FTC

Cesar Conda wrote a great editorial highlighting the "Broadband Triple Threat" National Review Online.

• Its an informative read and dead on.

Please don't miss Holman Jenkin's great Wall Street Journal editorial on Google: "Sort of Evil."

I particularly like his new term for net neutrality/open access regulation: "business model chauvinism." Dead on.

• Google is lobbying for laws and regulations which will advantage their business model and further their dominance of Internet advertising, and also to "block, degrade and impair" any other business model from competing with Google.
• Simply, Google has a very sophisticated strategy to foreclose potential competition to Google.

He also points the spotlight on what Google is really doing in organizing groups to view broadband companies as the big public enemy for things they might do in the future, and how that conveniently distracts people from scrutinizing Google's own increasing dominance of online advertising and the business model of the Internet. 

It didn't take long for the Empire to Strike back! Shortly after the release of Googleopoly, Ed Black, President and CEO of the Computer and Communications Industry Association, which represents Google, put out a critical press release on my Googleopoly white paper entitled:  "Merger Report Unconvincing." 

• As I predicted on my blog this morning:"I expect to be attacked personally for my analysis and conclusions here, just like I was attacked by Bernie Ebbers and WorldCom as "the idiot Washington analyst" for having the audacity to be the only analyst in the country willing to predict, and stick to my guns, that the government would block the WorldCom-Sprint merger."

As expected they tried to discredit the messenger because they don't like the message. Standard operating procedure from my debate opponents.

My detailed analysis over the last several weeks leads me to believe that the FTC is likely to block the Google-DoubleClick merger because it will enable Google to dominate online advertising and dramatically increase the opportunity for market collusion and price manipulation in the market for consumer click data, ad-performance tools, ad-brokering and ad-exchanges.

Antitrust is fact-specific and evidence-driven. To understand the true antitrust outlook for a merger one needs to become familiar with the core facts of the case. To date, media and investment coverage of this merger has been remarkably superficial.

• The executive summary and my new 35-page white paper: "Googleopoly: the Google-DoubleClick Anti-Competitive Case" can be found at Googleopoly.net. An audio file of my conference call on this merger outlook will also be on Googleopoly.net. The analysis and conclusions are driven by pages and pages of facts and evidence.
• The purpose of the paper is to present the detailed case theory, argumentation and evidence of why the merger is anti-competitive and harms consumers, content providers and advertisers.
• The paper:
• Defines the market;
• Explains why Google-DoubleClick are competitors;
• Explains why startups, Yahoo and Microsoft can't compete with Google in search;
• Spotlights the four anti-competitive network effects of the merger; and
• Shows how the merger harms consumers, content providers and advertisers.

I see three big takeaways from my white paper.

First, the more people learn about this merger the more concern they will develop.

You're invited to participate in a conference call Tuesday July 17th at 11 am EST to hear a discussion of, and Q&A on, my new 35-page white paper, entitled:

• "Googleopoly: the Google-DoubleClick Anti-competitive Case;" which will be released publicly at the time of the call at www.Googleopoly.net.

I will explain how a Google Inc. (NASDAQ: GOOG) - DoubleClick merger will facilitate a de facto Internet information access monopoly, substantially lessen competition, and harm consumers, Internet content providers, and advertisers.

CNBC's Larry Kudlow hosted a debate over Chairman Martin's proposed open access/net neutrality regulations for the 700 MHz auction.

Both sides were ably represented:

• John Rutledge of Rutledge Capital took the free market view and
• Gerry Waldron who represents Google and worked for Chairman Ed Markey took the pro-regulation view.

Watch and enjoy!

Given the issue of whether or not the 700 Mhz auction is being run for the benefit of the American taxpayer, there is a very interesting quote from a Justice Department official today on their view of "bid rigging" in a competitive government auction, in this case concerning a defense contractor.

• "The antitrust division is committed to protecting the competitive market for Americans," said Assistant Attorney General Thomas O. Barnett, who heads the department's antitrust division. "We will continue to bring to justice those who rig bids and thereby deprive the public of the benefits afforded by a competitive bidding process."

It is interesting to juxtapose this Justice Department quote of today with another quote from today in the Dow Jones article on the 700 MHz auction, which quoted the position of Gigi Sohn of Public Knowledge on "bid rigging":

• She acknowledged that effectively Google and public interest groups were asking the FCC to "rig the auction" to facilitate a third national broadband competitor to the incumbents - AT&T Inc. (T), Verizon Communications Inc. (VZ) and the cable companies.

The ends don’t justify the means.

Kudos to the Wall Street Journal today for their twin great editorials on net neutrality and the 700 MHz auction: "Reed Hundt's Spectrum Play" by the Jounal editorial writers and "Telecom Time Warp" by Robert Crandall and Hal Singer.

• The Journal editorial accurately hits on the Google/Hundt cabal to rig the auction rules so they can win the Nation's most valuable spectrum at a deep discount.
• Google is laughing all the way to the bank that they could sucker a Republican Chairman of the FCC to carry their water and stand heavily on the competitive scales to pick them as winner before the bidding commences.
• It will be interesting to see how Chairman Martin "squares this circle" and explains why market participants should ever trust what he says going forward on competition and regulation given that up to now he has discussed no market failure or consumer problem that requires regulation to solve up to now.
• My favorite point of many in Robert and Hal's great editorial is reminding everyone the outrageousness of the FCC mandating "unbundling" (a drastic action reserved for entrenched monopolies) when the wireless industry is so obviously competitive that the price of a wireless minute has fallen by 84% over the last decade!
• Amazing! Chairman Martin apparently finds market failure when prices are plummeting, consumer choice has exploded, subscribership and usage has skyrocketed and investment boomed. Huh?
• What's wrong with this picture? 
• The only apparent explanation is that Chairman Martin now believes more in the regulatory hand of Big Government than the "invisible hand" of market forces.
• Wireless is the single biggest competitive success story in communications!
• And Mr. Martin's reward for all those market players that invested billions of dollars of risk capital to buildout the world's most competitive facilities-based wireless marketplace -- is heavy handed and unnecessary "separations" and unbundling monopoly regulation!

Bottomline:  The Bush Adminstration's sole policy goal in telecommunications has been to promote broadband investment and deployment to all Americans.

According to DowJones, FCC Chairman Kevin Martin is proposing some of the net neutrality/open access regulation that Google requested for 22 of the 60 MHz of prime 700 MHz of spectrum to be auctioned off by the FCC in early 2008 for use in about 2010.

• A similar USA Today cover story got a key part of the story wrong in implying that the net neutrality/open access conditions would apply to  the whole 700 MHz auction, not just to 22 of the 60 MHz being auctioned.

I have three points to make about Chairman Martin's reported net neutrality/open access proposal.

The New York Times article today: "South Koreans Connect Through Search Engine" provides a huge window into what the real source of a search engine's market dominance is. (The article indicates that in South Korea, Naver.com is the leading search engine with 77% share, followed by South Korean company Daum.net with 10.8%, and Yahoo with 4.4%. Google's market share is 1.7% in South Korea.)

• The South Korean example is a particularly helpful set of facts and insights to the FTC and Congress in their journey to understand Google's increasing search dominance and the potential anti-competitive effects of the Google-DoubleClick merger.

Specifically, what makes Google's 1.7% South Korean search market share different from its 90% share in Germany, Spain, 82% share in France, 75% share in the UK, and its 65% share in the US -- given that Google has been competing in the South Korean market since 2000?