Politech: Cato Institute on Google as (not) a public utility

[Declan McCullagh <declan () well com>]

---

To: declan () well com
Subject: Cato TechKnowledge: Google as a Public Utility?
From: "Adam Thierer" <athierer () cato org>
Message-Id: <20031114215715.EF72C36E57 () mail6 uptilt com>
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 utility–style 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 () cato org) is Director of Telecommunications Studies 
and and Wayne Crews (wcrews () cato org) 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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