A Senate Subcommittee will hold a hearing Thursday on Google's proposed $3.1 billion acquisition of DoubleClick, and what the deal would mean for the online advertising industry. This is a complex transaction, with lots of issues of market competition and privacy to be worked out. But one witness isn't coming to the hearing to fret about the ad market or the dangers to consumer privacy. He's only coming to tarnish Google at the behest of other parties. Guess which ones?
This is one of those moments that shows how tactics work here, uncovering the underbelly of powerful forces in play. Call this the Bank Shot. The idea is not to hit a target directly on an issue of interest, but to hit it via a less direct route.
Here are the witnesses to testify before the Antitrust Subcommittee. David Drummond, a Google senior vp will be first. That makes sense. It's his deal. Brad Smith, Microsoft's general counsel, will appear. Microsoft also tried to buy DoubleClick, got outbid by Google, and now claims that the deal will harm the online ad world. Microsoft has a direct interest in the deal, as it has started competing with Google across a variety of business fronts. Marc Rotenberg, exec. dir. of the Electronic Privacy Information Center will testify about the issues surrounding the storing and use of consumer information. That's a legit issue.
Then there are two others. Thomas Lenard of the Progress and Freedom Foundation, a “free market” think tank, will testify. He has been interested in DoubleClick and related issues since publishing a book, “Privacy and the Commercial Use of Personal Information” in July, 2001.
And then there is the last, most curious witness, Scott Cleland of the Precursor Group. His interest in Google is recent, going back to last year and his interest in DoubleClick even more recent. That's because he doesn't really care about Google or its policies except for one aspect. Google opposes his main clients, the Bell companies, on Net Neutrality, spectrum auctions and a range of other issues.
Here the larger framework: Historians will note that when the Berlin Wall came down and the Union of Soviet Socialist Republics collapsed, a generation of American policymakers and military officers lost their reason for existence. The enemy that had defined their existence for decades ceased to exist, and it would be a while until a new one was found.
The Bell companies are in a similar mode. Following the Jan. 1, 1984 breakup of the old Bell System, the then-new Bell companies were in a state of war with the long-distance industry led by their former parent, AT&T, as well as MCI, Sprint and a batch of lesser foes. The conflict ranged from the Federal Communications Commission (FCC) to the hall of Congress, to state legislatures as the long-distance industry fought to have the Bells make conditions ripe for competition, and the Bells sought to prevent them while getting into long distance themselves. Then SBC, a Bell company, bought AT&T, Verizon, another Bell (plus GTE) company bought MCI, and the big game was over. But who would there be to fight?
For a while, they just thrashed around, but then as the fights over who should control the Internet started, one company gradually raised its Washington profile to oppose the Bell machine: Google. Google until relatively recently had little or no presence in Washington. But as the company became more prominent in Washington, to say nationally and globally, the Bell companies rejoiced. Now they had a new enemy, and a new talking point – the poor, downtrodden phone companies versus big, bad, freeloading Google.
Telephone company executives couldn't wait to start throwing out Google's name at every turn. They said Google was pushing Net Neutrality as a way of getting free or cut-rate telecommunications services. They said Google's Net Neutrality policy would raise prices for consumers. Those are nonsense, of course, because Google pays millions of dollars in telecommunications charges.
When the Federal Communications Commission (FCC) was considering how to auction off prime spectrum, the Bell companies again brought Google front and center. It was rich Google that was trying to get cheap spectrum and Google that wanted advantages in the auctions, the telephone companies said. Never mind that a coalition of public interest groups, including Public Knowledge, was in the forefront of some of the proposals. Never mind that the wholesale issue would bolster innovation. Google once again and front and center as the target.
Now it's in the Bell interest to attack Google on any front and impugn their credibility wherever they can. That way, when Google enters a debate on an issue of more central concern to the Bells, Google's credibility, the Bells hope, will be diminished as they are criticized as hypocrites, or monopolists or some such. Enter Cleland, who works for the Bells. Since 2006, he has run with the Bell talking points about Google, spending endless time criticizing them on his blog. Earlier this summer, he published a report slamming the Google purchase of DoubleClick, an area of economic research somewhat afield from his background in traditional telecom issues.
And his reputation for advocacy got the better of him. As the prominent blog Techcrunch noted, “Cleland is also an anti-net neutrality activist who has backed the position of the existing telecommunications players in testimony to a Congressional hearing; simply as with any analyst or lobbyist, he makes a case that is usually in line with the concerns or beliefs of the industry that backs him.”
The pity is that before signing onto the Bell company talking points, Cleland agreed with the principle behind Google's core positions on the need for an open Internet. In 1999, during the precursor of today's Net Neutrality battle, consumer advocates tried to persuade policymakers to force cable companies to allow Internet Service Providers to connect to their networks, much as telephone companies at the time had to do.
The Washington Post quoted Cleland: “To Scott Cleland, an analyst with Legg Mason Precursor Group, the special treatment that allows cable operators to shut out other providers follows neither history nor logic.
“'Cable is the fifth wire into America's homes,' Cleland says. 'The principle of nondiscrimination applies to the other four. The electric company cannot tell you what kind of brand of appliance to buy, the gas company can't tell you what kind of furnace or stove to buy. The water company can't tell you what kind of faucet or sink to buy. The telephone company can't tell you what kind of or brand of phone to buy or who to do business with over your phone. Why should cable?'”
This from the person who said in 2006, “In short, don't be fooled by the superficial appeal of the net neutrality legislation. The idea is rotten to the core because it's a heavy-handed fix to a nonexistent problem, and it's a lousy cost-benefit trade off for consumers.”