Research Notes

Is Google a company with large and deep pockets but with too short arms

– and thereby prioritising their profitability higher than their social responsibility?

Around the world there are many ongoing debates regarding how to handle the increasing amount of Internet traffic on the many different Internet providers’ networks.

On the one side we have the Internet providers, that want to prioritise various types of data traffic and differentiate the network products they are selling to their customers, and on the other side we have Google, who believe that operators should give their customers a uniform connection regardless of the type of service being used.

Basically network providers want to charge extra for e.g. video services that offer better video quality than customers will get from a basic connection.

Since this debate started, Google has been extremely clever at moving the focus of the debate over to net-neutrality, in effect thereby succeeding in changing the debate to a debate regarding whether network providers should be allowed to censor the Internet.

Simply put, Google has managed to position them self as the company that is defending liberty on the Internet and operators that are trying to defend their large infrastructure investments are companies that are trying to limit online freedom.

Why is this a problem? 

The Internet consists of a number of networks that are interconnected. These networks were built with private capital and access to these often parallel networks is sold by private companies, whose shareholders have taken a financial risk in the hope of gaining a return on their investments.

The Internet access market requires enormous investments. This is a market where many have already both lost and gained enormous fortunes and is a very turbulent market with prices generally plummeting, despite traffic volume consistently increasing.

In other words if you want to make money building, operating and selling access to the Internet, you stand a good chance of something going wrong.

In our report we have described the challenges that for example mobile broadband providers are currently facing. We have described in detail in both this report and our report many of the services that mobile broadband providers could offer to thereby create new revenue streams that can partially compensate decreasing broadband prices.

On this same market where operators are battling these challenges, we then have market players like Google and other companies that perceive themselves as service providers residing on top of the networks being built by operators – and in Google’s case then telling operators that they should not be allowed to prioritise one service over another service.

What Google is saying is that they do not want to pay to ensure that their customers’ traffic has a certain level of quality on an operator’s network and that their customers should not have to pay extra to access Google services in a certain quality.

In other words Google wants for example all video service providers to offer the same quality across all networks and that operators should not consider selling prioritise traffic to those who offer or consume services.

Strand Consult’s point of view regarding Google’s line of reasoning

Strand Consult has followed this debate closely since it started and with our level of knowledge about the telco industry, it is very difficult to sympathise with Google’s reasoning.

Agreed, it sounds almost patriotic that Google is trying to position them self as the company defending the free Internet – trying to ensure all consumers have equal access to the same services at the same time at no extra charge.

We have tried to put what Google is saying and doing into a perspective that makes it a little easier to understand. Then you can decide for yourself whether you agree that Google is a company with large and deep pockets but very short arms and who are prioritising their profitability over their social responsibility.

In modern society Internet access is of vital importance and we therefore also need companies that are willing to make enormous investments in network infrastructure. Competition between the many different types of networks gives consumers better products and cheaper prices. Google has no intention of investing in infrastructure and are not willing to take any financial risk regarding offering end-users access to the Internet.

When you build broadband networks and especially mobile networks, there will be bottlenecks. There will be periods or areas where traffic volume is periodically larger than the network can handle at that time. Simply put, the Internet is like a motorway, at certain times there will be more traffic than the motorway can handle. But according to Google, it should not be possible for providers to sell access to a fast lane and Telcos should not be allowed to prioritise their own services higher than for example Google services.

Google believes that all consumers should experience the same performance, thereby in reality abolishing queues on the motorway, abolishing differentiated pricing being used today in the airline industry, abolishing business class and in effect selling tickets to cinemas, concerts and sporting events at the same price, regardless of where the customer is sitting or whether they are receiving extra services during the event.

In reality Google wants to abolish the concept of differentiated pricing for different types of services and by talking about net-neutrality, Google is in reality misusing the sacred name of democracy as the foundation of their standpoint.

Does Google have double morals on this issue?

In a democratic world Google is welcome to publish their point of view. But is Google abiding by the same set of rules that they want Internet providers to use and that are the basis of their standpoint in this debate? It is tempting to ask Google the following questions:

1.    Are search results prioritised on Google and does your advertising revenue and business model have any influence on the order and presentation of search results on Google?

2.    Do all your advertisers pay the same for an advert, or can advertisers pay extra for better exposure than advertisers using the standard service?

3.    Are all Google services (Mail, Android, Analytics etc. etc.) neutral regarding advertising platforms, or are your different services closely integrated with the basic foundation of your business – Google advertising?

4.    Is it not correct that Google is trying to optimise your business in all areas – just like Internet providers – for example by placing Google sales offices close to customers, but invoicing offices in areas with optimal tax conditions! Is it also not correct that French President Nicolas Sarkozy has recently started a debate regarding how much tax Google is playing in France?

5.    As services move to cloud computing, thereby influencing corporate taxing in many countries, will Google help national governments minimise their tax losses as service providers move their billing to countries offering low VAT and taxes? Is it Google’s future intent to invoice customers and pay tax in the same country that their customers reside?

Strand Consult has a very clear opinion regarding Google’s net-neutrality discussion. From our point of view Google looks like a man with deep pockets and short arms, someone we often meet in town and who suddenly disappears when the waiter brings the bill. In our opinion Google has double morals regarding this issue and their social understanding and responsibility towards our future society is almost non-existent.

If you would like to know more about this subject you can read Google’s blog here: or alternatively acquire more information from the two reports we have published regarding this area.

Our report focuses on the challenges that e.g. mobile broadband providers are currently facing and that are described in detail.

Our report describes a number of the services that e.g. mobile broadband providers can offer to thereby create new revenue streams that can partially compensate the decreasing broadband prices. More information:

Successful Strategies for the Mobile Broadband Market

OneAPI – Next Generation Value Added Services in the Mobile industry

Show me the money – The future Business models for mobile Broadband Services

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