Thursday, August 05, 2010

Can't Win For Losing

I hate to be all telecom all the time, but this is kind of big news. The FCC has dithered, vacillated, and backslid on net neutrality long enough that Google decided to take matters into their own hands and cut a deal with Verizon. Both parties now appear to be denying that anything happened. But it was extensively reported and it's hard to believe there is nothing to it. And the deal, if there was one, appears to have demolished the FCC's quixotic efforts to reach a solution on net neutrality that left everyone happy. It's not exactly clear what the deal was, but the basic outline of it seems to be that Verizon would have free rein to do whatever the hell they want with wireless service, would mostly be non-discriminatory with wireline service, but would have some sort of for-fee prioritization setup. In other words, it's a pretty devastating loss for the net neutrality supporters.

I think there is a lot of sentiment that we've been stabbed in the back by Google, but Google was never an ideal champion for this cause. They're in some sense the best we've got because they have money and prestige and that seems to be the only real currency in policy-making circles these days. They also have that nice motto about not doing evil. But they have pretty conflicted interests on this. Allowing the service providers to create fast lanes does allow them extort a cut of the revenue from online content and service providers like Google, and will almost certainly hurt Google's profit margins. But Google has a lot of revenue and a lot of money. And the other big impact of it would be to increase the barriers to entry for disruptive new entrants in the online service and content business. It would cost more to get started and increase the companies' cash burn rate, making it harder for businesses to start small and organically build their businesses as they refine their service offerings with the early adopters (which was the path followed by the likes of Napster, YouTube, MySpace, Facebook, Twitter, not to mention Google itself). Basically, having climbed to the top of the heap, Google can, by throwing in with the service providers, attempt to pull the ladder up behind themselves. Google will have significant leverage with service providers. New businesses won't.

So it's great that Google has been (and if its press release it to be believed, still is) a strong advocate for net neutrality, but it's worth noting that their interests don't align completely with the interests of other net neutrality advocates.

But I think the big story here is what a disaster the FCC approach to net neutrality has been. Harold Feld has a really phenomenal post on this, and I don't want to rehash everything he says. So go read it (and note that it was written before this Google mess). And I agree with basically all of that. And I agree with the commenter to that post who notes that this is symptomatic of the way the Obama Administration appears to work (which is more or less what I said back in this post). Virtually every worthwhile policy initiative has an entrenched interest that will oppose it, and the Administration is so cautious and conflict-averse they appear to be willing to let everything be derailed by endless deliberation. They just need to pick some fights, take action, let the incumbents howl, defend themselves to the public as best they can, and then let the chips fall where they may. What they're doing now is completely ineffective (if not counterproductive) and, as Feld notes, utterly demoralizing to anyone trying to serve the public interest. Hopefully this thing with Google, whatever the truth of it really is, will serve as the swift kick in the ass that the FCC needs.

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