Fashionable to mention Google
But of course everyone is at it, exploiting the same loophole. Amazon operate out of Luxenbourg.
The guilty party is NOT Google, it's our government for making it unattractive for businesses to operate here.
Here are a few predictions: Google will shrug off last week's tax scrutiny with a flick of its robotic tail; politicians and campaigners will declare this a "success"; and the much greater toll Google and other multinationals take on the global economy will be ignored. The protestors, upset about the tiny corporation tax bills …
Agreed, perhaps if we had a competative tax rate we might actually entice a few more global businesses to come over here, rather than the current scenario of many companies gonig abroad because it's cheaper, or just dodging tax. In all honesty I don't mind the tax dodgers so much because hey, at least they're still hiring people over here.
A lot of companies are just closing up shop and going to portugal / spain, especially in manufacturing etc. Locally well over 1000 jobs disappeared from a single company last year when it closed down manufacture and moved to Portugal. I'd rather have a company paying less tax and employing a few thousand than no tax and 1000 people out of a job.
I've said this before and I'll keep saying it, if the government do fill in the current tax loopholes through some kind of giant reform all that will do is the following
1) We'll get a short burst of income as the taxes have to be paid.
2) A large number of smaller companies abusing the tax loopholes will go out of business
3) A large number of larger companies abusing the tax loopholes will leave the UK
4) We'll be in a worse situation tax wise than we are now.
If these loopholes are fixed, they need to lower the tax rates at the same time. 15% of a few million is better than 30% of nothing.
Although personally I'd rather see a far more transparant tax system. Right now we're taxed on our pay, taxed on our savings, taxed on our purchases, taxed on our tax, taxed on the tax on our tax so on so forth.
I know this is an over simplification, but a simple way to avoid a lot of the tax dodging among the common man would be to cut out the majority of tax, and go for taxing pay only. One level of tax, before they get the money makes it far more difficult to dodge. At least in theory. Once again I know this is an over simplification but you get the jist right?
I think you are describing a thing called a Laffer Curve, which is (in short and rough) that at 0% tax you collect no tax, and at 100% tax you collect no tax (everybody leaves) so somewhere in the middle is a "maximum tax take" point where it's not worthwhile leaving, or doing tax shenanigans because you'd spend more than you'd save.
Problem is, as with most economic theories it doesn't actually work. Witness Ireland for example. A race to the bottom is a bad place to be - we can't go lower than zero (Bermuda, Cayman etc) and we'd lose the small amount from non multinationals we take currently.
To deal with this Governments of all nations need to sit down and work something out, for example a global tax rate of (say) 15%. Every country has that rate, there is nowhere for Google/Apple/Microsoft etc to run to, so they just cough up wherever they do business. This would never happen, heck you can't get all 200 countries to even join the UN let alone agree on tax treatment.
It would also impoverish offshore tax havens, potentially to the point where their "parent" ("protector" could be a better word) would end up handing over more in aid that it has gained from a more favourable tax take.
It's difficult, I do not know the answer to it.
And the article misses the point just as badly. Google has this monopoly only because it makes the best free email service and the best free web search and the best cloud storage system.
Making a product free-to-use and funding it through targeted advertising does not somehow magically create user lock-in and a monopoly. Google keeps creating services like gmail, google drive, google+ and so on precisely because its core business, search, has no lock-in at all. Changing to another search engine is as easy as changing a browser bookmark. So google has two options for keeping its dominance: Create services around search that create lock-in, or keep its search better than anyone else's.
It's not clear to me that its 'surrounding products' strategy is working. Gmail is, AFAICT, the best free email out there. But if a better one came along, I can jump ship any time and set up a permanent forward from gmail to the new service. Google Drive is, AFAICT, the best free cloud storage out there. But if a better one came along, I can download all my documents and put them in the new one whenever. Google+ is as near as they come to a true lock-in product, but it seems pretty clear that it is losing to Facebook, precisely because fb has beaten them at the lock-in game.
it makes the best free email service and the best free web search and the best cloud storage system.
You're missing the point that the article makes (IMHO; of course): Google is only "best" because it is economically impossible for anyone else to develop such a platform as they have to compete with a cross subsidised entity. I would also observe that Google supplies those services in total defiance of applicable privacy laws, which is why it is now being investigated in the whole of Europe ("best" is also a matter of interpretation, but not relevant to the argument).
I would also argue that "free" is an EXTREMELY misleading term. Google services are not free by any means, you pay for them with personal details. This means you're not only paying, but because you have no control over what Google does with that data, the potential is there that you are effectively paying forever.
I disagree completely with your view, just because something is free does not give them the right to send me targeted advertising based on personal emails. I would rather not have any advertising sent to me at all, I for sure do not want people calling me for advertising and I for sure do not want google spying on personal information which AFAICT to use your favorite acronym is exactly what they do....
Many people do not realize this (I suspect if they did they might be mildly concerned, probably not enough to do anything about it but thats for another discussion) and therefore google has access to more data about people and things than anyone else which then by default means that they can provide better services.
Not sure if you have ever tried forwarding all your emails to a different email address but it sucked when I did it because if you hit reply you are just replying to yourself and feeding the google monster in your case!!
When I started my subscription with ntl ages and ages ago they ran their email in house (Which there is no reason any semi competent ISP can not do).
At some point they decided to for whatever reason migrate everything to Google. For saving a trivially small amount of money and breaking the ability to actually do stuff with the accounts. It is just a mess.
That sort of stuff annoys me greatly.
