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IP Democracy:

Expert: Google Owes Success to Carrier Discrimination

(Washington, DC) The idea that broadband carriers might discriminate in favor of a particular service or application is generally considered to be a bad notion, but some experts say broadband carrier discrimination might actually help innovation. Speaking at the Internet Video Policy Symposium yesterday former FCC Chief Economist and current George Mason University professor Tom Hazlett pointed to Google's 2003 deal with AOL, a pact premised on carrier discrimination, as one key factor leading to the search engine's meteoric rise.

AOL's deal to give Google exclusive search engine rights on its service was "the break of its life," Hazlett said. At the time AOL was the dominant Internet access provider in the U.S. and "Google paid for that, they paid an ISP for that."

"That was a highly discriminatory action" that nonetheless spurred Google, and the Internet, to great heights.

Simon Wilkie, another former FCC Chief Economist and currently a professor at USC, took a more nuanced approach. Discriminatory against a service or application in favor of another service or application is "OK so long as you don't block it."

FTC economist Patrick DeGraba said that a particular form of arguable discrimination, traffic shaping, doesn't rise to a level of anticompetitive concern unless the broadband carriers are deemed to have market power. "If there is market power, then the kind of traffic management becomes an issue."

But Cowen & Co. Chief Technology Strategist was more blunt. "I have a hard time believing that [carrier discrimination] would be in the best interests of consumers."

I don't think Hazlett has a strong case here. Discrimination at the application layer, which is essentially what happened when AOL built in Google to its search pages, is very different in effect than discrimination at the network level. We expect our interfaces to be customized; to favor one application over another. We expect the network to deliver content without regard to its source. So there are stronger free speech concerns in network discrimination.

Still, the deal with AOL is an important and often forgotten part of the story of Google's success. I think it has historical importance and explains much about Google. But it does not necessarily have a place in current network neutrality debates.

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Comments (1)

Jardinero1 on March 21, 2008 11:54 AM:

The AOL case illustrates why the concept of non-discrimination is an unachievable absurdity. Discrimination is unavoidable in any case.

In a non-government regulated market, the various participants will discriminate among themselves. In a government-regulated scheme, such as net-neutrality, political actors influenced by their financial backers will discriminate by legislative or judicial fiat.

It boils down to how you want your discrimination served: do you want it determined by market actors, not just producers but also consumers, making the decisions; or do you prefer a coercive, government-imposed discrimination?

I use the word coercive because that is the most important difference. In an un-regulated scheme you can opt out, by refusing to play and/or refusing to pay. In a regulated scheme you don't necessarily have to play but you have to obey and you have to pay for the expense of enforcement whether you agree with the rules being enforced or not.

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