OPINION
Will Google Learn Government 101?

A decade ago, Microsoft (Nasdaq: MSFT) thought it could ignore bureaucratic rumblings with little or no fallout. That attitude led to the historic Microsoft antitrust trial and the realization that bureaucrats can indeed wield bigtime impact. Google (Nasdaq: GOOG) is now learning a similar lesson, albeit in a different way.

In the race to provide WiFi access to Internet users, one strategy that looked like a shortcut was to partner with government bodies that seemed inclined to offer a near monopoly to companies who agreed to provide citywide wireless Internet service for "free." In April of 2006, Google was awarded permission to build such a network in conjunction with EarthLink (Nasdaq: ELNK).

Bait and Switch

Local governments control the so-called "rights of way" for companies to set up their broadband wireless equipment throughout a city. When a company is awarded the main rights-of-way permissions, one might think that future service provision would be in the bag. In a world where everyone followed the Google motto, "don't be evil," that would be the case, but in San Francisco, reality has set in for the search giant.

Chris Sacca, Google's special projects leader, recently voiced frustration with the city of San Francisco's slow negotiating style. According to the San Francisco Chronicle, Sacca complained that "talks to come up with a final contract have advanced little since they started, and officials have made unreasonable demands, including a request for free computers and a share in revenues."

It is interesting to see how the city's original goal of "solving the digital divide" has morphed into delays and demands for money and free goodies. What truly shocks is that Google actually seems surprised that the city is pulling a bait-and-switch job on it. Cable operators were subject to such outrageous demands for years, so it is quite amazing that Google didn't see this coming. And Google is making this mistake on the national level too when it comes to "net neutrality," an effort to expand government reach in the Internet marketplace.

Trusting Wisely

Google and other Internet companies, such as eBay (Nasdaq: EBAY), are worried that network providers like AT&T (NYSE: T) and Comcast (Nasdaq: CMCSK) will block consumer access to Web pages if Web companies refuse to pay for future premium services. This future threat, Google and the rest argue, necessitates the need for government intervention. At this juncture, what Google executives need to consider is how much they can trust government to manage their interests.

If San Francisco is any indication, they should be running from net neutrality-based red tape as fast as they can. And given that the threat Google and eBay imagine has not even come close to happening, it looks a little crazy to be proposing such government supervision. At least 100 companies from the networking and communications sector tried to get this message across to Congress this week.

Cisco Systems (Nasdaq: CSCO), Nortel Networks (NYSE: NT), Qualcomm (Nasdaq: QCOM) and others signed a letter to Senate Majority Leader Bill Frist and Democratic Leader Harry Reid saying that it was "too soon to enact network neutrality legislation." That's the diplomatic way of putting it.

No Free Lunch

What these companies know is that for all the dangers that might lurk in the rigors of the competitive marketplace, government control is a worse fate. Microsoft experienced years of antitrust issues that still dog the company, and the telecommunications sector felt it with price controls from the 1996 telecommunications act. Now Google faces problems with building the citywide WiFi network it thought the city would expedite. When will these companies ever learn?

There really is no such thing as a free lunch. When a deal looks too good to be true, it probably is. Politicians make their living by promising the world and delivering little, but technology executives should be smart enough to see through those tricks. It's time for Google and other tech firms to wake up and fix their mistakes before it's too late. Broadband access, WiFi or not, depends on it.