Google as a Public Utility? No Results in This Search for Monopoly

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The Google search engine is one of the Net's great successstories, with one analyst projecting possible revenues of$800 million and profits of $200 million this year. Just a fewshort years ago no one had even heard of this company. But todayGoogle represents a classic example of the little guy going upagainst the Goliaths of the industry-Yahoo!, Lycos, AltaVista-and winning, and now there's talk of apossible $15-$25 billion IPO. But companies,ideas, and fortunes rise and fall in the blink of the eye in thedigital economy. Remember Disney/Infoseek's "GO" network and the"portal wars"? GO's portal is now "powered by Google." Today Googlemay be king of the hill, yet it's just as easy to imagine a worldwithout it.

But jealous rivals and would-be reformers aren't always patient.So a Google backlash was almost inevitable. One schemegaining some traction would classify Google as a "public utility"and regulate it accordingly. In the high-tech sector and networkindustries, the "openaccess" mentality is increasingly prevalent. Competitors wantgovernment, via regulatory mandate, to guarantee them access to arival's property, whether it's the Windows desktop, AOL's InstantMessenger service, the telephone loop, the electricity grid,satellite TV, or so on. Onecoalition even wants to pre-regulate broadbandInternet service providers on the theory that they mightinterfere 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," localwater and sewer systems come to mind-not Internet search tools. Butconsider this flash of economic wisdom regarding Google fromtechnology consultant Bill Thompson in a recent online BBC News column: "Perhaps the timehas come to recognize this dominant search engine for what it is-apublic utility that must be regulated in the public interest."Thompson adds, "A government serious about ensuring that the netbenefits society as a whole could start by investigating Google andconsidering whether we should create Ofsearch, the Office of SearchEngines." Daniel Brandt of Google Watch / Public InformationResearch, Inc., has similar dire predictions. "It's way too powerful…It's scary becauseif 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 publicutility assume that it is a "natural monopoly" or an "essentialfacility" that acts as a bottleneck to consumer choice andcompetition. Those amorphous concepts have been used to justify an array of regulatory shenanigans. Regardless,Google doesn't meet even the textbook definition of a naturalmonopoly. Switching by consumers is easy, and Google has nogovernment protection from rivals. In fact, as CNN recently reported, "Yahoo has committednearly $2 billion to its Google counterattack [and] Microsoft isdevoting an unspecified portion of its $49 billion war chest tobuilding a better search engine." Even using Google itself tosearch for other search engines, one finds hundreds of globaloptions. For example, typing the phrase "search engines" on theGoogle homepageyields the "Search Engine Colossus," basically, as the nameimplies, a search engine of search engines, with listings foralmost every country on the planet. Over 100 search engines arelisted for the United States. For the United Kingdom there are over50. From Afghanistan to Zimbabwe, the Search Engine Colossus"offers you links to search engines and directories from 195countries and 43 autonomous territories around the world." Sowhat's the problem here again? With so many competitors in themarket, Google cannot be regarded as having monopolistic marketpower.

The idea of an essential facility, even a low-barrier one madeof software, unfortunately has no patience for the evolutionarynature of a market and information economy. P.H. Longstaff, authorof The Communications Toolkit, hascommented that, "Discussions of essential facilities often ignorethe existence of alternative channels in which the traffic inquestion could flow." To micromanage technology policy under theassumption that no other channels will emerge would be terriblyshort sighted, with unintended consequences galore.

In fact, treating Google as a public utility may have theperverse effect of locking in Google's own current generation ofsearch engine technology. That would be a huge mistake.Business 2.0 notes that search technology is "still in itsinfancy as a computer science problem," given that half or moresearch queries are unsatisfactorily answered by any search engine.The magazine quoted one executive who argues that "No one is successfully doing [search] today." TheWall Street Journal notes, "Some search industry gurus evenpreach heresy: that Google isn't the field's technology leaderanymore." Google's PageRank system, which ranks sites on the basis ofwebsites that link to it, is merely one imperfect approach, and maybe superceded by others like Teoma, or perhaps even the open source projectcalled Nutch.

Clearly those who blithely advocate public utility-styleregulation of Google see only benefits and no costs. The purportedbenefits of public utility regulation is that it brings down thecost of what many consider an essential good and helps ensure thatdeployment to most members of a given community. But public utilityregulation typically results in mediocre service quality andlimited innovation. Do we really want Google to become just anotherlazy public utility providing basic, plain vanilla service? Weshould aspire for more in the Internet world, especially withrelatively low barriers to entry in the search engine market.Public utility regulation rarely delivers the goods faster thanmarkets, and in this case, the universal service rationale behindregulation has been satisfied by a vigorously competitivemarketplace. If Google abuses its market position, web surfers willquickly flee. But it's hard to make a case for abuse when theservice in question is free to the public and millions havevoluntarily flocked to it over its many rivals.

Of course, if the public utility crusade dies the death itdeserves, other regulatory agendas await. The GoogleWatch web page catalogs grievances against the search engineand calls for government regulation on the grounds that it is "aprivacy disaster waiting to happen." Others warn that Google's"cache" raises intellectual property concerns. So stay tuned.