If you are running an ISP you should do email / usenet in house like people used to.
(Even small ISP's used to no reason for the huge ones to outsource).
(Not as bad as Sky going from Google to Yahoo).
Even Laffer discredited the Laffer Curve.
Don't forget we and the US had much higher tax rates before and busisness were still started. The idea of a global tax is a non starter as some tossy little country (Ireland) will alway do a deal with the corporations.
Tax at source on revenue in the country the sale is made and refund against costs and investment with no transfer pricing allowed. Do that nad they can't get away.
Is Google going to go, bollocks we don't want the business in the UK? Will Amazon go sod it, thats £6 billion we can live without? Apple as well, they can go and close every Apple store and refuse to sell in th eUK, they won't do it. And even if they do, someone else local will step into their place to take that business.
The example of Boots moving their headquaters to Luxembourg, there is NO WAY they can leave the UK. Even if they did, which they won't , Superdrug or local stores will take the business.
Laffer discredited? It's surely bleeding obvious that the receipts from a tax set at 100% are zero, because you'd have to be mad to earn under such a regime. So there must be a curve from zero income at 0% tax to zero income at 100% tax. The argument is over what shape that curve is and how it varies with time, for tax rates between the extremes, and the effects of changing the rates. This, like many interesting things in economics, cannot be measured with useful precision. (Though gut reaction says that if a government is taking more than half of what one earns, it's time to start thinking about leaving! )
Actually, it did. Reagan cut taxes, revenues went up. Problem is, commentards like you ignore that fact in favor of the deficits going up on the assumption that spending was fixed. What actually happened was Tip O'Neil (D) increased spending $2 for every $1 in increased revenue.
Fix your tax rate at historical norms (18-22% for the US) and things will work. If you make it so it requires less effort to game the system than to pay your expected tax rate, people will. The issue is similar to music prices.
(Bermuda, Cayman etc)
By gad sirah!
Are those not good ol' British Overseas Territories?
There cannot be anything untoward happening in those territories at all!
(Or can there?)
Wake up earthlingz - you in the UK re being so very fleeced.
We steal ownership of your football clubs and you pay even more for the privelege of seeing them play, someone in an office decides a publicly owned entity (think bandwidth?) is worth selling for many billions. Guess who pays the many billions?
Since so many companies can avoid paying this tax by relocating, why not scrap it?
There would then be no incentive to leave the UK and every incentive to relocate to the UK. More employment, so less benefits paid by the government to the unemployed. More purchasing by companies in the UK, so more indirect taxes raised. Maybe the government might find that it didn't need to raise taxes to make up any shortfall, maybe even the opposite. Worth a try?
You don't scrap the corporate tax for the simple reason that everyone that CAN declare themselves a corporation immediately does so (plumbers, doctors, independent consultants, etc.) and pays zero tax on income (or close to it) and leaves all the paying of earned income tax to those of us that have jobs working for others.
And the lower you make the corporate tax, the more incentive there is to do so.
Yes, once you are a corporation, you still have to pay yourself a salary, and get taxed on THAT little piece, but with creative accounting you can end up making £100,000 and only pay yourself (and be taxed on) £10,00 of it. Everything you can possibly make a business expense is one, and you hire your wife, children, etc. all to work for you to, and they pay tax at their rates (near 0%). This is an old game (it was written up well in "Rich Dad, Poor Dad"), and the sucker is the working stiffs that have to show up at their job and pay 40% tax while others pay 5% effectively, for the same job.
Most people reading this are wage slaves, like I am currently. Understand that all a zero corporate tax does is shift even more of the cost of running the country onto us, and allows a select segment to largely escape it at our expense. If that is your definition of a fair tax code, then good luck to you.
The way you avoid this is by making the difference between the personal tax rates and the corporate tax rate just a little less than the pain of the marginal effort of going through the trouble of incorporating, selling your own contract work, doing the accounting, etc. Figure 10% to 15% less corporate tax rates than personal tax rates. And then no one is disadvantaged just due to their employment structure.
But politicians don't want a simple tax system, it would be too easy to actually compare the manifestos of the parties. Much the same as complex tariffs in the energy market appear to offer choice, but actually make real comparison tedious and difficult.
It's just easier for one party to tinker some details in the complex tax structure and then claim a tremendous benefit, and the opposition can claim the precise opposite - all without anyone having the vaguest idea of which is better.
Britain isn't an unattractive place for a business to operate. Hundreds of thousands (millions?) of small businesses operate here, and pay their taxes. The problem is that governments (of various colours) permit/encourage curious loopholes so that their greedy chums in big business can and will avoid paying a fair and reasonable level of tax to support our society (okay, with the usual caveats about Trident, wars etc - it's the principle we're talking about).
Message to government: find a way to ensure that business activities carried out in the UK pay tax in the UK.
I think you have missed the main point of the article - that Google is a monopoly, which stifles any possible competition by undercutting everyone in a wide area of activities by subsidising it from its ad revenue, to which their potential competitors do not have access.
Amazon is in a different position as they are subject to much more competition and they do not have a special source of revenue, which is unavailable to their competitors.
The corporate tax "issue" is totally irrelevant to this discussion.
Actually in their core business of paid search, Google are a monopoly by any measure of the term used in most economies. They account for nearly 90% of all searches globally and over two-thirds of all paid search revenue. Now, you can argue that my definition of their business is too narrow, but online is rapidly catching (and overtaking) other advertising sectors; and lots of advertising sectors, especially TV, are subject to monopolies regulation, so why isn't internet? Google already makes more money in the UK than ITV and online's share of voice will continue to grow (indeed its pretty much the only growth ad market - everyone else is flat or in decline), with Google dominating that.
