Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Analysis: Bad News For Startups If ISPs Start Charging Google

Posted by Tom Foremski - February 8, 2010

Associated Press reports: Spain's Telefonica considers charging Google - Yahoo! News

Speaking Monday at a press conference in the northern city of Bilbao, President Cesar Alierta said companies like Google use a lot of network bandwidth for free, something which was lucky for them but not for Telefonica.
...He says things had to change.

Foremski's Take: If ISPs, such as Telefonica, start charging Google they will also charge other companies providing web services. This will be bad news for thousands of startups worldwide.

Why?

Because Google can afford to pay the fees while startups cannot. This will be a huge tax on innovation.

Google, Yahoo, Microsoft, etc -- can afford to pay the fees. This will help their businesses because it will keep competition at bay.

Those companies will then be able to acquire smaller companies that don't have the means to scale their businesses, and eliminate large numbers of potential competitors. While they can do this already, the fees will speed up the process.

The Telcos are in a strong position because in every country they are government regulated entities, which provides a strong barrier to competition. How many new Telcos have arisen in the last five, or ten years? Consolidation has strengthened the current Telcos.

Here is another reason why GOOG should look at the strategic benefits of becoming a Telco or acquiring a Telco.

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Please see: Analysis: GOOG Needs To Have Its Own Telco Service More Than It Needs A Phone...

Google Becomes (Almost) Full-Fledged Telecom, Vonage, Skype, Others In Sites | BNET Technology Blog | BNET


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