Verizon’s Thorne Criticizes Google as Network Free Rider
Google is profiting from free-riding on others’ network investments, said John Thorne, Verizon’s deputy gen. counsel. While telecom firms have boosted spending on building networks that the search giant will use to provide services, Google is doing little such spending, he told a panel at George Washington U. He said Google offers an example of problems with the 1996 Telecom Act, which were discussed by Thorne and other panelists at a seminar marking its 10th anniversary.
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Thorne expressed frustration with the lagging stock prices of firms like his, as Google shares shot up. “Investors are hammering companies building networks,” while touting the prospects of firms relying on the assets of Verizon and peers, he said. Companies including Verizon are “spending a fortune” building networks Google will use, said Thorne: “It’s enjoying a free lunch.” Verizon is expected by analysts to spend $20 billion on its FiOS fiber project to sell faster broadband service and pay TV. Its stock has fallen about 10% the past year as investors have fretted about that spending (CD Feb 3 p4).
Verizon’s 2004 capital spending was the highest of any U.S. company, said Thorne. By contrast, he said Google invested about $800 million -- 1/4 as much as Time Warner. CompTel has said Bells including Verizon have been spending smaller amounts on their networks overall, a point some carriers said was belied by heavy investment last year (CD Feb 6 p6). “Facilities based companies are getting plenty of blisters laying expensive fiber,” said Thorne, alluding to Dire Straits’ song ‘Money for Nothing’. “All the while [Verizon is] spending a fortune constructing and maintaining the networks that Google intends to ride on with nothing but cheap servers.” A Google official had no immediate response.
Facilities-based companies are best able to protect consumer data and prevent fraud, said Thorne: “If you have networks, rather than software, you can provide the kind of security and trust that will drive the networks forward.” When the microphone he was using failed at the end of his presentation, filling the room with feedback, Thorne and members of the audience joked that Google was responsible.
Others on the panel said they expect the FCC to reconsider media ownership rules once Robert McDowell -- nominated Fri. by the White House to be the 5th member -- starts the job. The FCC has shied from contentious ownership proceedings after court losses in 2001 on cable limits and in 2003 on media rules (CD Dec 8 p2). Asked by audience members about prospects for tighter ownership rules, panelists said it was unlikely. Radio deregulation -- which resulted in Clear Channel owning more than 1,000 stations -- is unlikely to change significantly, said George Wash. U. Prof. Christopher Sterling. “It’s a little late to close the corral doors,” said Sterling, an FCC 8th floor staffer in the early 1980s. The FCC should be required to review its rules less often than the Telecom Act requires, said Georgetown U. Prof. Angela Campbell. She said the news media and Commission must communicate better with the public on issues including TV station license renewal and net neutrality.