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 companies, ideas, and fortunes rise and fall in the blink of an 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.
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 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. With so many competitors in the market, Google cannot be regarded as having monopolistic market power.
P.H. Longstaff, author of The Communications Toolkit, has commented, “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. 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, “No one is successfully doing [search] today.”
Those who advocate public utility-style regulation of Google see only benefits and no costs. 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.
Adam Thierer ([email protected]) is director of telecommunications studies and Wayne Crews ([email protected]) is director of technology policy at the Cato Institute in Washington, DC. (htpp://www.cato.org/tech)