[IP] Cato Institute on Google as (not) a public utility
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Date: Tue, 18 Nov 2003 09:26:49 -0500
From: Declan McCullagh <declan@xxxxxxxx>
---
To: declan@xxxxxxxx
Subject: Cato TechKnowledge: Google as a Public Utility?
From: "Adam Thierer" <athierer@xxxxxxxx>
Message-Id: <20031114215715.EF72C36E57@xxxxxxxxxxxxxxxx>
Date: Fri, 14 Nov 2003 13:57:15 -0800 (PST)
Google as a Public Utility? No Results in This Search for Monopoly
Issue #65
November 14, 2003
by Adam Thierer and Clyde Wayne Crews Jr.
The Google search engine is one of the Net?s great success stories, with
one analyst projecting possible revenues of $800 million and profits of
$200 million this year. Just a few short years ago no one had even heard of
this company. But today Google represents a classic example of the little
guy going up against the Goliaths of the industry?Yahoo!, Lycos,
AltaVista?and winning, and now there?s talk of a possible $15-$25 billion
IPO. But companies, ideas, and fortunes rise and fall in the blink of the
eye in the digital economy. Remember Disney/Infoseek?s ?GO? network and the
?portal wars?? GO?s portal is now ?powered by Google.? Today Google may be
king of the hill, yet it?s just as easy to imagine a world without it.
But jealous rivals and would-be reformers aren?t always patient. So a
Google backlash was almost inevitable. One scheme gaining some traction
would classify Google as a ?public utility? and regulate it accordingly. In
the high-tech sector and network industries, the ?open access? mentality is
increasingly prevalent. Competitors want government, via regulatory
mandate, to guarantee them access to a rival?s property, whether it's the
Windows desktop, AOL?s Instant Messenger service, the telephone loop, the
electricity grid, satellite TV, or so on. One coalition even wants to
pre-regulate broadband Internet service providers on the theory that they
might interfere with access to certain websites.
Google?s rise is occurring against this unfavorable backdrop. When one
thinks of a public utility or a ?natural monopoly,? local water and sewer
systems come to mind?not Internet search tools. But consider this flash of
economic wisdom regarding Google from technology consultant Bill Thompson
in a recent online BBC News column: ?Perhaps the time has come to recognize
this dominant search engine for what it is?a public utility that must be
regulated in the public interest.? Thompson adds, ?A government serious
about ensuring that the net benefits society as a whole could start by
investigating Google and considering whether we should create Ofsearch, the
Office of Search Engines.? Daniel Brandt of Google Watch / Public
Information Research, Inc., has similar dire predictions. ?It's way too
powerful?It?s scary because if Google drops you, you could be out of
business in no time.?
It?s difficult to address such proposals with a straight face, but we?ll
give it a shot. Proposals to turn Google into a public utility assume that
it is a ?natural monopoly? or an ?essential facility? that acts as a
bottleneck to consumer choice and competition. Those amorphous concepts
have been used to justify an array of regulatory shenanigans. Regardless,
Google doesn?t meet even the textbook definition of a natural monopoly.
Switching by consumers is easy, and Google has no government protection
from rivals. In fact, as CNN recently reported, ?Yahoo has committed nearly
$2 billion to its Google counterattack [and] Microsoft is devoting an
unspecified portion of its $49 billion war chest to building a better
search engine.? Even using Google itself to search for other search
engines, one finds hundreds of global options. For example, typing the
phrase ?search engines? on the Google homepage yields the ?Search Engine
Colossus,? basically, as the name implies, a search engine of search
engines, with listings for almost every country on the planet. Over 100
search engines are listed for the United States. For the United Kingdom
there are over 50. From Afghanistan to Zimbabwe, the Search Engine Colossus
?offers you links to search engines and directories from 195 countries and
43 autonomous territories around the world.? So what?s the problem here
again? With so many competitors in the market, Google cannot be regarded as
having monopolistic market power.
The idea of an essential facility, even a low-barrier one made of software,
unfortunately has no patience for the evolutionary nature of a market and
information economy. P.H. Longstaff, author of The Communications Toolkit,
has commented that, ?Discussions of essential facilities often ignore the
existence of alternative channels in which the traffic in question could
flow.? To micromanage technology policy under the assumption that no other
channels will emerge would be terribly short sighted, with unintended
consequences galore.
In fact, treating Google as a public utility may have the perverse effect
of locking in Google?s own current generation of search engine technology.
That would be a huge mistake. Business 2.0 notes that search technology is
?still in its infancy as a computer science problem,? given that half or
more search queries are unsatisfactorily answered by any search engine. The
magazine quoted one executive who argues that ?No one is successfully doing
[search] today.? The Wall Street Journal notes, ?Some search industry gurus
even preach heresy: that Google isn?t the field?s technology leader
anymore.? Google?s PageRank system, which ranks sites on the basis of
websites that link to it, is merely one imperfect approach, and may be
superceded by others like Teoma, or perhaps even the open source project
called Nutch.
Clearly those who blithely advocate public utilitystyle regulation of
Google see only benefits and no costs. The purported benefits of public
utility regulation is that it brings down the cost of what many consider an
essential good and helps ensure that deployment to most members of a given
community. But public utility regulation typically results in mediocre
service quality and limited innovation. Do we really want Google to become
just another lazy public utility providing basic, plain vanilla service? We
should aspire for more in the Internet world, especially with relatively
low barriers to entry in the search engine market. Public utility
regulation rarely delivers the goods faster than markets, and in this case,
the universal service rationale behind regulation has been satisfied by a
vigorously competitive marketplace. If Google abuses its market position,
web surfers will quickly flee. But it?s hard to make a case for abuse when
the service in question is free to the public and millions have voluntarily
flocked to it over its many rivals.
Of course, if the public utility crusade dies the death it deserves, other
regulatory agendas await. The Google Watch web page catalogs grievances
against the search engine and calls for government regulation on the
grounds that it is ?a privacy disaster waiting to happen.? Others warn that
Google's ?cache? raises intellectual property concerns. So stay tuned.
Adam Thierer (athierer@xxxxxxxx) is Director of Telecommunications Studies
and and Wayne Crews (wcrews@xxxxxxxx) is the Director of Technology Policy
at the Cato Institute in Washington, D.C. (www.cato.org/tech) They are the
authors of What's Yours Is Mine: Open Access and the Rise of Infrastructure
Socialism. To subscribe, or see a list of all previous TechKnowledge
articles, visit http://www.cato.org/tech/tk-index.html.
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