Hazlett on Google and The Myth of An Open Net

by on October 13, 2006 · 14 comments

Great article this week in the Financial Times by Tom Hazlett of George Mason University. Keying off from the Google-YouTube deal, Hazlett–a former FCC chief economist–writes that the Internet has never been as “open” as net neutrality fans say, and that’s no bad thing:

…the capitalist engine that powers the internet demands something completely different, as Google’s acquisition of YouTube makes clear. That strategy is to integrate Google’s search and advertising sales with YouTube’s users, which could potentially impede access to one of the hottest technologies by other service providers…

The internet lurches forward in spasms of business model discovery, as when Google figured out how to auction off search-targeted advertising slots, leaving banner advertisements behind. Today, Google’s absorption of its little video cousin is part of this jockeying for positions of competitive superiority. The internet really is not open–if, as Google hopes, it is doing it right.

Google has been doing it flawlessly–forging exclusive bargains nonpareil. Mr Vise declares the watershed business event in the company’s history to have occurred on May 1 2002 when its search engine was licensed to AOL. “Web properties that connected more than 34m subscribers had a small search box on every page that said, ‘Search Powered by Google.'” To land this deal, Google extended to “AOL a very large financial guarantee”, including stock options. An ISP getting paid to feature a favoured search engine? What net neutrality would presumably end is what helped launch Google.

Worth reading.

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James Gattuso / James Gattuso is a Senior Research Fellow in Regulatory Policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation. Gattuso also leads the Enterprise and Free Markets Initiative at Heritage, with responsiblity for a range of regulatory and market issues. Prior to joining Heritage, he served as Vice President for Policy at the Competitive Enterprise Institute and also as Vice President for Policy Development with Citizens for a Sound Economy (CSE). From 1990 to 1993, he was Deputy Chief of the Office of Plans and Policy at the Federal Communications Commission. From May 1991 to June 1992, he was detailed from the FCC to the office of Vice President Dan Quayle, where he served as Associate Director of the President's Council on Competitiveness. He lives in Alexandria, Virginia with his wife Dana, 8 year-old son, Peter (whom he relies upon to operate his VCR), and his four year-old daughter Lindsey (who does the DVD player.) He has no known hobbies, but is not nearly as boring as he seems.

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