Should Google Be a Public Utility?

By
June 8th, 2012

Jeffrey Katz, the CEO of price-comparison site Nextag, is an outlier to the virtually unanimous view that the Internet should remain unregulated.  In an op-ed in today’s Wall Street Journal, Mr. Katz takes the position that Google should be turned into a public utility, although he doesn’t use that terminology.

The op-ed is aimed at European Competition Commissioner Joaquin Almunia, who has set a July 2 deadline for Google to respond to the EU’s antitrust concerns. Commissioner Almunia will make a big mistake and risk serious damage to the Internet if he follows any part of Mr. Katz’s advice.

Mr. Katz is nostalgic for the old days.  Maybe he should get into a different, slower moving, industry.  He laments the fact that Google doesn’t work the way it “used to work.”  It now promotes its own (according to Mr. Katz) “less relevant and inferior” products.  Google used to highlight Nextag’s services, because they “were better – and they still are.  But Google’s latest changes are clearly no longer about helping users.”

In the U.S., antitrust authorities are skeptical about complaints from competitors and, hopefully, Mr. Almunia will be as well.  Indeed, there is no evidence that Google has engaged in the type of exclusionary practices that were the focus of the Microsoft case, for example.  It is true that both Google and Bing sometimes favor their own specialized search results.  Understandably, Mr. Katz doesn’t like this.  But both search engines have discovered this is a service their users do like.

The scope of Mr. Katz’s proposed remedy is astounding:

  • Google needs to be transparent about how its search engine operates.”  Presumably that means making Google’s algorithm, and the changes that occur continually, public.  Perhaps Mr. Katz would like a forum where Nextag could express its views on Google’s algorithm changes before they are implemented.  That would certainly speed innovation along.
  • When a competitor’s service is the best response for the user, Google should highlight it instead of its own service.”  Who determines the “best response”?  Does Mr. Katz want a say?
  • Google should provide consumers with access to unbiased search results.” Who determines what is “unbiased” and how is it even defined?
  • Google should grant all companies equal access to advertising opportunities regardless of whether they are considered a competitor.”  “Equal access” is a defining feature of public utility regulation.  It has no meaning in the absence of price regulation.  Is Mr. Katz suggesting price regulation for advertising on Google?

There is a large literature on public utility regulation that people tend to forget.  Suffice it to say, the experience overall was not beneficial for consumers.  That is why there has been a worldwide movement toward regulatory liberalization over the last few decades.  If regulating traditional industries was difficult, regulating an Internet company like Google, and a product like a search engine, in a pro-efficiency, pro-consumer manner would be far more complex – basically, impossible.

In the U.S., public officials and various other stakeholders are in the process of preparing for the international telecommunications negotiations at the December ITU meeting in Dubai, with the goal of keeping the Internet unregulated.  This argument becomes more difficult to make if we are in the process of doing the opposite.

Fundamentally, Mr. Katz wants Google to work “the way it used to work.”  That is not a recipe for innovation.  Hopefully, the authorities will see his recommendations for what they are – the self-interested proposals of a competitor – and discount them accordingly.

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