Don't be arrogant

Google is starting to act like your garden-variety monopoly, says Fortune's Brent Schlender.

By Brent Schlender, Fortune editor-at-large

(Fortune Magazine) -- What was good for our country was good for General Motors, and vice versa. - Charles E. Wilson, president of GM, 1953

What is it about powerful companies that makes them conflate their own selfish interests with those of their customers, their industry, and even the world at large? This is especially true in high tech. You could plug the name of any prominent Fortune 500 tech company into Charles Wilson's famous quote, and the result would sound like a mission statement for some of our most notorious corporate bullies. "What's good for Microsoft is good for the Internet." Oops, that's how Gates & Co. ran afoul of federal trustbusters as they trampled Netscape underfoot.

Seriously, when a company attains extreme market domination, hubris and a sense of infallibility can't be far behind. It's only a matter of time before said market dominator tries to tell everyone else how to run their businesses.

The latest example is Google (Charts, Fortune 500), which lobbied hard in Washington to dictate the terms of an upcoming FCC auction of radio spectrum. The frequencies, currently used for UHF television, are to be sold next January. In 2009 the winning bidders will take their swaths of spectrum and unleash a new and (they hope) profitable era of data-intensive wireless devices - smartphones, media players, car computers and gizmos no one's thought of yet.

Why would the Google guys bother themselves with this auction? After all, the company isn't even in the big-time telecom biz ... yet. The answer is simple. Google wants to take its breathtakingly profitable targeted advertising beyond PCs and inject it into any other medium it can find, whether it be radio or TV or even newspapers and magazines. But the biggest prize of all may be cellphones. Why? Because there are so damn many of them, and they're behaving more and more like pocket-sized, full-blown computers (e.g. the iPhone).

Now we come to the hubris part. Google promised the FCC it would bid at least $4.6 billion to purchase spectrum rights - but only if the FCC met all of Google's terms. Specifically, the FCC must ensure that all networks using the new parcels of spectrum be "open platforms." That means four things: (1) The new networks must allow consumers to use any device they desire; (2) they would support standard software like Internet browsers and e-mail; (3) network operators would be required to lease some capacity to other providers; and (4) the new networks would all have to be mutually compatible. In other words, Google wants this spectrum to behave a lot like the Internet.

Sounds reasonable. Wouldn't it be nice to use your cellphone on any network you wanted? But traditional telecom powers like Verizon (Charts, Fortune 500) and AT&T (Charts, Fortune 500), which run tightly controlled wireless networks, felt blindsided when they first heard of Google's demands. Allow any old device to plug into their new networks to run any old software? That's giving away the store! Even more galling was the notion of being forced to lease out capacity to all comers. If they pay billions for spectrum, shouldn't they be entitled to use it as they see fit? What are we, communists?

Moreover, by preemptively offering to meet the FCC's minimum bid if its conditions were met, Google appeared to be forcing the agency into an auction for spectrum that would arguably have far less business value. The spokesman for the Cellular Telecommunications Industry Association called it nothing short of "Silicon Valley welfare."

The FCC has offered a compromise: yes on the open devices and software; no on the other two conditions. Hungry for the new spectrum, AT&T reluctantly announced its support; at presstime, Verizon was mulling its choices. Google should be thrilled that the FCC adopted even some of its suggestions, given that it's not a big telecom player. But apparently "compromise" isn't in the company's vocabulary. After the vote, the nicest thing Google's chief telecom lobbyist could say was that the FCC ruling was "real, if incomplete, progress," adding that the company would take weeks before deciding whether to participate in the auction.

Open networks are a legitimate goal for Google and are good for consumers. But all the grandstanding has probably hurt Google's chances to get open networks. Message to the "Don't be evil" people: Don't be so arrogant, either.

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