[ NNSquad ] Google's premature monopoly

["David P. Reed" <dpreed@reed.com>]

Let's face it: monopolies happen.

I was a vice president at Lotus Development Corporation when we had a clear monopoly (IANAL, so take that as a lay opinion, but it's in the past, so my colleagues won't kill me) on the "spreadsheet market" (more than 80% share).  Our executives didn't spend more than one day without considering Robinson-Patman and other antitrust laws that say what monopolies can and can't do.  Had we ever been taken to court, though, we would have argued, as do most other companies in that enviable position: well, there really is no "spreadsheet market", and we really weren't being predatory when we exploited the need for companies to "standardize" on the 1-2-3 file format. (in our defense, we published the format, but we also changed it unpredictably, so our hands weren't squeaky clean.)

Antitrust law doesn't make monopolies illegal.  They do, however, grow out of the inordinate power of monopolies to give companies controlling them extraordinary and unfair power.

We see many monopolies today: Facebook, Google, Verizon FiOS (in the >10 Mb/sec Internet-to-the-home market, but not the 500 channels of TV market)), ...

Where do they come from?   Well, Lotus's monopoly came from "standardization benefits" - there are enormous benefits to users from standards.  They also come from "network effects" - supra-linear returns of value to scale.   Google has a standards-based monopoly in search, and Facebook has a network effects monopoly in social connection.   Each benefits the users hugely.  They didn't kill to steal a monopoly: their users gain hugely.

So the issue comes down to behavior.

Monopolists become scary when they *act* badly.   But we love the benefits they create.  Do you really want Verizon to tell you what "search" service you can use with FiOS?  Probably not.  Probably you like Google just fine for search.  What if Google stopped making cool things like the open Android phone, rather than letting Apple's closed phone define the entire mobile applications market?

I find it incredibly amusing that Steve Ballmer has started beating the drum for antitrust investigations of Google, when his position at Microsoft for the past 25 years is that Microsoft never exploited its monopoly in a bad way.  In fact, Ballmer is on record as saying that Microsoft never had a monopoly in the operating systems market - a very interesting form of reality-denial.

By all means, be on the lookout for Google behaving badly.  But let's also realize that this is a battle of monopolists.  The monopoly on your residential access line (fiber or cable) is threatened by Google's small attempt to make sure its services are not blocked or filtered at the routers and switches.  Or like the 19th century robber-barons, being charged "extra" fees to ensure that they get through.

We are going to have many more standardization-benefit and network-effects monopolies like Google and Facebook.  Rather than vilify them for making their users happy, let's make sure they know that there are things they should not do because they are unfair and anti-innovation.