You are here

Google Fiber’s Corporate-Welfare Vigorish for Running the Game

Google Fiber’s motto is “Think big with a gig,” as in gigabit fiber broadband speeds.

However, if one is open to considering non-Google data, there is substantial evidence that Google Fiber’s de facto motto may be more like “Think vig for the pig,” as in the non-transparent, corporate-welfare vigorish that Google Fiber takes to feed Google Inc.’s porcineappetite for 1) Local government subsidies and special government treatment; 2) immunity from state and local law enforcement; and 3) FCC price subsidies and use of consumers’ private-information without consent. 

Wikipedia explains:Vigorish, or simply the vig, also known as juice, the cut or the take, is the amount charged by a bookmaker, or bookie, for taking a bet from a gambler. In the United States, it also means the interest on a shark's loan. … Bookmakers use this practice to make money on their wagers regardless of the outcome.”

1.  Local Government Subsidies & Special Government Treatment

Please consider the evidence that Google Inc. -- with its world-leading demand for bandwidth and covetousness for “the world’s [private] information” -- guarantees itself a “vig” or vigorish by masterfully manipulating public policy and perception to transfer most all of Google’s business risks and costs to taxpayers so Google wins and taxpayers may lose no matter the outcome.

A recent GovTech article explains how Google effectively avoids America’s biggest cities -- like Los Angeles, New York, San Francisco, San Diego, Las Vegas, Seattle, Houston, Jacksonville, Detroit, Boston and Philadelphia – because those cities won’t or legally can’t give Google the special treatment and implicit subsidies to meet Google Fiber’s exacting special demands of cities.

The nine cities which have attracted Google Fiber to date have acceded to Google’s demands for a public-private-partnership model where Google dictates most all of the terms of “the partnership,” and most importantly Google Fiber’s “red” demands.

Google’s “red demands” are unlike past city requirements or expectations: Google can discriminate at will where it builds, “redlining” a community into neighborhoods that represent a critical mass of committed subscribers in advance of any build and those that don’t; and Google must be honored with “red carpet” welcoming treatment, where the city must meet Google Fiber’s City Checklist of exacting unilateral demands before Google will commit to selectively build to provide limited geographic broadband coverage to their cities.

Apparently many cities do not appreciate how Google has such market and politicalpower to dictate to cities how Google will operate in their jurisdictions, something which is normally the purview of a city’s elected officials.

Google’s legendary PR machine has brilliantly positioned itself that Google does not need cities, cities need Google. So Google will not negotiate, and cities must concede to Google’s de facto sponsorship and endorsement demands. It is How Google Works.

Importantly, Google doesn’t need to put Fiber in their cities because 90% of Google’s revenues come from advertising, which means the citizens of Google Fiber cities, are not Google’s customers they are the product that Google sells to advertisers.

Google’s core business interests are dramatically different from their broadband competitors. Google is economically aligned with advertiser interests and work for advertisers; whereas broadband competitors are economically aligned with subscriber interests, and work for subscribers.

Google’s brilliant play-hard-to-get PR/lobbying, means cities implicitly start the process where they see themselves as a “partner” and de facto “sponsor” and “endorser” of Google in their communities in hopes that their city will benefit from Google’s cool/innovative branding and popularity by close association.

However, in doing so, these cities unwittingly, and uncritically, concede and imagine that Google Fiber’s interests are aligned with these cities’ taxpayer/consumer interests – when they are not.

2.  Immunity from State & Local Law Enforcement

Are these Google Fiber cities concerned with protecting the privacy and safety needs of their citizens? It appears not, at least in the special case of Google.  

City governments should be appalled with Google’s official stance in Federal Court that cities and states have no sovereign consumer protection, law enforcement authority over Google.

Local governments should take note of Google’s challenge to their ability to enforce their local laws in Google’s Federal lawsuit to quash a Mississippi Attorney General’s subpoena investigating Google’s alleged willful, aiding and abetting of many criminal activities via advertising, given that it has found initial evidence to indicate that the criminal behavior that Google admitted to in a 2011 $500m DOJ Non-Prosecution Agreement may be continuing to this day.  

