"Asking a nation-state to manage Internet crime is like asking a Mountie to pull over a Prius"- Meng Wong
By the end of this year or in early January, the Federal Trade Commission (FTC) is going to weigh in on their 18-month investigation of Google over antitrust accusations. This will conclude a contentious period where Google competitors lobbied for draconian penalties while an uncharacteristically introspective FTC considered the viability of ongoing government regulation of the fast-moving Internet technology sector in general.
Lets be clear, shall we? Any government agency trying to keep up with the rate of change in the technology sector is a futile gesture. Technology is changing constantly, and by 'constantly', I don't mean monthly, quarterly or annually. I mean minute by minute, hour by hour, day by day. Government agencies, when they are fast, work on 18-month intervals, like the FTC did in this case. Technology has its own rate of speed that (in my quarter century in the sector) doesn't slow down to accomodate externalities like regulation and taxation.
This investigation of Google for monopolistic activity, like the prior investigation of Microsoft, existed for two reasons:
1) The question if Government should be involved in anti-trust behavior in technology, and/or if the market will respond more efficiently than some externally imposed regulatory regime.
As Microsoft would argue, any regulation that prohibits or partially limits any company's behavior will move slower than market forces. Microsoft learned a punishing financial lesson at a Federal and State level about bundling Internet Explorer in Windows, as Google is currently learning with Google travel and other services receiving prioritized rankings over other search results. So what do we do, not regulate?
This isn't financial services, people, with principled regulations like the Glass Steagall act that were created in more rational times in preparation for these irrational times.
The technology sector eschews static regulation by definition. It is too fluid and dynamic to regulate without killing it in the cradle. The best way to regulate technology, unlike, say, financial derivatives, is by market forces. When left to their own devices without regulation, banks will implode the economy as evidenced by the value of your 401(k) since 2008. When left to their own devices without regulation, US technology firms will innovate at an increasing rate of speed, which in turn has created unprecedented wealth for individuals, companies, and the tax income of the United States.
Here is an example of these market forces in action: Microsoft, leveraging market forces, started Scroogled, which highlights paid results over organic search results on Google's search platform. As a result of this campaign and others, they've seen their marketshare of overall search grow from 0% in May 2009 when they launched Bing to nearly 16% as of September 2011.
I don't recall where I originally heard this aphorism 20+ years ago. It is along the lines of "The Internet routes around bad routes, bad routers, and bad business models with equal equanimity." And it does. Anyone who becomes abusive in their pseudo-monopolistic business practices will find themselves in the elephant graveyard alongside IBM, Hewlett Packard, and others who felt that their incubancy gave them inevitability.
2) Companies attempting to use regulation as a competitive market tool. This is usually the exclusive domain of very well-heeled companies, using the SEC/FTC/NIH/DEA/FDA/EIEIO as your competitive weapon to quash competition from a non-market angle. All of the big boys in the tech field are guilty of having tried this course in recent years, including my old alma mater Cisco. The fact that Google's competitors are doing this to Google right now, when they have been beaten by the same regulatory stick, is humorously ironic.
And dirty pool.
It's a sign of failure of competing in the open market to play the Government regulation card. The market in technology is remarkably and painfully efficient. Using regulation as a substitute for free market competition distorts the natural forces of market inputs, competition and outputs, and is ultimately counterproductive to all market participants other than the bad actor who invokes them.
As for Mr. Wong quoted above, I would respectfully modify his quote to read, "Asking a nation-state to manage the Internet is like asking a Mountie to pull over a Tesla Roadster."