Read the above comments guidelines BEFORE posting. If you disagree with the article (as many of you do, which is entirely right and fair), make your point civilly.
Demanding people be sacked, accusing us of being shills, mindlessly slagging off XYZ company/service/product/person ... comments like that are not going to make it through. Think before you post. If you don't like this, I refer you to point 1 in the link above.
Thank you for your manners and restraint. We have no problem with civil, reasoned discussion on here.
Not sure why people fail to get the message Shitpeas since you're speaking the truth. If the UK government wants to fix the issue they have to make it onerous to avoid taxes to compel Google to comply. Expecting them to do it from the goodness of their own hearts is not going to work on Google or any other company.
It may be fashionable to mention Google, but equally fashionably, everyone's (erroneously) throwing the tax affairs of these companies into the same pot. The way Google avoids tax isn't the same as the way Amazon avoids tax. In Amazon's case they've convinced their shareholders that profitability isn't a requirement for running a successful business, so, the amount of profit available to be taxed (in ANY country) is small because most of their revenues are ploughed back into growing the business. This is actually common and quite "old fashioned" in a way. Google's use of the Double Irish and effectively charging itself to keep profits in Ireland down is is also perfectly legal, but far more ethically dubious (in my opinion), because the value of what Google charges itself is entirely under Google's own control. They're stacking the deck.
However, as the article states, the tax affairs of large corporates are really a distraction compared to the wider effects of Google and others on the economy. As industry after industry is transformed, the vision of net utopians of creator engaging directly with consumer (always a naive vision, but its amazing how many people bought into it) has been replaced with consumer and creator engaging with a handful of absolutely massive middlemen, which ultimately can't be good for competition and consumer choice.
To be fair, Google-based advertising processes vastly improved on the practises if those that went before them - losing the animated pop-up shit - and at prices that allow even small players to afford and profit from their services.
I'd rather look at the likes of PayPal and the Big Banks for taking too big a slice of online purchases. If you can finance a space programme or a Formula 1 team from the profits, then you're taking too much.
At least Google's profits are going somewhere useful - like self-driving cars.
No, you're wrong, Google absolutely ARE the worst offender. So they've made advertising more effective than earlier models? Great. If you're an advertiser. Except its not really great because now 60% of your ad spend goes to Google and you've twisted your whole marketing organisation into a Google-friendly pretzel (for the last few years it was SEO, now Google says "do content" so everyone starts "doing content"). If Google changes the rules, you don't have a plan B.
This article is bang on the money and you've actually fallen for the seduction of Google; "At least Google's profits are going somewhere useful - like self-driving cars." - well, yes, Google make so much money they can do "cool stuff", but its their agenda, and their "cool stuff" that gets built, usually because there's ultimately yet another data payoff for Google at the back end.
As for looking at PayPal and the banks, I don't disagree, except, Google are no better than them when they DO charge for stuff, and just to be clear, Elon Musk doesn't fund a space program from what PayPal earns, he funds it from what he sold PayPal for.
I'm not particularly worried about Facebook, because advertisers are already wising up to their inability to deliver value, but Google are incredibly adept at using their dominance in one sector (and their huge pile of cash) to leverage themselves into others. Yes, their products are good, but they create such effective barriers to entry for new players that we have little or no opportunity to see potentially better alternatives once the Google tanks are parked on a particular sector's lawn.
"[...] and their "cool stuff" that gets built, usually because there's ultimately yet another data payoff for Google at the back end."
Spot on. Take Google Glass for example. Cool stuff, eh? Now say you meet someone on the street. They wear the glasses. Without your knowledge, you could be recorded and the video be shared online. And even if it isn't shared or made public, Google still can and will gather information from it. It's naive to think anything else. Still cool stuff, but a little bit more evil than Google would like to be seen, as usual.
Privacy goes right out of the window, if it hasn't already. (Chances are that it has a long time ago, depending on how many Google services you use [*], and for how long. And all that will happen is some petty fine by the EU which costs Google less than a weekly company-wide supply of toilet paper).
[*] certainly also applicable to a number of other data collecting companies; however, Google undoubtedly does it on the biggest scale, by far.
You say "offender" as if Google has committed some kind of offence.
Guardian ran an (almost) good article about it, which despite all the not-too-subtle digs, quote Schmidt as saying "change your tax laws, we'll always pay the least amount we can get away with, we're obligated by US law to do so."
"At least Google's profits are going somewhere useful - like self-driving cars"
Wow just wow lol, you couldn't come up with something better than a self driving car for what google is helping everyone with? The self driving cars that may or may not ever see the light of day and that everyone would be scared to death to use.
I would trust google to drive me in a car once im dead thats about the soonest they will be doing that thanks very much.
A couple of points:
1) The current trend in the global economy is towards automation. Under that scenario it's easy to see the effects: you will have a few people and companies with lots of money and everyone else in low-paid service jobs. The fact is that corporation tax will have to be large just to stop a revolution.
2) Saying that GMail and Facebook offer 100bn of "surplus value" to consumers, and this should be tapped, is another way of saying "we should charge consumers more". As it's an Orlowski article, this is a similar argument to the piracy = lost sales argument. Even if it's true, consumers don't have a spare 100bn lying around, so what *don't* they buy to pay for e-mail?
