Taken together, these inquiries are a litmus test for the U.S. government's willingness to challenge a widely liked and admired company and to take on some profoundly difficult questions.
Can monopolies exist online, when competition is only a click away? What constitutes anti-competitive behaviour in the complex networked economy, where the very size of big companies allows them to operate more efficiently, and thus grow even bigger? Are consumers harmed if various services are bundled together, but everything is free?
Google executives acknowledge the scrutiny. "We're getting larger, and we have been very disruptive within some industries," says Alan Davidson, head of U.S. public policy at Google. "We know we have a giant bull's-eye on our backs."
In Washington, there is significant disagreement over the proper scope of competition regulation and what the future should hold for Google - and both sides have big financial stakes.
On one side are companies like AT&T and Microsoft, which vociferously lobby against Google in the policy arena.
AT&T is Google's staunchest foe in the battle over "net neutrality," a term used by Google and others who fear that telecommunications providers might throttle bandwidth for certain Internet services, discouraging innovation. Microsoft provides e-mail and other services in competition with Google and has a rival search engine, Bing, which controls 11.8 per cent of the market in the United States. (Google has 64.4 per cent, and Yahoo 17.7 per cent, according to comScore.) Microsoft is also a paying member, along with Amazon.com and Yahoo, of the Open Book Alliance, a group founded by Mr. Reback to oppose the Google Books settlement.
Google oozes a confident, seemingly cavalier attitude. Its Washington office, a few blocks from the White House, has all the casual accouterments of other Google spaces, like massage chairs and foosball tables. Furthering the idea of an open, freewheeling atmosphere, the company uses a public meeting space at the office to present regular events that are available to the public, like conversations with authors and a recent panel about home energy use with Carol Browner, a senior energy official at the White House.
When it comes to government scrutiny, the company's executives challenge the premise that Google is a monopoly, even as the company's share of the search market inexorably rises, arguing that Google is still a minor player in the overall advertising market, which totals $800-billion a year.
Google also says that linking prominently to its own services over those of rivals is good for consumers and not malicious. Its famous search algorithm, conceived by one of the founders, Larry Page, at Stanford in the 1990s, uses a series of complex and opaque formulas to rank the sites within a set of search results. The algorithm is responsible for what Google calls the "organic" listings that appear on a search results page.
But increasingly, above and mixed throughout those search listings, Google presents links to its own services, like maps, YouTube videos, local business results and product search listings. Executives argue that providing these easily accessible results clearly benefits users. Rivals claim that this is self-serving, and that Google promotes its content even though there may be better material elsewhere.
Behind the scenes, Google is taking its challenges in Washington seriously, adding to its staff, increasing expenditures and meeting criticism head-on.
"As we have a bigger impact, we have to expect to have more kinds of scrutiny, and we have to adjust," said Vic Gundotra, Google's vice president of engineering, when asked whether Google could ever again make large acquisitions, like YouTube, without stiff government resistance. "It also means we have a lot of resources today that we didn't have when we were tiny. So we have a lot of choices."
To fight these and other battles, Google employs a dozen or so policy experts, including nine registered lobbyists, and a public relations staff of four. It also retains at least four Washington public affairs and communications firms.
According to public records, Google spent more than $4-million lobbying in 2009, a 160 per cent increase since 2007. Much of that money was spent through entrenched Washington lobbying firms like the Podesta Group and the Franklin Square Group.
The search giant is still outgunned by its primary adversaries: AT&T spent $14.7-million on lobbying in 2009. Microsoft spent $6.7-million.
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