Friday, July 1, 2016

Zero Rating is Good for Consumers, Google, Media and Communications Companies.

Some now say Google is essentially dictating Internet policy in the United States and European Community. One does not have to make such claims to note that it is very hard (virtually impossible) to find any Internet-related issue, on either continent, where Google’s position has lost a regulatory battle.

That is not to belittle in any way Google’s advocacy of its own business interests. But the simple matter is that no firm spends serious money on regulatory matters without a clear understanding of its own economic interests.

And one is hard pressed to find any significant issue where Google has not gotten its way. That is not nefarious. But some of us would argue that Google’s very success shows why it could be quite unwise to impose more regulation on the industries Google is beating in the policy battles, namely Internet service providers of several types.

The very large point is that it does not make sense to place new burdens or restrictions on industries that are in decline.

On the other hand, it likewise makes sense to encourage the growth of new industries by likewise minimizing barriers to their growth. A regulatory “light touch,” in that sense, makes sense both for the industries policymakers might wish to encourage, as well as industries with large societal and economic impact that are virtually destined to be smaller in the future.

The issue of bans on zero rating provides an example. Ironically, Google is able to provide valuable services of so many types, at zero incremental cost to end users, precisely because third parties (advertisers) subsidize the services and apps on behalf of consumers.

In other words, Google literally has built its business on zero rating, but wants ISPs banned from any similar practices, even if zero rating has been commonplace in the Internet, media, content and communications businesses for decades.

“Zero rating is nothing more than price flexibility,” argues consultant John Strand. “ It is a business model enjoyed across every industry and even in the Internet itself.”

“Every Google search is zero rated by an advertisement,” Strand notes. “That is a third party subsidizes the cost so the end user does not have to pay.”

That is no argument for placing limitations on Google’s ability to innovate, in business models as well as other key elements of its growing stable of businesses. Google should be as free as possible to innovate.

But ISPs also need more ability to innovate, as their core revenue models are disappearing. Zero rating is what toll free calling has been about. Zero rating is what advertising-supported content and media have been all about. Fairness, as well as necessity, requires that the present lawfulness of zero rating be maintained, many would argue.

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