October 17, 2006

Google and Monopolies

Greetings. In the wake of Google's seemingly pricey acquisition of YouTube, some observers have suggested that Google is on its way toward effectively monopolistic control over many Internet services.

The question of who is or isn't a "monopoly" is interesting, but trying to use standard definitions may lead us somewhat astray from key issues.

First, Google isn't currently a monopoly by any classic definition and is unlikely to become one in a general sense. Google clearly isn't a utility in the vein of residential water, electricity, or natural gas delivery, which despite attempts to introduce "competition" still are obvious "natural" monopolies.

Google isn't even "oligopolistic" in any broad sense, unlike conventional phone services or "last mile" ISPs, where only limited practical consumer choice exists.

And Google obviously has never had the leverage that Microsoft has with consumers who buy PCs, since for the vast majority of PC users there is no simple turnkey alternative to the Windows systems that come bundled on their computers. Many consumers don't even realize that there is a difference between the hardware and OS of their PCs.

Google is different. It can be argued -- with considerable validity -- that Google can't become a "monopoly" for most Internet applications since consumers can easily switch away from Google to other services, with little or no monetary cost associated with such a choice -- just enter a different URL. At least, this is the case so long as Net Neutrality (which Google strongly and admirably supports) is the basis of the Internet.

But this is all only part of the equation. The ability to choose alternate services depends upon the availability of the desired information on those services. When we're only talking about conventional Web search engines, this is not a big issue -- there are lots of such search services, and I've never yet seen a conventional Web site that limits search spidering only to Google. The fact that Google has become the dominant search engine is a tribute to the quality of their product, not to nefarious manipulations.

Even Google's YouTube acquisition doesn't automatically prevent other entities from competing in various ways in the user-contributed video space. We're likely to still end up with more competition in that area than, say, in national radio networks and other aspects of conventional media.

The bigger issues come into focus in two aspects -- "exclusivity" deals and data retention. To the extent that Google or other entities engage in contracts (such as Google's Book Search scanning deal with the University of California) that restrict the ways in which those scans can then be used by others, most consumers will inevitably be steered toward specific firms if they wish to have access to that data.

Now, it takes two to tango, and in this case it would seem obvious that Google would reasonably wish to retain leverage over these materials. It's far less clear that it is appropriate for UC to accept such terms as a public institution.

However you might wish to parse the motives, the end result is that consumers' choices can be significantly limited in these kinds of situations, and of course as the data corpus grows the tendency for further concentration of these materials becomes ever greater.

This leads us inevitably toward the data retention issue. To the extent that consumer choice becomes limited by the structural and/or financial tapestry of these systems, the responsibility of the dominant players (e.g. Google) when it comes to data collected from their users is increasingly paramount. This is the case regardless of whether or not the term "monopoly" or even "oligopoly" can be reasonably applied to such firms.

I won't get into specific data retention arguments here (please reference my "Open Letter to Google" and related essays for more details on this topic).

The executive summary is pretty simple. Issues and problems related to these kinds of Internet services are unlike those in any other field. The associated risks (whether the result of benevolent intent with unintended consequences, impartial structural evolution, or other factors) are not obviously delineated by classical competitive categorizations.

Or to use the vernacular -- just because you're a genuinely good guy doesn't mean that what you've built can't be utilized by others in negative ways that you never intended. With size and power comes the responsibility for helping to ensure that such outside forces can't do evil with your magic.


Posted by Lauren at October 17, 2006 08:37 AM | Permalink
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