Don't look to GOOG, YHOO and MSFT to keep Internet open and neutral

Don't look to GOOG, YHOO and MSFT to keep Internet open and neutral

Summary: The debate over Internet neutrality assumes that Google, Yahoo, Microsoft and the other big Internet services companies support laws that would mandate equal access to our common technology. Yet I would argue that those companies have lots to lose from an open Internet.

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TOPICS: Browser
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The debate over Internet neutrality assumes that Google, Yahoo, Microsoft and the other big Internet services companies support laws that would mandate equal access to our common technology. Yet I would argue that those companies have lots to lose from an open Internet.

The most obvious strategy is for GOOG et al to partner with the Telcos and cable companies because they control the last mile--the link into the consumer home. And as consumers consume more products digitally, the telcos and cable companies have a key strategic position as the gatekeepers, and as the toll collectors.

You can see the effectiveness of their market position in your bills. My cable TV bill has been going up steadily and so has my telecommunications bill--yet I don't recall that I watch more TV, and I certainly didn't find a few extra hours in the day to talk more on the phone.  Yet I'm paying a lot more now than a couple or three years ago--and I don't have much choice in the matter.

Competition is non existent, and it will remain that way until maybe WiMAX, wireless broadband with a reach of many miles, can vault over the last mile walls of the Telcos.

The Telcos and the cable companies have another advantage:  these are federally regulated companies. This means any competitors have to be federally regulated and that is a huge and expensive barrier to competition.

And these companies know the ins-and-outs of the federal regulatory system, and they have political connections crafted over many decades.

It is understandable that Google, Yahoo, Ebay and others, are concerned that their services could get shut out of easy access to consumers. The Telco and cable companies are going to be offering similar web services as those found anywhere else, after all, in this mashup world web services are going to be commodities--it's who gets the first screen that counts. And it is the providers of the pipe that can put themselves on the first screen that you see.

You'll still be able to get to Google, or Yahoo, or Microsoft, or Ebay, or Amazon--but it'll be a click or two away, and the web pages might not load as fast as those of Telco partner sites. Eventually, you'll stick to the first screen you see to get your maps, or search,  because its a few clicks easier, and a few seconds faster.

GOOG and others have seen this coming. In September 2005 GOOG hired Vint Cerf, considered one of the Fathers of the Internet, away from MCI and made him Chief Internet Evangelist.

But the big guns, GOOG, YHOO, MSFT, EBay, AMZN etc have the least to be worried about. In fact, they have a tremendous amount to gain because it is much easier for them to do sweetheart deals with the telcos and cable companies. Such partnerships would represent a huge competitive barrier--it is the small companies that have the most to lose.

The startups and the smaller companies won't be able to get the deals on bandwidth that GOOG et al can get, because they can buy bandwidth in enormous quantities across many regions. That's why the GOOG coalition hasn't put much into their fight for laws that would mandate Internet neutrality and they I bet they won't.

Why should they risk an open neutral Internet when they are vulnerable to smaller, swifter competitors? Yes, right now GOOG, YHOO and some of the others can move reasonably fast but as they grow larger they won't be as nimble.

If you are a well established Internet services company such as GOOG, it doesn't pay to expose yourself to any disruptive, innovative startups--if you can help it. Why make it easy for your future competitors to access a neutral Internet?

Don't look for GOOG et al, to save the Internet from the gatekeeper telcos and cable companies and keep it neutral. I"ll tell you in the next post who should be in the frontlines...


 

Topic: Browser

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  • If GOOG et al pass the costs to consumers...

    ... they're happy. Increased profits. How often do these companies get a chance to screw the consumer while spouting idealistic language?

    The amounts of money involved aren't small. In fact, they're large enough to keep out the riff raff. Forcing GOOG and friends to pay would reduce the number of potential competitors.

    But undifferentiated pricing means no limit to what the larger companies can do. If costs don't block a competitor, then leaving the competitor no market in which to compete will do the same job.

    Any competitor looking for an open niche the large companies cannot cover profitably will find those niches closed. When the single biggest expense is minimized, large companies can afford to lose a small amount to assure that customers are never tempted to stray to another provider for anything.

    So, your choice. Make the huge companies (rather than you) pay for the extra resources they consume and leave niches open for innovators. Or pay to increase Google's profits and foreclose any niche for new players.

    I know which choice I'd make.
    Anton Philidor