $7 billion estimate that Google fleeced taxpayers.

Martin Geddes of Circle ID challenged my estimation methodology in reaching that Google fleeced the American taxpayer for $7 billion.  

With all due respect to Mr. Geddes, first his analogy of taking "a tasty apple, a yummy banana and a mouldy pear, is simply not analogous here. One doesn't pay $4.7b for a "mouldy pear." The regulations did not make the spectrum itself bad to eat, but simply restricted the use of the spectrum or in Mr. Geddes example how someone would be allowed to eat a good pear. People will pay less for a fruit if they are restricted on when and how they can eat it. 

Second, Mr. Geddes suggests I am confusing the American taxpayer with the American public. I most certainly am not. I am recognizing that there is a very specific law, the 1993 Budget Act, which effectively defines that the American public is the American taxpayer because the purpose of these spectrum auctions are to reduce budget deficits. One may not agree with how the law defines the American public in this instance, but that opinion doesn't change that it is the operative law here.  

My estimate in my blog was trasparent and simple so everyone could see how I got my figure.

  • The important point here is that Google fleeced the American taxpayer of several billion dollars, was it $7b? $5?b $9b? $3b? -- it depends on the estimating method.
  • My estimating method was straightforward, transparent, logical, simple and easy to understand. 
  • I stand by it until someone else comes up with a more defensible estimate.    

New spending surprise for Google's 1Q08 earnings?

My eyebrows raised when I read the FT's article: "Google loses talent that turned chos into capital."

What attracted my attention is that Google is reacting to the ~37% drop in Google's stock price by spending shareholders money on giving restricted stock to employees who are no longer satisfied with stock options.

I wonder what the price tag will be for this, it could be significant....

New York Times op ed on net neutrality uses the wrong analogies

Successful Internet musician, Damian Kulash wrote for the New York Times, the standard pro-net neutrality op ed -- Beware the New Thing.

  • It looks like its was ghost-drafted by the FreePress/Moveon.org media machine, because it lip-synched SaveTheInternet's standard chorus -- that because the monopoly phone system was regulated as a common carrier... all internet service providers should be regulated like common carriers!

There are two big flaws in that logic.

Google unabashed about gaming the FCC auction process to fleece the taxpayer of ~$7billion

Many have broadly swallowed Google's "spin" that Google really "won" by losing the 700Mhz auction -- without digesting the serious implications of Google's public admission.   

  • So needy to convince everyone that Googlers, yet again, proved themselves to be the smartest people alive, Google hasn't realized that they have unabashedly admitted to de facto gaming and manipulating an official Government auction statutorily-created to fully reward taxpayers for commercial use of public airwaves. 
  • Miguel Helft of The New York Times has the best coverage of Google's actions in the auction in his article: "An Auction That Google Was Content to Lose." 
    • Our primary goal was to trigger the openness conditions,” said Richard Whitt, Google’s Washington telecommunications and media counsel."
    • The article goes on to explain its nonsensical bidding strategy of bidding against itself: "For much of the first week, Google gradually topped its own bids. With no competitors emerging, anxiety grew."  

So what's wrong with what Google did?  

First and foremost, Google's flagrant manipulation of the auction rules and process fleeced the American taxpayer out of at least $7 billion, by my estimate.

Why isn't Google warning users about their heightened risk of identity theft and fraud?

Surprisingly, Google continues to keep its users in the dark on the new reported cyber-security threat where cyber-crooks have infiltrated Google's searches putting them at heightened risk of identity theft and fraud.  

The San Franciso Chronicle in its article "Hackers infiltrate Google's searches" followed up on the original USA Today article "Google searchers could end up with a new kind of bug."  I blogged on the USA Today story and explained why this problem is a big deal.  

  • Per the Chronicle article, "Google is working on a filter that will find and automatically block such malicious Web addresses, a spokesman said Tuesday. In the meantime, it has been contacting affected organizations to advise them on how to fix their sites' vulnerabilities."
  • WHY ISN'T GOOGLE WARNING ITS USERS!  Google users are the ones that are at immediate risk of losing their identity and private information to crooks forever -- not the websites.  

