Open Internet

What business trade-offs must Alphabet-Google make to continue to grow revenues at its 25% annual rate -- i.e. +$27b in new revenues in 2018, +$35b more in 2019, and +$45b more in 2020 -- to become another company worth a trillion dollars?

Alphabet-Google has decided apparently, whatever it takes.    

Maybe no single Google action tells us more about where Alphabet-Google stands in its twentieth year as a company and what it believes it must do to succeed as it wants in the next twenty years, than “Google Plans to Launch a Censored Search Engine in China” – the main driver of Google’s apparent new China-first growth strategy revealed in The Intercept’s scoop this week.

In 2003, Professor Tim Wu coined the term “net neutrality.”

Fifteen years later, it’s now time for a network reality check. That’s because net neutrality is back in the news with a quixotic Senate vote that proposes what a majority of the House and the FCC, and the President all oppose, all while rejecting real legislative proposals to enshrine net neutrality consumer protections permanently into law.   

How is network reality today different from 2003?

When net neutrality was conceived in 2003, Amazon was a company with ~$5b in revenues, Google just started generating revenues, and Facebook didn’t exist. Now America’s largest network company by annualized revenues is Amazon at $193b, not AT&T, at $160b.

The annualized revenues of the three largest edge-networks, Amazon, Google, and Facebook will likely surpass the collective revenues of the three largest ISP networks, AT&T, Verizon, and Comcast, sometime this fall.

If current revenue growth rates continue, expect Amazon, Google, and Facebook’s collective revenues to be twice that of AT&T, Verizon, and Comcast in less than three years.

That is network reality.

Note: this post summarizes a Precursor LLC presentation filing for the record of the U.S. DOJ Antitrust Division’s 3-14-18 Roundtable on Antitrust Exemptions & Immunities. See the presentation/filing here.

Presentation Title:

“A Market Divided: U.S. Internet Policy Creates Anticompetitive Asymmetric Accountability.”
Government exemptions and immunities overwhelmingly favor regulatory arbitrage over free market competition. Accountability arbitrage harms: consumer welfare; free market forces; the process of competition; and economic growth.

Executive Summary:

Americans believe in equal accountability, that no one should be above rules or outside the law.

Then why are America’s only unaccountable network monopolies, Alphabet-Google, Facebook, and Amazon, calling for maximal accountability of utility-grade, network-neutrality regulation for their ISP competitors, but no accountability for their own apparent utility-like, monopoly distribution networks?

Internet users are the forgotten consumers.  

They have been forgotten for over twenty years because America’s Internet policy has been tech-first-consumer-last. 

Hiding in plain sight, U.S. Internet policy prioritizes what’s best for technologies and Internet companies over what’s best for people, because at core it assumed in 1996 and 1998 that whatever is good for Internet technologies and companies is good for Internet consumers.

For many years that appeared to be largely true. However, the cascading revelations this past year -- big societal, economic, and political problems caused by Google, Facebook, Amazon, Twitter, etc. -- prove that core U.S. Internet policy assumption false.

Let’s contrast the Government’s protection of Internet companies with its protection of Internet consumers.

You can’t make this stuff up.

Asymmetric Realities: The five most valuable companies – Apple $802b, Alphabet-Google $688b, Microsoft $585b, Facebook $500b, and Amazon $475b – are together worth an unprecedented $3 trillion and widely-appreciated to be dominant in the communications-driven businesses of smartphones, search advertising, subscription business productivity software, social advertising, and ecommerce platform services respectively.

In Washington’s theater of the absurd, these well-known, winner-take-all platforms, are playing the role of victims of potential harms, that supposedly can’t afford to shoulder the potential risks for the potential net neutrality problems that they allege are potentially serious, when they produce $131b annually in free cash flow and have $357b in cash (mostly overseas).

iHypocrisy?

After fourteen years of diligently dodging any public position on net neutrality on principle, while operating the largest non-neutral, non-free, non-open, Internet network of smart devices on the planet, Apple Inc. is now taking a “principled” public position for net neutrality, and a free and open Internet, because Apple now tells the FCC in its net neutrality public comments that Apple now believes in the principles of consumer choice, no paid fast lanes, transparency, competition, investment, and innovation. iHypocrisy.

Let me be crystal clear here.

I am a longtime iPhone user and big Apple fan. I have long publicly defended their freedom to maximize the value of their patented innovations and property-rights driven business model and value creation strategy. I strongly defend their right to free speech and their right to reverse their “principled” position when their business needs warrant it, like wanting to save money on bandwidth for Apple’s new streaming services because it is losing money on streaming now that it invested a billion dollars in new video content over the last few months.

SUMMARY:

In 2015, the FCC’s Title II Open Internet broadband order was predicated on a demonstrably false central competitive premise: that the Internet’s edge was competitive while the broadband Internet core was not competitive. The facts prove the opposite.

The 2015 FCC’s competition premise is myth.

While there is plenty of information in the record, and in the July 17 comments, that broadband is  competitive, until now there has been little data and research on the overall competitiveness of the Internet edge providers, save for NetCompetition’s July 17^th comments that showed how concentrated the Internet edge is using the Internet Association as a proxy.

To further rebut comments that were predicated on the demonstrably false central premise that the Internet’s edge is competitive, NetCompetition submits additional Internet competition research below.

July 17, 2017

FCC Restoring Internet Freedom WC No. 17-108

Submission by Scott Cleland, Chairman, NetCompetition (An e-forum supported by broadband interests.)

Debunking Edge Competition Premises in FCC 2015 Title II Broadband Order – FCC Comments

In 2015, the FCC’s Title II Open Internet broadband order implicitly was based on three core competitive premises about “edge” competition and competitors, that are demonstrably false, which undermines the factual legitimacy and legal justification of the FCC’s 2015 Open Internet order, and which supports the current FCC’s Restoring Internet Freedom NPRM to overturn it.

Summary: The 2015 FCC’s three demonstrably false core competitive premises are:

Ironically, the world’s leading winner-take-all Internet platforms -- Google, Amazon, and Facebook -- are the leading voices of the July 12th “Internet-wide Day of Action to Save Net Neutrality.” They want to pressure the U.S. FCC to maximally regulate ISPs as Title II telephone utilities, even though they don’t believe in operating neutral networks themselves.

Even more ironic, is this 1 min. Google-YouTube video -- by the Internet Association, “the unified voice of the Internet economy.” It defines net neutrality and what it wants the FCC to ban ISPs from doing. However, those banned behaviors closely describe how Google, Facebook and Amazon often operate. Awkward.

In yet another video supporting this Day of Action, three U.S. Senators video message said: “We believe the Internet is the extraordinary opportunity that gives everybody in America the chance to get ahead. We have to make sure it is not controlled by a handful of powerful corporations.”

This piece has two tasks.