You are here

Antitrust

Top Ten Pitfalls of Wireless Innovation Regulation

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. 

Is Google's Book Search the Chicken or the Egg?

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?

Do what they say, not what they do...

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.  

Google: Antitrust's Pinocchio?

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?

Where else will a viable competitive alternative to Google come from, if not from a Yahoo-Microsoft deal?

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:

Where does choice come from?

Choice, having the benefit of a selection of different alternatives to choose from, springs from the risk and opportunity of market competition  -- not from Government economic regulation.

Google's gobbling Yahoo's search revenue share -- per Google/Yahoo earnings reports

Yahoo lost 11% of its search revenue share to Google during the first six months of 2009 versus the last six months of 2008, per Yahoo's and Google's 2Q09 earnings reports. 

  • This time period comparison was selected because it represents most of the time period since DOJ blocked the Google-Yahoo ad partnership 11-05-08, where the DOJ concluded that Google and Yahoo had combined market shares of 90% and 95% in the relevant antitrust markets of search advertising and search advertising syndication. 

It is relevant, interesting, and instructive to analyze what has happened since the DOJ's 11-05-09 action, and since the economic downturn, given that the DOJ concluded Google and Yahoo commanded 90% and 95% market shares at that time.  

This relative revenue share transfer analysis is straight-forward.

DOJ will find vibrant competition in reviewing telecom industry

The DOJ has opened an initial review of the telecom industry, per WSJ reports, as part of the Obama Administration's and the Varney Antitrust Division's "aggressive stance on antitrust enforcement."

Antitrust enforcement is fact-driven, since it ultimately must be proven in court. The competitive facts in the telecom industry will speak for themselves; the industry is clearly and overtly competitive and trending more competitive. 

This review will not be difficult or take long since the DOJ has vast and deep experience with the U.S. telecom industry -- having overseen the AT&T Consent Decree 1984-1996, been intimately involved with the drafting and implementation of the 1996 Telecom Act including the detailed development of local competition and Bell entry into long distrance. The DOJ also has reviewed and approved a number of telecom mergers over the last several years, most recently the approval of Verizon-Alltel and Centurytel and Embarq.

  • It is important to note that the scrutiny standard of approving a merger is a dramatically tougher standard than that of a Sherman antitrust action.
  • Generally as a rule of thumb, the DOJ prevents proposed mergers that would create combined market share of over 30%, while the market share standard to prove a Sherman antitrust case generally requires at least a 50% share and more likely 70-90% share.    

Moreover, the DOJ will examine the telecom marketplace to see if it exhibits the core characteristics of a competitive market:

DOJ is formally investigating another Google deal

An unusual and notable pattern appears to be developing with Google and DOJ antitrust enforcers. 

  • Twice in less than a year, the DOJ has formally investigated Google for trying to anti-competitively extend its monopoly market power via a market agreement.
    • It is unusual for the DOJ to seriously investigate a single formal market agreement/settlement for anti-competitive behavior because normally antitrust lawyers can convince a company's leadership to stay away from the anti-competitive line that possibly could prompt a DOJ investigation and/or suit.
    • What is exceptionally unusual is for a company to propose two non-merger-related market agreements in less than a years time that prompt serious antitrust investigations from the DOJ.
  • Today, the DOJ Antitrust Division wrote a letter to the Federal Judge overseeing the Google Book Settlement deal "to inform the court that it has opened an antitrust investigation into the proposed agreement between Google and representatives of publishers and authors... we have determined that issues raised by the proposed settlement warrant further inquiry."

This is the second formal agreement in less than a year that Google has negotiated and drafted that has "crossed the line" prompting DOJ antitrust officials to have to formally and publicly investigate. 

What is "one click away?"

"One click away from competition" is Google's ever-present, antitrust defense slogan that Google does not have any market power to anti-competitively exercise. 

In today's New York Times, Google's CEO Eric Schmidt ratcheted up the centrality of that slogan to Google's antitrust defense by claiming it applied to Google's user "customers." CEO Schmidt said:

  • We are one click away from losing you as a customer, so it is very difficult for us to lock you in as a customer in a way that traditional companies have.”

The problem with Google's "one click away" slogan is that it is untrue and deceptive; it simply does not withstand close scrutiny of the facts or logic.

I. It is untrue -- a false claim.

A. The claim fails the dictionary test.

The dictionary definition of a "customer" is "one that buys goods or services."

Pages

Q&A One Pager Debunking Net Neutrality Myths