"Even the SERVICE jobs are being automated. Think self-checkouts, voice-recognition expert systems, and so on. Pretty soon, the phrase "There's just no place for you" is going to be alarmingly common."
Yes. We will have armies of unemployed. Expect 1) revolution and anarchy, or 2) a massive war to kill off lots of young people.
> Even if it's true, consumers don't have a spare 100bn lying around, so what *don't* they buy to pay for e-mail?
No, I definitely have a couple of mill down the back of my sofa I just haven't been bothered to spend yet. I would definitely use it for FaceBook and GMail if only the Free Market would just give me the chance!
1) The current trend in the global economy is towards automation. Under that scenario it's easy to see the effects: you will have a few people and companies with lots of money and everyone else in low-paid service jobs. The fact is that corporation tax will have to be large just to stop a revolution.
You aren't taking it far enough, who are those service jobs going to service? You're talking about a situation where there are only 100 or so people in the entire world with the money to be able to go out to eat. How many restaurants do you really thing can be supported in that situation?
I'll give you one example. I've just worked on a project that used Amazon's cloud.
Hardware costs before were 1 million a year.
Putting it on the cloud dropped that to 80K.
That's without moving to spot instances (you bid for the machine) or reserved instances (you sign up for a year, two years for a cheaper rate).
That's not a fat cat in the middle. It's hard cash savings.
Just where does this €100bn come from?
Would workers get higher wages to pay for it or would they just spend less on other things?
By providing a free service, they enable people to pay less to multinationals and more in their local shops.
The less I spend on emails the more I spend on apples (at the greengrocers!)
The figure comes from here, I suggest you read it carefully. There are costs to "free" I didn't have time to mention - a bit off-topic here.
"The less I spend on emails the more I spend on apples (at the greengrocers!)"
No. People buy as many as apples as they feel they need. They don't splurge £200 in Apples in one go and then let them go moldy. By contrast the willingness to spend on cultural goodies is enormous, it's a discretionary purchase, and we've all splurged. McKinsey is simply pointing out the obvious: we like paying for stuff. There is a huge disparity between what we could be (gladly) paying for and what we actually spend.
If the economy is bigger there are more opportunities for the taxman: more employees (income tax), more profits (corporation tax), more capital changing hands (capital gains tax).
Your reference to "multinationals" is particularly weird, because your logic entrenches the dominant position of a small number of US oligopolies, at the expense of many tiny local UK businesses (eg, games studios, small imprint poetry publishers, magazines). These are things we're quite good at. And these are businesses that generally pay their taxes, too.
a) Good article although in your comment title I believe the original reference is TANSTAAFL - albeit I understand the reluctance to endorse the implied grammatical horrors.
b) Its in part also a failure of tax simplification and that's not something most corporates feel easy about right now - it would be too tempting politically for HMT to go for a short term taxes and resulting in a lower overall tax rate under the guise of simplification. 'closing the loopholes' or at least implied but never identified loopholes without tax simplification seems unlikely, especially with the HMT's beloved non consultation approach claimed to prevent tax loopholes aka budget secrecy. Working well so far isn't it?
c) Its also in part a failure of the tax transparency promoted by TPA on employment taxes including hidden employment taxes like employers NI. There has been a clear move to taxing people not employers - that's largely sensible for many reasons but handled in an opaque fashion. Not least as we might query the value of our taxation levels in a more democratically meaningful way than companies can were the true taxation level exposed.
d) The conflation of issues around competitive tax as opposed to competition policy does not help the public debate and I object strenuously to HMT and BIS not responding porperly to the poor debate and abuse of PAC by Hodge the dodge. As with so many things using tax is politically expedient - which tends to suggest competition policy is actually in need of an overhaul (a real one this time!).
e) Money is fungible - who knew :) .
To the poster saying you can't get less that 0% - a competitive tax is not the same as a lowest tax. The value of tax paid is highly questionable in the UK though and that requires equal urgent attention. If you have well paid employees especially in London you have to compensate for the additional social costs and transfer of funds outside of the home counties to less commercially sensible locations, doubling up of personal costs such as health insurance and education services and resulting higher costs of commuting, TSB style redistribution, poor access to academia etc.
"No. People buy as many as apples as they feel they need. They don't splurge £200 in Apples in one go and then let them go moldy. By contrast the willingness to spend on cultural goodies is enormous, it's a discretionary purchase, and we've all splurged. McKinsey is simply pointing out the obvious: we like paying for stuff. There is a huge disparity between what we could be (gladly) paying for and what we actually spend."
However, since people in the UK are broke, and aren't saving anything, any extra purchase of email, etc., will have to come by sacrificing something else: we'll just move to a different point on the indifference curve. The question for the UK economy is: is the spending that is cut going mostly out of the country, and the spending that is increased mostly staying in the country?
The reality is that many large Internet companies are from the US and don't pay UK tax. We cannot change e-mail address easily unless there is some mandated address migration service like for mobile phones, so millions of people would have to pay Google, at least in the short term.
But let's examine the McKinsey report, and the breakdown of the "consumer surplus", i.e., stuff people haven't yet got raped by corporations for, such as air. More than half of this surplus comes from e-mail, search, IM and social networks.
Search is dominated by Google and Microsoft (US corporations paying no UK tax), social networks basically means Facebook (US corporation paying no UK tax) and IM means Skype, really (US corporation paying no UK tax). Giving them more money doesn't really seem to improve the UK tax position. The idea that payment will suddenly means that a brand new search engine can be developed that will compete with Google, simply because of the high barriers to entry. Social networks and IM are similar, as the high barrier to entry here is userbase.
