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Google and Telecoms vs. the 'Regulatorium'

The company has put together a "checklist" -- installing fiber conduit when streets are re-built, streamlining government processes and having up-to-date data on local infrastructure -- a consultant's wish list that the consultants call "Gigabit Communities." 

By piling on the deregulation pressure up front, Google maintains maximum leverage over its "chosen" cities, most of which are falling all over one another to comply with its requests.

Under Google Fiber, "universal service" -- the idea of serving every community within a region -- is dead. In Atlanta, for instance, Google is only offering to serve the central city and some nearby suburbs. The offerings in the other markets are similar, and in the more far-flung cities there are no suburbs being offered service at all. 

Back in the days of cable franchising, this would be called "cherry picking," and some jurisdictions not on the list are almost certain to make that charge. But more important than the where is the what: the promises of subsidy being made by local governments to Google, in the hopes of getting Google-controlled fiber.

The governments that fail to win Google Fiber will have created a bid that other fiber companies can answer. Cable or phone companies that want to "overbuild," investors that want to build their own fiber networks, or municipal efforts will have a road map to doing business cheaply. You can't offer Google one deal and then deny that deal to its competitors when Google doesn't take it. If "better service" is the result, why would you?

None of these promises break the oligopoly now found in last-mile Internet services. Only those with a line to the home can provide the service, and very few can afford to run that line. The way to create real competition would be, as Copps wrote, to enforce "common carrier" status on infrastructure owners and make the wholesaling of capacity a condition of doing business, as the 1996 Telecommunications Act contemplated.

But that's not going to happen. Infrastructure owners are not going to invest where their actions and rights are restricted in any way.

With telecoms leading the charge from the top and Google leading it from the bottom, regulations are being replaced by a corporate gold rush for assets and territory. Whether it works better for the customers than for the old regulatorium is unclear.

What is clear is that it's happening and smart investors can benefit.

At the time of publication the author had a position in GOOG.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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