This big Google legal war on state and city sovereignty to protect their citizenry from serious harms -- should be a wake-up call to city governments.

Any Google Fiber city, or wanna-be Google Fiber city, should ask Google why they are suing in Federal court to deny their city and state’s law enforcement their sovereign authority to protect their citizenry, if they believe there is probable cause to investigate Google’s apparent aiding and abetting of criminal activities endangering American consumers?   

And if those cities are in one of the 40 states where their own state Attorney General signed an amicus brief in support of state and city law enforcement sovereignty to investigate and protect their citizenry against reckless endangerment of their citizens – they should ask their State Attorney General what they think of Google’s actions and practices as it relates to consumer protection.  

Moreover, have Google-Fiber-involved-cities done any due diligence about whether Google’s model is aligned with the consumer protection interests of their citizenries?   

Cities’ due diligence should include relevant research like the following. Please see:

  • Digital Citizens Alliance research: hereHow Google Continues to allow Bad Actors to Continue to Flourish on YouTube,” hereHow Google and YouTube Stand to Benefit when Bad Actors Exploit the Internet,” and the most recent research hereSelling Slaving: Outing the Principal Enablers that profit from Pushing Malware and Put Your Privacy at Risk.
  • Consumer Watchdog research: here Google+: A Playground for Online Predators?
  • Precursor research: hereThe Public Evidence Google has violated the DOJ-Google criminal Non-Prosecution Agreement,” hereBullying is “How Google Works” – Ask Law Enforcement,” and hereIntimidation is “How Google Works” -- Ask State AGs or EU.”

3.  FCC Price Subsidies & Use of Consumers’ Private-Information without Express Consent

Now consider yet another big area where Google is proactively working against the best interests of the citizenries in Google Fiber cities – how Google has used its outsized political influence in Washington to ensure that FCC broadband rules favor Google’s interests more than consumer interests, in two big ways: price regulation that forces consumers to subsidize Google and other edge providers; and strict privacy rules that newly apply to Google’s Fiber’s cable and telco competitors’ core business, but not to Google’s core business – which may have the single worst privacyrecord in the economy.

In the FCC lobbying over the FCC’s Open Internet Order, Google was a primary advocate for an FCC ban on paid prioritization, which in reality is an FCC permanent regulated price of zero for all Internet downstream traffic. Since ~25% of the Internet’s daily traffic is Google’s, and YouTube is the dominant online video distribution platform, consequently, Google is the single biggest economic beneficiary of this FCC price regulation, which forces consumers to pay for Google’s and other edge providers’ outsized distribution costs.

In a last minute change to the FCC Open Internet order to benefit Google earlier this year, the FCC changed its entire Title II theory and implementation to suit Google so that Title II utility price regulation would only apply to broadband provider traffic, but not to even larger edge provider traffic from Google, Netflix, Facebook, Amazon, and Apple.

The economic effect of this regulation of only one half of the same coin is to ensure that the consumer is the loser, because consumers alone must subsidize Google et al’s business; and because Title II consumer privacy protections under section 222 apply to broadband, but not the edge providers like Google who currently are the entities which most abuse consumer privacy the most by commercializing consumer private information without a consumer’s express consent.   

In short, cities should not look at Google Fiber through rose colored glasses. The substantial evidence above indicates that a more realistic view -- through the eyes of their citizenry -- is in order.

Google Fiber’s motto may be “Think big with a gig,” but in practice, substantial evidence indicates it is more like “Think vig for the pig,” as in non-transparent, corporate-welfare vigorish that Google Fiber takes to feed Google Inc.’s piggishappetite for 1) government subsidies and special government treatment; 2) immunity from state and local law enforcement; and 3) FCC price subsidies and unfettered use of consumers’ private-information without express consent. 

Forewarned is forearmed.


Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc. Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.