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Britain Rejects Net Neutrality as Investment Barrier -- for Next Generation Broadband Networks

The British Government flatly rejected imposing net neutrality in Britain because it is a barrier to investment and innovation in next generation networks, according to the recently released "Digital Britain" report, which lays out Britain"s digital strategy for the future.

  • The relevant net neutrality text is brief, clear and quoted in its entirety below: 


From Section 2.1 Next Generation Networks:


Between now and the full Digital Britain Report, the Government will, while recognising existing investments in infrastructure, work with the main operators and others to remove barriers to the development of a wider wholesale market in access to ducts and other primary infrastructure.

The "Cybrastructure" Stimulus

Let me offer a new organizing term -- "cybrastructure" -- to describe the myriad of digital investments being discussed in the pending economic stimulus package.

Its odd to me that with technological convergence, the Internet which interconnects all things digital, the evolution towards cloud computing and smart power grids, the digitizing of health records, and the promotion of universal broadband deployment and adoption, etc. -- that there is not a holistic term describing all the different but inter-related infrastructure investment involved that is being enhanced. 

  • What's missing from the discussion of all the separate infrastructure component parts is that the sum is greater than the parts.
  • That's because different types of digital infrastructure have beneficial network effects between and among them -- and those collective network effects create something new that deserves a new name -- "the new and improved national cybrastructure."

The term "cybrastructure" captures all the different kinds of digital-related infrastructure being discussed in the multi-hundred billion dollar economic stimulus package designed to jumpstart economic growth, create jobs and promote investment quickly and for the long term. 

Hopefully the stimulus will produce a more cohesive, powerful and effective national cybrastructure -- which enables growth and a host of new efficiencies, advances, innovations and benefits.


An Unrepentant Google Basically Taunts DOJ/State AGs to File an Antitrust Suit in the Future

Google remains its own worst enemy.


After dodging a certain DOJ antitrust suit from the most lenient antitrust enforcer in the modern era by withdrawing from the Yahoo ad agreement, Google’s CEO essentially spit at DOJ/State AG prosecutors by publicly and gratuitously saying: Google would have beaten the DOJ in court, nothing has changed, and that they were happy they reached out to Yahoo.


Google’s unrepentant stance was captured well in the New York Times article by Miguel Helft: Google and Yahoo Say Deal Would Have Survived a Suit.”

What Yahoo Earnings Say about Google-Yahoo

Yahoo's earnings provide another excellent window into why the DOJ has serious antitrust concerns with the proposed ad partnership between Google and Yahoo.

  • Yahoo's discussion of its 4Q08 earnings provides the DOJ with substantial fresh evidence that Yahoo continues to lose revenue and profit share to Google.
  • Moreover, Yahoo's earnings report showed Yahoo was clearly caught off guard that the Google-Yahoo ad agreement did not get cleared by DOJ, as evidenced by the big whipsaw in Yahoo's headcount plans.

I.  Evidence Yahoo is losing revenue/profit share to Google:

While Yahoo tried to put the best face on Yahoo's search business growth, in the comparisons that matter to the DOJ, Yahoo slid much further behind Google.

From 3Q07 to 3Q08, Yahoo grew overall revenues by $.018b or 1%, and search revenues $.063b or 17%, while Google grew search revenues $1.310b or 31%.

  • In other words, in the last year, Google grew 20 times more revenue than Yahoo in absolute terms.

In 3Q08, Yahoo's operating income was $.070b, a decrease of 53% from 3Q07, while Google's operating income was $1.743b, an increase of 32% from 3Q07.

What Yahoo job cuts say about Google-Yahoo deal

Yahoo's reported job cuts of over 1,000 of their 14,300 employees is a helpful window into the real prospects for the pending Google-Yahoo ad partnership that is under serious investigation by the DOJ.  

First, the job cuts signal Yahoo is pessimistic about getting the proposed ad agreement with Google approved by the DOJ.

  • If Yahoo was confident the deal was near approval, Yahoo would be more patient in awaiting the beginning of an ~$800m annual revenue infusion to begin in 4Q08, not obviously hunkering down to go it alone.
    • To put this ~$800m in perspective, 1,000 job cuts would save Yahoo about $100m annually, or the equivalent of a couple of months of the Google ad deal.
  • In other words, if the ad deal was likely to get approved, Yahoo would be doing what it told the DOJ it would do -- investing not disinvesting.