Apparently, from what I have been able to gather from my sources -- Google is under the illusion that because they don't control the websites that are infected -- they don't have an obligation to warn their users.

Let's review the facts of why Google may have: a budding user trust problem, a potential PR disaster on its hands, and a potential legal contingent liability/class action lawsuit vunerability for shareholders to worry about.

Of course the FCC will deny the Skype-Carterfone petition for open access regulation of wireless

It was very welcome, but not surprising news, that FCC Chairman Martin and a majority of the FCC plan to deny eBay-Skype's petition to apply 1960's "Carterfone" monopoly regulations on today's wireless competitors.

This was not a close call. Carterfone regulations were appropriate forty years ago with a monopoly and no competition. However, dusting off ancient regulations for a bygone monopoly era have no business or relevance today. 

The facts are that Americans enjoy more wireless competition than most any country in the world, enjoy the lowest or near lowest wireless prices in the world, and use about four times more wireless minutes than our european counterparts, because of the dramatically lower prices -- all per the American Consumer Institute

  • The market is serving consumers excellently, and vastly better than regulators could ever hope to.

The Skype petition is an excellent evidence that the net neutrality movement does not believe in competition policy or a free market Internet, but believe in a government managed Internet.

  • The FCC majority rightfully understands that government control and regulation of the Internet would be an unmitigated disaster for all concerned.  

    

Google is not warning its users of its role in one of largest cyber-security breaches ever on the Net

USA Today broke a much under-appreciated and potentially blockbuster Internet security breach story: "Google searchers could end up with a new type of bug." Kudos to Byron Acohido and Jon Swartz, who reported it in USA Today, and also blogged on it at ZeroDayThreat.com, a site for their book "Zero Day Threat" which defines a Zero day Threat as "a threat so new that no viable protections against it exists." 

  • In a nutshell, the article and blog post explain how cybercrook hackers have figured out how to use and leverage Google's search engine results "to spread spam, and carry out scams. Typically it also lets the attacker embed a keystroke logger, which collects and transmits your passwords and any other sensitive data you type online."
  • This new cyber scam ring is expected to spread rapidly, increasing from a "few dozen major websites" today, to  "hundreds of high-profile websites" in the next few weeks.
  • "...in March alone... security researchers found several hundred thousand corrupted Web pages returned in common Google search queries."

Why this is a big deal:

More bandwidth no cure for network management -- Japan experience shows

Despite Japan having some of the fastest and cheapest broadband in the world, they still have to worry about network congestion and need to manage their networks and shape traffic, according to Adam Peake, a fellow at the International University of Japan who spoke yesterday at the Freedom to Connect Conference.

The takeaway here is that many in the net neutrality movement maintain that there is no need to manage the network if providers would just add more capacity.

  • The Japan experience is powerful evidence of the fallacy of that argument.
  • Experience shows that usage can often fill whatever capacity is made available.

Peake also explained that there is a pernicious p-2-p program called Winny, which is a major culprit in the network congestion and which is near universally reviled because it is one of those pernicious p-2-p programs that give all p-2-p a bad name because the protocol routinely makes the private content on users' hard drives available for identity theives and fraudsters.

Donna Edwards admits net neutrality not key to her beating Congressman Al Wynn (MD)

I am attending David Isenberg's Freedom to Connect Conference today as a very very small minority of broadband industry folks.

In listening to a panel on politics and the web, my ears perked up when Donna Edwards, who defeated Rep. Al Wynn (MD) in a democratic primary, admitted that only one citizen of the thousands she met going door to door during the campaign -- actually asked her about net neutrality.  Very interesting.

All the bragging by Matt Stoller of Open Left and other net roots suggested that Edwards win was a win for net neutrality at the net roots.

The reality is now shared from the candidate that net neutrality was not at all on the minds of voters in Maryland.

  • Once again, the net roots have overstated their power and impact to look more powerful than they really are.  

Why isn't Google more "open" with investors?

I must admit I have been amused watching the market's angst over trying to figure out if Google's growth is slowing down given that Comscore has reported that paid clicks have fallen 3% from January to February of this year.

First, I am amused because Comscore also showed that Google gained market share during that same period from 59.2% from 58.5%. 

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Q&A One Pager Debunking Net Neutrality Myths