Has Google Changed its Mind about Net Neutrality?

By Peter Bernstein January 22, 2013

For those who are concerned about “Net Neutrality”—the principle that claims that Internet service providers and governments should treat all data on the Internet equally and not discriminate or charge differentially by user, content, site, platform, application, type of attached equipment, and modes of communication—this is a kind of public service announcement arising from an interesting piece in Forbes by Ewan Spence.

First, if you are U.S.-centric you need to know that net neutrality is a global issue. In addition, you need to know that few things stir the juices of those who use the Internet to deliver services than the thought of having to pay network services providers to carry their traffic, the thought that such payments would lead to tiered pricing that is confiscatory, or that the network providers would abuse their control of the pipes to block the content of those who might not be willing to pay or pay a premium to create differentiated value. What you also need to know is that heading the group of companies that wish to keep the net neutral has been Google. 


Image via Shutterstock

That said, it appears despite all of it protestations in the past, to grab share in Africa, Google has been paying giant France Telecom-Orange to send traffic over its network in the growing markets of Africa where Orange has a major footprint. The revelation that Google is doing this has the Internet lit up with comments and speculation to say the least.

Pay to play

This all started during a recent interview on French TV, when Orange CEO Stephane Richard casually mentioned that indeed his company was being paid by Google to carry traffic, although he would not say under what terms and conditions. This story was later confirmed by an Orange spokesperson who told the Register a deal has been in place for at least a year.

No matter how one feels as to whether net neutrality is even relevant as a stance in a world where large content providers like Google, Amazon and others use their own private networks to deliver content to customers rather than the Internet, calling into question the posturing by all parties to the debate, to say this is non-trivial would be a gross understatement. 

First, Google accounts for more than half of the traffic on Orange, which has now gone viral.

Second, such payments belie numerous statements by Google that are the business equivalent of governments saying, “We will not negotiate with terrorists,” while they are negotiating with terrorists. This is not to imply in any way that network service providers are terrorists. In fact, I have argued previously that a reasoned approach where cost causers are the cost bearers needs to be applied considering the traffic stress all of those new devices, apps and services place on network operators, but it does illustrate the duplicity at work here.

Third, understanding the business issues involved, regardless of where one stands on the net neutrality debate is important context. It turns out that as African mobile users switch from cell phones to smartphones, Google is very concerned that Apple and Microsoft not get a foothold in this growing market. The goal is to head them off at the pass by making the Google ecosystem experience so dominant that it creates a barrier to entry that is not that dissimilar to how Google has managed to keep search competitors at bay. In short, as a practical matter it makes sense to pay to play since market share in this instance trumps a little greasing of the supplier.

What has the industry in an uproar is the precedent this could be setting. Since clearly Orange is using its market power to demand payment, this serves to the defenders of net neutrality as confirmation of their worst fears. Now there is the possibility or even probability of network operators using pricing to block competitive activities. The message of fear is that if you don’t pay you will not get to use the network. Plus, this is viewed as a very slippery slope. The incentive now would be for revenue strapped network providers to start charging and then to ratchet things up for “E”veryone going forward.

In addition, there is also the issue about market dominance from the Google side of things. They can afford to purchase preferred access to customers. This would be a decided competitive advantage in terms of providing a differentiated customer experience, which ultimately could be a key in cementing their dominant position as smartphones and tablets become the norm rather than the exception in emerging as well as even more mature markets. In other words, short-term pain for long-term gain is the philosophy being employed and like it or not it is rational behavior.

Inquiring minds have lots of questions. A few good ones just for starters are:

  • Is this a one-off deal or is Google willing to pay anyone who asks them to gain share? 
  • How much are they paying? 
  • What kind of preferential service are their packets receiving, especially versus those of competitors?

This is breaking news that is going to have reverberations around the world. The details of the arrangement are going to be fascinating as well as what happens next, where it happens and how policy makers react. Stay tuned.




Edited by Brooke Neuman
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