Second, the job cuts underscore how dependent Yahoo would be on the Google ad partnership. 

  • Google's proposed ad bailout of Yahoo was masking what Yahoo knew all along, that Yahoo is clearly losing the competition with Google.
    • So "if you can't beat em, join em." 
    • Being on the good side of the "mono-pole" is better than being on the bad side of the "mono-pole." 

Finally, the job cuts are evidence of "The Google Effect" more than "The Walmart Effect."

Google CEO suggests journalism become not for profit!

Google's CEO Eric Schmidt had the temerity to suggest that journalism consider becoming a not-for-profit enterprise -- at a recent Google program for magazine executives.

  • See Ad Age's article: "Google's Schmidt says Internet 'cesspool' needs brands -- Says the solution is quality content; tells publishers and editors to 'increase your relevance'
    • From the article: "...when asked where the industry ends up if there aren't outlets willing to pay journalists to create quality content, Mr. Schmidt was a bit Palin-esque, saying that he didn't have an answer but one thing to look at is whether journalism should be a for-profit enterprise."

Google's CEO must think journalism-business people are stupid.

Good WSJ european Op Ed -- "Stuck in Neutral"

Don't miss the excellent Op Ed in the Wall Street Journal European Edition strongly criticizing net neutrality -- "Stuck in Neutral."

  • It's helpful to hear the voice of reason from thoughtful europeans who oppose the typical EU reflex for Government intervention.     

What 3Q earnings tell us about Google-Yahoo Antitrust Review; GOOG-YHOO earn ~100% of profits

With the 3Q08 earnings releases by Google, Yahoo and Microsoft in the last few days, DOJ antitrust investigators of the Google-Yahoo partnership now get their first fresh look at the most recent revenue and profit market shares for this market.

Takeaways from Google's earnings call

Growth: 39% YoY revenue growth on a ~$20b base, in a slowing global economy is impressive. Hats off to Google. Lots of network effects at work as Google sites revenue grew 42% YoY.

Tone: I did note the slightest whif of humility this quarter that external factors had some effect on Google's business, in stark contrast to last quarter's more bold statement that Google saw no effect of the external market or economy on Google's business.  

DoubleClick: As I suspected, CEO Schmidt said in an answer to a question, that Doubleclick was going well but that he would not break out any information -- in Google's well-established sorry-Charlie-style... no insight or guidance for you... The only thing interesting that was said about DoubleClick was indirect, in that Sergey Brin said that the big problem in display is that it is highly-fragmented." Couple that with CEO Schmidt indicating that Google was only months away fom offering a one-stop advertising solution, one can surmise that Doubleclick will indeed prove to be a material growth kicker to help Google fight off some of the natural drag of the law of large numbers.  

Mention most worth follow-up: In Q&A my ears perked up when the CFO explained part of a cost jump was "legal costs" and CEO Schmidt chimed in that these costs were "bursty." I am amazed that a $20b company that gives minimal detail would mention that legal costs were a factor. Do you know how unusually big a legal number has to be to pop up in an earnings call? Did they settle some case that we don't know about? or is the Viacom-Youtube discovery work a lot more costly than Google has let on? Something is amiss and worthy of followup.   

Google's Cerf digs a deeper 'nationalize the Internet' hole...

Kudos to Jim Harper of Tech Liberation Front for eliciting a comment from Google's Vint Cerf on Mr. Cerf's public ruminations in favor of 'nationalizing the Internet'  which was reported first on TechCrunch and which prompted me to post why nationalizing the Internet was such a horrible idea. 

While claiming his comment:  "Should the Internet be owned and maintained by the government, just like the highways?" -- was taken out of context -- Google's Mr. Cerf essentially repeats in his comment to Jim Harper's post -- the thrust of the thinking that has created the bruhaha:

  • "What I was getting at is that the Internet is in some ways more like the road system..."
  • "What I was speculating about in the Personal Democracy Forum was whether incentives could be provided that would render the Internet more like the public road system which is open to everyone." 

I think it is pretty clear that while Mr. Cerf may not have liked the "nationalized" term TechCrunch's Erick Schonfeld used in his headline to describe and denounce Mr. Cerf's thinking -- it was indeed accurate -- given how Mr. Cerf reiterated in his comment his desire for the Internet to be more like the "public road system."