Cleland served as Deputy United States Coordinator for Communications and Information Policy in the George H. W. Bush Administration. Eight Congressional subcommittees have sought Cleland’s expert testimony and Institutional Investor twice ranked him the #1 independent analyst in his field. Scott Cleland has been profiled in Fortune, National Journal, Barrons, WSJ’s Smart Money, and Investors Business Daily. Ten publications have featured his op-eds. For a full bio see: www.ScottCleland.com.
Latest posts by Scott Cleland (see all)
- Why New FTC Will Be a Responsibility Reckoning for Google, Facebook, Amazon - April 28, 2018
- How Did Americans Lose Their Right to Privacy? - April 6, 2018
The juxtaposition of Google tacitly accusing the EU with “digital protectionism” and “discrimination” as the EU’s Digital Chief, Günther Oettinger, visits D.C. and Silicon Valley, while the Google-created Internet Association this week asks for U.S. protection from ISP “discrimination” in an appeals court brief in support of the FCC’s Open Internet order – exposes exceptional hypocrisy.
Antitrust and privacy regulators around the world weren’t born yesterday. They know Google and its online platform allies want it both ways – manipulating policy to advantage them and disadvantage their potential competitors.
Google et al currently enjoy the benefits of a lavish U.S. industrial policy that spoils them with national-champion-like special treatment via effective antitrust and privacy passes from the FTC and multi-billion-dollar pricing-subsidies from the FCC, while they colonially expect others to subordinate their sovereign laws and interests to their domineering corporate interests.
Consider the exceptional hypocrisy in Google’s legal stance on the FCC’s Open Internet order.
By way of background, Google’s Internet Association’s brief “urges this court to uphold the FCC’s order in its entirety.”
Let’s examine the three big ways Google et al are being exceptionally hypocritical with the EU in particular on: 1) government restraint of market power; 2) privacy regulation; and 3) implicit government price subsidies.
Government Restraint of Market Power
Google’s Internet Association asserts to the court that ISPs have unique Internet gatekeeper market power. “ISPs have absolute control of the physical layer of their networks. That control, coupled with the fact that “all end users generally access the Internet through a single broadband provider,” places them in the unique position of “‘gatekeeper’ with respect to edge providers that might seek to reach its end-user subscribers.” This power “distinguishes broadband providers from other participants in the Internet marketplace . . . who have no similar ‘control [over] access to the Internet for their subscribers and for anyone wishing to reach those subscribers.’”
The first problem here is that the U.S. ISP market is much more competitive than the most important online platform markets are.
Most all U.S. consumers have 5+ facility-based, wireline/wireless, competitive choices for broadband access platforms.
In stark contrast, there is one dominant (90%) global mobile operating system platform – Google Android; one dominant global video distribution platform – Google-YouTube; only two choices of search platforms Google and Bing; only two dominant social network platforms – Facebook and Google-YouTube; and only two dominant app store platforms – Google Play and Apple’s App Store. Those in glass houses should not throw stones.
The second problem here is that ISPs are not unique in the Internet ecosystem. For example, Google’s 2.2 billion users are more than twenty times that of any U.S. ISP. Thus under Google’s theory of market power, Google enjoys dramatically more real originating and terminating access market power than any ISP globally. Claiming that ISPs are the only part of the Internet ecosystem with potential gatekeeper power is self-serving and patently false.
Antitrust authorities from the EU, India, Russia and Brazil can plainly see that Google is leading the net neutrality charge to declare that U.S. ISP “gatekeepers” with at most <30% market share, deserve the “strongest possible” price regulation in the U.S., while Google completely denies, “as a matter of fact, law and economics” that Google is a dominant Internet gatekeeper when it has >90% share of Internet search in the EU, India and Brazil.
Meanwhile, antitrust authorities in Russia, the EU, India, and Brazil have seen Google’s search dominance already extend to mobile OS dominance, and is rapidly extending its coredominance into video, maps, email, browser, apps, etc.
As Google forcefully rejects any EU privacy regulation that empowers consumers to own and control their own private data, Google’s support for the “FCC’s order in its entirety” includes support for common carrier privacy regulations that give users the right to strongly control how their private identifying customer information is used.
If Google fully support the need for strict privacy regulation for those that they allege have Internet market power, how can they, with vastly more market power, justify their refusal to respect EU law that gives consumers the right to control the use of their private data?
Implicit Government Price Subsidies
Classic protectionism is when a country subsidizes an industry to give it a powerful advantage in international trade.
Google’s support for the “FCC’s order in its entirety” also includes support for the FCC’s ban on “paid prioritization” which is an intentionally deceptive euphemism for permanently setting a price of zero for all downstream Internet traffic.
Since Google-YouTube and the other American dominant online and cloud-computing platforms are the biggest generators of downstream Internet traffic in the world by far, the FCC is non-transparently trying to establish a de facto protectionist industrial policy that forces ISPs and consumers to subsidize Google-YouTube and other online platforms’ distribution costs – permanently, both inside and outside the U.S.
Tellingly, Tim Wu, the professor who coined the term “net neutrality” made clear that net neutrality is all about subsidies by design in his white paper: “Subsidizing Creativity through Network Design: Zero Pricing and Net Neutrality.”
It is one thing for Google and online platforms to support reclassifying Internet traffic to be “telecommunications” in order to force U.S. ISPs and consumers to subsidize America’s Web national champions. It is quite another to try and force the rest of the world, under the deceptive guise of “net neutrality,” to permanently agree to a “receiving party pays” economic model that fosters, subsidizes and entrenches the dominance of America’s Web national champions as a matter of policy.
Ironically, President Obama’s call for the FCC to reverse U.S. Internet policy to reclassify Internet traffic to be “telecommunications” revives a UN-ITU treaty that promotes a “sending party pays” economic model for communications traffic.
Thus if Google and online platforms support the FCC’s new policy that Internet traffic is “telecommunications” for their national subsidy benefit, then it is harder for Google and online platforms to object to sovereign nations asserting their UN-ITU treaty rights to adopt a “telecommunications” “sending party pays” model for the biggest generators of downstream traffic.
It is hard to see how an EU Digital Single Market can fully succeed long term if it implicitly submits to massively subsidize and further entrench Google and other online platform’s digital dominance going forward via net neutrality.
In sum, just like Google has successfully tricked many that they work for users and care about user privacy when users’ privacy is the product that Google sells to advertisers, and just like Google and some of its platform allies have tricked countries out of billions of dollars in taxes on revenue earned in their country, it should be no surprise that Google is leading the latest scheme to persuade countries that Google-bankrolled net neutrality policy is good for them when it’s mainly about tricking them to protect, subsidize, and entrench Google and its online platforms allies.
It is supremely ironic and sad that America has lost the high ground in promoting free trade and guarding against protectionism, by brandishing such an exceptionally hypocritical protectionist Internet industrial policy.