Google Learns Government Is Not a Good Business Partner

In 2007 Google decided it wanted a more permanent role in the political game. The company launched its D.C. public policy headquarters the following January. Google and policy makers in D.C. were excited to see this step being taken by the tech giant; the expectation was that Google would take the system by storm.

Over the last three years Google has been highly invested in the public policy process and in many cases they have molded policy to their whims and desires. In 2008 Barack Obama ran as a pro-net neutrality candidate and Google jumped on that bandwagon donating $814,540 to the campaign. His opponent, John McCain received less than $100,000. Additionally another million dollars was provided by Google to MoveOn.org. This grand show of support was in hopes that it would ensure Google Federal Communications Commission support for Net Neutrality. For the most part they got it. And that policy looks to stick, for now, after last week’s inaction by Congress, allowing the FCC to start passing law for the United States.

Though recently it appears Google has begun to realize a valuable lesson about the world of D.C. politics, when the Department of Justice and Federal Trade Commission announced they would be investigating Google for monopoly practices.

Recently, Eric Schmidt, executive chairman of Google, spoke with the Washington Post after his first appearance for congressional testimony, and the “take D.C. by storm” expectation certainly appeared to be catching up with Google as Schmidt vocalized his frustration.

“So we get hauled in front of the Congress for developing a product that’s free, that serves a billion people. OK? I mean, I don’t know how to say it any clearer,” Mr. Schmidt stated to the Post. “It’s not like we raised prices. We could lower prices from free to . . . lower than free? You see what I’m saying?”

But the real zinger that many conservatives and maybe even more liberals in the tech sector will be surprised to hear came when Schmidt noted, “Regulation prohibits real innovation, because the regulation essentially defines a path to follow,” he said. “[This] by definition has a bias to the current outcome, because it’s a path for the current outcome.”

Google’s rival Microsoft learned ten years earlier when the DOJ sought to break the company when Microsoft was being investigated for monopoly practices that you can try to play D.C., but in the end, D.C. always plays you. Microsofts recent political contributions pale in comparison to what the company was giving in the mid to late ’90’s. Money talks, but only for so long. Washington has a strange way of cutting the legs out from the most generous as when they start to become a little to comfortable in their higher chairs.

Schmidt is right in the fact that regulation can often paint an industry into a corner. Innovation can continue on some level, but innovation must then remain within the guidelines of the established regulations. Real innovation occurs when it is unhampered. Over the last month we have celebrated the life of Steve Jobs. His success was due in part to the lack of limitation in his environment. What if the government told Jobs that a computer business isn’t allowed to make cell phones?

Google should take special note of regulatory barriers to innovation. This is especially important when concerning Google’s role with Net Neutrality regulation that will limit what the broadband suppliers – (Internet Service Providers like AT&T or Comcast – are able to do with the modern Internet, and how they are able to innovate the Internet of tomorrow. Much of the concern with Net Neutrality from Google’s point of view has always been how Internet architecture affects content creators with little interest in how it may play out with other sectors of the same industry.

Content has to travel over broadband companies’ networks; hopefully Google will soon realize that if the broadband sector is limited by how it can innovate, those limitations will eventually trickle down and affect how content creators like Google can innovate. If approaches are limited for the transportation of data, it will affect how a content creator can get its data to the end user, you and me, and in what ways companies like Google can design their products.

Of course, a company could just create its own network and make a deal with a third party broadband carrier like Amazon has done with Whispernet, the company could then prioritize network traffic to the end user and bypass Net Neutrality regulations completely since the company is not a service provider.

Consider that many wanted to include bans on private networks like the one used for the Amazon Kindle or even regulate the Apple app store as part of Net Neutrality regs. Since that time the Kindle has matured into the Fire, and the app store has created thousands of jobs for programmers, income for hobbyists, and billions in revenue.

These newfound struggles should wake Google up to the notion that the hard and fast play in D.C. is generally not effective, and the slow hand of regulation may serve their greater interests better in the future. Then again, maybe Google’s recent hiring of 12 center-right lobbying firms, the found anti-regulation religion comments from Schmidt, and the start of funding toward organizations like The Heritage Foundation and various conservative candidates are simply a ploy in the buildup behind a decision toback a new horse during next year’s election. If Google is anticipating a Republican victory in the White House, they have a lot of ground to make up and a lot of bridges to rebuild on the right.

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