E-mail is the only place where you could argue that UK companies could capture some of the market, and only if it becomes easy to change your e-mail address.
"Consumers derive significant value from all they do on the Web, and since advertising pays for much of this, it involves no immediate out-of-pocket cost."
Seriously? And what advertisers pay Google (and Google invests in infrastructure and apps, and takes home as profits, etc.) is not factored into the cost of advertised goods and services (and deducted from taxable income as operational expenses, and so on), and therefore is not paid for, ultimately, by the consumers of said goods and services?
So the McKinsey experts asked some folks how much they would be willing to pay for Gmail if they had no choice (or out of the goodness of their hearts), extrapolated the survey results, and arrived at the figure of EUR100B/yr. It's not like this money is currently lying around. It is spent on something else, or kept in a savings account and is thus invested in something, or is hidden down the back of the sofa as a reserve for a rainy day if no other means of having a liquid reserve is available. If these billions are spent on Gmail then other areas of the economy (yes, the fuzzy feeling of a financial safety net down the back of the sofa counts as such) will be adversely affected.
Sorry, I don't even buy the basic premise of this story, let alone the various conclusions. I will avoid dissecting the feasibility of supporting a Gmail-like service for 25p/yr even for a larger ISP as irrelevant in the context.
Except that you (probably) buy your apples at Tesco or ASDA, who funnel the profit out of your local area. OK, you have some minimum-wage jobs in your locality, but the major benefits do not stick.
I would much rather have locally owned and run shops, but unfortunately, I also need to keep my expenditure under control, and big businesses make it hard for them to compete on price.
Why should internet access be bundled like cable? Really, you are paying for a connection for bits, and all that should matter there is an ISP model where you get an honest choice of service versus cost.
Sure, ISPs want to be "value adding" but in most cases this is likely to be achieved by throttling services that are not directly revenue-providing to themselves.
You might argue about the practicality of an "unlimited" ISP offer, and we all know that is not a sustainable model for an ISP (though they are mostly racing to the bottom here), but a more honest model is a connection fee plus a 'reasonable' data volume+speed cost (as typically used for other services).
Sadly what we are getting is dishonest advertisement and toothless regulation.
What we DO NOT need is the ISPs or similar becoming gate-keepers to the Internet, with variable charging for access to services depending on who they can screw over the most.
Good analysis. There isn't really an ISP business any more, and because they can't add value they have to cut cost - by making the experience as shitty as they can get away with.
It's still a poll tax, though, with the light user subsidising the heavy user. Once you change the incentives so that the valuable bits are being paid for, then it's in the ISPs interest to get them to you as fast as possible. They have no excuses left.
My concern here is who decides what "valuable bit" are?
For ISPs that are bundling other services, such as IP TV or similar, there is a major incentive to prevent you from getting such as good service from other competing suppliers. Extend that to a general case where ISPs cut secret deals with some of the big players on the web and you have a recipe for anti-competitive practice.
It may not be framed in the style of targeting certain competitors, but if they have crap back-haul capacity and rely on caching of their own/partners offers then they are, in effect, selling you a discriminated service.
What should be happening is the ISP deal you get provides some guarantees of 'service' (say bandwidth and/or latency) for those services that matter, such as on-line game play or VoIP, that are detached from who they connect to.
That is how I support net neutrality: not a free for all but an honest arrangement where you buy connectivity of differing grades according to needs, convenience and price (e.g. cheaper and faster general purpose data transfer at night, for example).
The one-price-fits-all and weasel worded 'unlimited' deals are simply dishonest, and OFCOM should have been stamping on ISPs for not providing understandable and measured performance for the various prices they offer.
"Today, a working-class retiree on the state pension who exchanges a few JPEGs with her family pays the same for internet access every month as a banker in a Docklands apartment who downloads 24x7. Quite what is fair about that escapes me - although obviously the banker can be expected to be happier with the arrangement."
Is this actually common?
Assuming these two people are on the same package, either the pensioner's on something far too expensive for their needs (which happens in most, if not all, markets if people don't understand the stuff being sold) or the banker's about to be throttled to something almost useless in its irritatingly low bandwidth.
If you only want to exchange a few pics - buy a PAYG dongle from a phone shop.
If you want to download 24/7, you WILL end up paying for it when the ISP realises.
The old lady who lives upstairs and is supplied by the same ISP as I am does not pay the same that I do.
I pay just over double what she pays for unlimited bandwidth.
I definitely don't want cable style packages for my internet connection. That sounds truly horrendous. The internet is much more like a road network than a TV network FFS.
I couldn't disagree with this article more.
For example, on email - fastmail exists. It's not ad supported, and they charge a subscription fee.
People who really care about not receiving ads, and any other problems with Google's offering can (and many do) use them.
The existence of free services is of tremendous help to many people, and if you don't like them - don't use them. The author might be happy to pay subscription fees for everything, but what would this situation do to people in poor countries?
Free email and free search are of HUGE benefit to society, and it would be a disaster they didn't exist. And the fact remains that there ARE paid versions of most of Google's offerings.
Orlowski has a very weird view of the economy.
He appears to be saying that free stuff drives out paid-for stuff and that is bad because it reduces paid-for stuff which reduces tax income, employment in paid-for-stuff industries etc.
