Innovation

Expect privacy concerns to be the eventual catalyst that ultimately bursts the Internet investment Bubble 2.0. It is rare when there is a profound disconnect and suspension of reality between industry behavior/investment expectations and customer wants, needs and expectations, but that is precisely what is at work in Bubble 2.0.

• Almost by definition, investment bubbles are unsustainable; what goes up must come down, it is only a matter of how and when -- not if.
• Simply what fuels Bubble 2.0  is the patently false core assumption that the current unfettered, widespread, and largely clandestine data mining of individuals private information in order to target specific individuals with personalized online advertising:
  • Is aligned with real user interests;
  • Is a forthright business practice consumers are aware of and have meaningfully consented to;
  • Will not be legally constrained in the future; and
  • Will become the accepted norm -- meaning that the populace and governments will adapt to the wishes and desires of the online-ad- industry and not the other way around.
• In a word, is online tracking, profiling and data mining a consumer-driven model? -- or a consumer-dragged model?

This is deja vu for me. I've seen this movie before when I had a front row seat as the original dotcom Bubble 1.0 wiped away $4 trillion in market valuation in a few weeks.

See a preview below of Google's likely official public apology for collecting kids' partial Social Security #s and other private information -- without the permission of their parents.

Per Google's Official Blog:

"We are deeply sorry, very very sorry, and even oh-so-sorry for collecting partial social security numbers, date and place of birth on kindergartners and grade schoolers participating in the Doodle-4-Google contest.

The DOJ should call Google's bluff that it would fight the DOJ in court if the DOJ tries to block Google-ITA,  because Google will fold precisely because Google has so much to lose from going to war with the U.S. Justice Department over a $700m deal.

• If DOJ decides to sue to block Google's acquisition of ITA Software, expect Google to walk away from the deal to maintain the status quo and to choose to not make their antitrust predicament massively worse by their own behavior.

While Google blusters they have a strong case in court on Google-ITA, the last thing Google should want is for all their political and PR antitrust defenses to be subject to vivisection, sandblasting, and ridicule in public court for everyone to see.

Mobile content producers do not have a truly competitive choice between Google's 10% fee One Pass service and Apple's 30% fee subscription service, as much as they have a value system choice between Google's Internet commons model and Apple's property-rights-driven market.

• Google's One Pass offering looks eerily like its Google TV offering, where major video content owners faced the platform choice between dumb content and Content is King."
  • Given that choice, content-is-king-oriented owners broadly rejected Google's property-hostile, dumb-content system/model.
• As mobile content providers and carriers threatened with "dumb content" and bandwidth/spectrum commodification from Google's "free" commons model assess their real long term strategic competitive and value-creation options, they will increasingly look toward, and forward to, the nascent Microsoft-Nokia alliance offering and RIM's offering for content-is-king allies and true competitive choices.

As much as Google tries to fool Little Red Riding Hood content owners that their Grandma always had such big eyes and big teeth, most mobile content providers will spot the Google commons wolf in disguise.

Google search executive Amit Singhal exposed two fatal flaws in Google's antitrust defense in an excellent and revealing interview with James Temple of the San Francisco Chronicle.

The core of Google's antitrust defense (overall, in Google-ITA, and in the Google Book Settlement) are two foundational claims:

• Everything Google does is for users and is pro-user -- so tautologically Google cannot be doing anything wrong; and
• Everything Google does is innovative and is pro-innovation -- so tautologically Google cannot be doing anything wrong.

I. Does Google only work for user interests?

Beneath Google's saccharine claim that they only have users interests at heart, is a deep cynicism that everyone is stupid, especially antitrust authorities.

Does Google think antitrust authorities are so stupid that:

Do the actions of the FCC match the FCC's words of support for the President's commitment to the "least burdensome tools to achieve regulatory ends?"

• Does the FCC truly agree with the President's State of the Union that: "We can't win the future with a government of the past?"

• There is much troubling evidence that the FCC mindset is firmly wedded to the regulatory past and not committed to competitively "winning the future."

There are three disturbing trends at the FCC: preservationism, pessimism and silo-ism -- that all strongly indicate that the FCC's trajectory is more geared toward losing the future than winning the future.

I. FCC Preservationism (Shackling the future with the mindset, approaches and legacy networks/regulations of the past.)

Most of the last year the FCC has been obsessed with FCC historical preservation, i.e. strongly considering restoring the FCC to its past glory days with new Title II common carrier regulation of the Internet, but then settling on a 1934 era interpretation of the FCC's Title I authority at its most boundless.

Skyhook Wireless' anticompetitive complaints are to Google's antitrust problems what Netscape's complaints were to DOJ's anti-monopolization case against Microsoft -- i.e. the most blatant, understandable, and strategically-important example of abusing monopoly power to monopolize a linchpin technology in order to extend the monopoly into other strategic markets.

• Simply, Skyhook Wireless is the poster child victim of Google monopoly abuse.

I.  Why is Skyhook-Google analogous to  Netscape-Microsoft ?

Of all the many claims of anti-competitive behavior against Google that I have reviewed over the last four years, I believe the Skyhook complaints are the charges that Google should be most worried about and that the DOJ/EU should be most interested in.

The FCC's Open Internet order should be ripe for review and "fixing" given President Obama's pledge in his SOTU speech last night:

• "To reduce barriers to growth and investment, I've ordered a review of government regulations. When we find rules that put an unnecessary burden on business, we will fix them."

Clearly the FCC's preemptive bans, restrictions and economic/price regulation of competitive broadband providers based on scant and weak evidence of any real problem to solve, obviously place "an unnecessary burden on business" and the Administration should "fix them."

As I explained in my previous detailed post: "Why FCC's Net Regs Need Administration/Congressional Regulatory Review," the FCC's Open Internet order violates the President's pledge for regulations to:

Larry Page is very different from Eric Schmidt, consequently he will be a completely different Google CEO.

• Mr. Page is the internal hardliner and the main driving force behind Google, providing the uber-ambition, the "open" philosophy/ideology zeal, the passion-for-innovation, and the impatient, aggressive take-no-prisoners approach to most everything Google does.
• Mr. Page has always been the penultimate power, final decision-maker and driving force inside Google behind the scenes.
• Mr. Schmidt has been the co-founders' public face and very able implementer and businessman.

The biggest difference people will notice will be external relations.

First, Schmidt and Page are polar opposites when it comes to external relations.

To promote "America's free market," President Obama today ordered a government-wide review of regulations that "make our economy less competitive," in order to take us "toward a 21st century regulatory system."

Here is the case for why the FCC's December Open Internet order deserves to be atop of the Administration's regulations to review for abolition.

• (This regulatory review analysis is also highly relevant and applicable to Congress' review of the FCC order under the Congressional Review Act.)

First, the FCC's new Internet regulations violate the President's goal of a "21st century regulatory system" by applying "outdated" 19th century common carrier regulatory thinking and approaches to the previously un-regulated, and flourishing 21st century Internet. (Para 68)

Second, the FCC rules violate the President's goal of avoiding "excessive, inconsistent, and redundant regulation."