By extension, cheap stuff drives out more expensive stuff, so does he really want us all to only pay for the most expensive things to keep as many people employed as possible and to maximise tax revenue?
Did I read that correctly? I find it rather disturbing that people want as much surplus value as possible to be removed from customers by corporates in the form of higher prices.
Or maybe its just click-bait.
I think you have missed the point.
Paid for email is just email. They try and give you the best email experience possible because you pay for it i.e. you are the customer and have a right to expect good service.
Free email is data collection. As long as the email is not so bad you jump ship they can record who you are, what you email about, who you send email to etc.. and sell it to pay for the email + make a huge pile of cash i.e. you are the product and have no right to expect anything.
See the McKinsey link I have posted elsewhere in comments about costs. There are enormous opportunity costs to parking an intermediary in the middle of where an economy should be, capturing the value. The costs McKinsey doesn't calculate go on for generations.
"The author might be happy to pay subscription fees for everything, but what would this situation do to people in poor countries?"
Many things are "free" at the point of delivery but complex valuations and transactions take place out of sight, they are invisible. I am sure many things would remain free OTT and ad-supported too.
As for "poor countries" - perhaps they would like their own news media, their own culture industries, and would like to shape their own digital economy however the see fit, on their own terms - rather than remain some forelock-tugging outpost of the Google economy?
Just a thought.
Today, a working-class retiree on the state pension who exchanges a few JPEGs with her family pays the same for internet access every month as a banker in a Docklands apartment who downloads 24x7. Quite what is fair about that escapes me - although obviously the banker can be expected to be happier with the arrangement.
The retiree, if paying the same as the banker, is on the wrong internet package.
what I'm willing to pay and what providers want to charge.
25p/year. I'm in.
25p/month Still in.
25p/day. No thanks.
But no ads and no monitoring. I like it.
Note there is a lot to unpack in this article. Google provide a service. But they are notyour friend.
Look at the additional cost on other related services you might procure as an individual - domain name services often do bundle it as a very reasonable upgrade. I maintain my domain and email as a paid for service independent of any ISP that way. The value - to me at least - is a decent personal and business email address as much as the email service itself.
Entertainingly its so rare that people use these facebook doesn't recognize it as valid.
"over the top" players who piggyback the world's expensive network infrastructures - give away their services for free. They'd prefer us to believe it's through benevolence. They like to promote the idea of a sharing hippy utopia, and slack-jawed academics applaud this. But I would argue that another motivation is that said free services are a powerful barrier to competition, and ultimately, the emergence of a real digital economy.
This is nonsense google don't piggy back on anything, they pay for bandwidth the same as everybody else. And their services aren't free they are paid for by advertises. This is a standard form or market interaction the same way that most commercial tv and radio staions work.
The thing is that network companies don't like the idea that after paying for the infrastructure and being paid by people to use it they are only being able to charge based on what it costs them , not what it is worth to the user. The is analogous to a tool bridge that charges higher prices to taxis that family cars. This doesn't normally happen so why should it be allowed to now.
This whole article is a whine becuase smaller companies aren't doing so well as larger ones and that if we made the larger companies pay more and that consumers paid more everything would be alrright because smaller companies would also get paid more.
This is completely wrong. the tax issue is just that, a tax issue and the laws should be changed to stop it happening. The rest of the article is beside the point.
This article isn't that co-herent, and I stopped reading after this paragraph:
"Today, a working-class retiree on the state pension who exchanges a few JPEGs with her family pays the same for internet access every month as a banker in a Docklands apartment who downloads 24x7. Quite what is fair about that escapes me - although obviously the banker can be expected to be happier with the arrangement.""
Uhm, so there is no difference between say, BT/TalkTalk/PlusNet/Virgins lowest end packages and their highest end? My mother pays a smaller amount for her BB than I do, due to lower usage. So this does not stack up surely?
Or has the author misdescribed something else as internet access?
I stopped reading earlier.
Google is costing a lot of money by being in between end user and commercial services? I don't see why. What I see is that Google allows me to easily find commercial services.
People drop their ISP email, because the google mail is free? True, but it is also better.
Google annoys us with advertising? It is just because of google initiatives like adwords we see less popups and blinking banners from advertisers.
Google can drop your service anytime? True that Google drops services and adds others. But if you want professional service you can get a Google business account for e-mail, storage etc. with SLA guarantees, which can not be withdrawn just like that.
Google can drop your service anytime? True that Google drops services and adds others. But if you want professional service you can get a Google business account for e-mail, storage etc. with SLA guarantees, which can not be withdrawn just like that.
Orlowski completely contradicts himself here. First he complains about Google providing services for free (despite other successful paid offerings), then when Google drops a free service, he complains again!
Surely Google dropping a free service would provide a space for paid for products to take their place. Or perhaps people aren't prepared to pay for these services after all?
25p per annum for email would be the tip of the iceberg. Broadband monthly costs are getting cheaper so you can see a way for the big players (google, ebay, amazon, bing, yahoo) to charge for access to their sites and reap more income. You wouldn't pay directly though, it could be via your ISP by proxy.
If this adds a £1 per month to everyone's broadband bill so be it. The big players will get a slice of that £1 times millions. Less advertising then and a better experience to be had? perhaps.
It's an interesting thought experiment though.
Don't agree with this article at all. AO seems to have tried to bring together all the problems he sees with the Internet economy (in its widest and loosest terms) and try to relate them to one another. Not very convincing.
Not that there aren't serious issues to think about, but really I think he's failed to link them convincingly.
An example is the flat pricing for Internet bandwidth mentioned in he article. It has nothing to do with google or Facebook, and everything to do with the way the ISP market is overly competitive, to the detriment of some consumers.
The idea of ISPs charging us for various value added services was tried before, and the walled garden systems thankfully died with MSN and Compuserve.
In general though, a working micropayments system would be nice. Paypal and CCs don't work well for micropayments. Cellphone operators tried to do it, and we ended up with a million random companies accepting a grunt or a "no" on the phone, or a "please stop sending me this crap!" in an sms as signing a contract to pay them 10p per day for nothing.
Today most ISPs are too incompetent to send out correct bills for the simple fixed monthly fees they charge, or then they mess i up intentionally, so they can motivate hiring more people to answer phones, people who click a button to "fix the bill" quickly, to dilute the number of real unresolved issues people call to complain about, and thus their statistics look nicer.
I'm told bitcoins aren't that useful for microtransactions either..
It's somewhat amusing that it's 2013 and still no successful microtransaction system. Is it because there's no demand, difficult to do, or a chicken and the egg problem?
This is a complex area with a wide set of opinions but this paragraph definitely doesn't help your case
"Don't take my word for it. Consultants at McKinsey estimate the annual consumer surplus of free services such as Facebook and Gmail at €100bn a year. That's how much money would be willingly handed over by users if they had to pay for those services, and shows how much people really value these websites."
"shows how much people really value these websites."
- something is only worth what someone is willing to pay for it and the only way to find out what someone is willing to pay for something is to establish a price mechanism not hypothesie, run a "counsultancy secret sauce" tool or conduct a survey*
"consumer surplus of free services"
- there are many example of services willingly given that could be subjected to the same technique - a pseudo feminist-marxism got there first with attaching "value" to housework and other exchange economy transactions
- should we expect surveys by cleaning companies complaining that if only housework were charged for it would contribute to the growth of the economy and they could compete for it?
(actually they do compete, because people can, intuitively at least, evaluate the deal; calculating opportunity cost and substitution effects, possibly also transaction costs of "getting someone in" but if they haven't got the money and they have got the time, etc.,)
- over time, through competition and other mechanisms the price of something moves to to its long run marginal cost of production
which proprietary software companies (for example) really hate and try to prevent
As discussed only today on another El Reg article
- in the digital world people are savvy and can trade a little of what they don't value that much (behaviour patterns) for something they value more (online services and products) but wouldn't necessarily pay for
What would be equally interesting to know is who sponsored the research - I am reminded of the Cap Gemini research sponsored by Microsoft and reported here that showed the cost of FOSS to be higher than proprietary software
Similarly we have seen attempts to have the Courts declare that the GNU GPL is anti-competitive
If the business model depends on the right answer you need to know who is formulating the question
* my favourite survey to this day remains the one conducted for a schools science competition BBC TV programme from the sixties
we surveyed consumers and asked them would they be more likely to buy a particular soap powder if it came with a free plastic flower or a money off coupon - they overwhelming said they preferred the money off coupon, we asked the soap powder manufacturers what was the most effective way of increasing sales... "
"blah blah one person uses the Internet more than the other."
At the top level, ISPs will pay a flat rate, whether they transfer 40MB or 40PB. That's if the peering agreement isn't as simple as "you carry our packets, we carry yours."
Why this should translate at all into per-packet pricing for consumers is anybody's guess. I guess Orlowski knows.
By the way, what ISP do you have that doesn't provide its own email service? People use Gmail because they can't be bothered, or don't know how, to set up Outlook or Thunderbird, or they plain old don't know that their ISP provides webmail.
"Why this should translate at all into per-packet pricing for consumers is anybody's guess"
Andrew's point is that you pay via the ISP: so if you want to read newspapers and books and aren't interested in Netflix and Vimeo, you don't buy a web video bundle from your ISP, you pick an alternative that may well include a Times/Telegraph/Nook/whatever subscription. And the money goes to those services; it's not entirely pocketed by the broadband biz.
It's a more fine-grained system than simply signing up for a 2, 4, 16, 24 or 50Mbps-speed line, and it means cash goes direct to the content makers bypassing the free services that Andrew is railing against.
Just a thought for debate.
@diodesign. Accountability could be the reason for not using a more fine-grained system. Accounting for what data was used where and by who could be quite expensive, and so a one-size-fits-all is simply easier (and therefore cheaper to administer) A per-meg is a way of breaking that down slightly that actually works well enough - at least for most people.
Most people I know, don't moan too much about their internet package (Ok, that's not true when talking about cellular connections!).
A long time ago, postage was based on distance until, I believe Babbage came along and said it would be cheaper to just have a set fee, rather than having to calculate the distance all the time.
Another example would be that I only read the financial section of the Telegraph, but I pay for the whole thing. Why can't I simply remove those particular pages, and only pay for that bit? On so many levels, that just doesn't work.
I disagree. I don't have "electricity packages" based on which bits of electronics I want the national grid to power for me in my home! I pay for the amount of electricity I use, this covers high usage and low usage.
Paying for differing download speeds on internet access is different in this case, but I guess if I wanted to run an industrial plant in my kitchen, I would have to pay out a shed load more money annually for the connection to the electricity supplier to handle it, so is sort of similar.
Why should ISPs get a cut of content providers services? Should my electricity supplier get a cut for all the TV shows I watch? Should it get a huge chunk from the kettle manufacturers when everyone switches on the kettle during the ad breaks for Eastenders or corrie? No, of course not.
You get electricity, not TV shows or tea. The SAME electricity will run your TV and kettle and light bulbs. So you only need and get the SAME TYPE of electricity, so it makes sense to pay for it by quantity.
For internet, there are various speeds available. The idea of "packages" is, you get the low-speed where that's okay, the high-speed (more expensive) where you need that. Slow is fine for email, a PITA for streaming video. They'd be saying "these sites are in the expensive bucket" and let you choose from 10 or 100 combinations of expensive ones. These might be quote extensive. Perhaps you could nominate the sites yourself, which you want in your expensive portion.
But for it work as an economy, really some of that higher fee should go to the site you're "paying" for. That way they get something too, and maybe produce better content, or slap in a few more servers so they can PRODUCE the speeds at which your ISP is now prepared to pass them on to you .
"Andrew's point is that you pay via the ISP: so if you want to read newspapers and books and aren't interested in Netflix and Vimeo, you don't buy a web video bundle from your ISP, you pick an alternative that may well include a Times/Telegraph/Nook/whatever subscription."
My experience tells me, that you'll get exactly the choice you describe: use Netflix/Vimeo, or nothing (after all, there is now an ISP trying to make money via an exclusive deal with Netflix). How does that free the Internet economy? What about that cheaper, better service that will come up in a years time?
With a fine-grained system, you freeze out the development of the internet economy right where it is today. That can't be so great?
If we're talking about the UK, the peering costs are a tiny part of the cost of an ISP's bandwidth costs.
By far the biggest part is the cost of getting data between the ISP's data centre and the customer.
That's the bit typically provided by BT (wholesale and/or Openreach), unless it's in a an area where the LLU ISPs know for certain that they can profitably undercut BT (even accounting for BTw's "low cost area" discount).
The bandwidth costs paid to BTw by ISPs do depend on how much bandwidth the ISPs want to pay for.
In the interests of keeping things simple for the end user, most retail ISP's retail tariffs don't truly reflect the underlying variable nature of their costs. A handful did, maybe one or two still do, but the closest most get are a couple of different packages, depending on usage.
Most ISPs don't even reflect the BT "low cost area" discount where, in order to compete with LLU, BTw charge less for services in LLU/cable areas than they do in the sticks. The only ISP I can think of that reflects these discounts is BT Sheffield (aka Plusnet) which appears to be used primarily as a regulatory diversion tactic.
"By the way, what ISP do you have that doesn't provide its own email service? People use Gmail because they can't be bothered, or don't know how, to set up Outlook or Thunderbird, or they plain old don't know that their ISP provides webmail."
Or people use Gmail/Hotmail/Yahoo, because they don't want to faff around changing their email provider each time they change their ISP.
Or much more likely, because Gmail is a far better service than any email system provided by an ISP.
"It's a more fine-grained system than simply signing up for a 2, 4, 16, 24 or 50Mbps-speed line, and it means cash goes direct to the content makers bypassing the free services that Andrew is railing against."
No. This will turn ISPs into supermarkets who will dictate which "content maker" lives or dies by forcing them to rent bandwidth and delisting them at will without recourse, like the supermarkets do with their suppliers.
They will be the ones deciding whether you get Vimeo or Youtube, Telegraph or Guardian, Kindle or Nook. Exactly the opposite of the free competition and thriving independent's internet economy which the article accused Google of suppressing.
This is just so stupid and short-sighted an idea, I am left speechless...
I think the article is misguided. Saying that Google drains money out of the economy because it's a fat middle-man between willing sellers and buyers, is quite baffling.
The seller is the only party paying for ads, and that is on a bid-system where pressumably due to the volume, the fair market price-point for the advert is usually found. Indeed, compared to advertising in your local paper, for example, with a local audience in the thousands, I'd suggest that the global audience reached for a similar amount of money is good business.
When, prior to Google, was consumer purchasing so global? I'm no fan of Google, but to suggest that it has sucked money out of the global economy, is to deny that it has had any role in development of the internet market place as it is today; when in fact, it's quite the opposite.
...shame about the reality. The fact is that the likes of gmail (just to look at email clients) became popular in a free market competing against mail providers that you pay for. The free market favoured ad-supported sites that were free to use. Any economic theory that ignores this reality is nonsense.
The Sunday Times reported that: "In 2011, the internet search provider paid just £6m in corporation tax despite its US accounts revealing that its UK turnover was £2.7bn. That year Google’s profit margin was 26 per cent, which, if applied to its British revenue, would produce profits of £676m and a corporation tax bill of more than £180m."
This statement is so wrong on so many levels.
"£6m tax .. turnover £2.7bn" - Corporation tax is paid on profit, not turnover. If it was paid on turnover, then new businesses would find it hard to start up when they are in the initial phases and making a loss (because of the capital investment, etc).
"profit margin 26%" - That's the worldwide profit margin, not the UK one. So it cannot be applied to British revenue in any way shape or form. So the corp tax bill of £180m from £676m profit is based on an invalid assumption that UK margin is the same as the world wide margin.
Google's accounts have been audited by accountants and filed and checked by HMRC. If anything is wrong, they would have been pulled up on it by now. All companies follow the law. If the law is wrong, change it. Don't go around grandstanding saying that Google aren't following the rules. They are following the rules. Oh, and when you do change the rules to tax companies on their turnover (if you manage to get it past the sensible accountants and not ones living in cloud cuckoo land), be prepared for massive recession as companies go bust or leave the UK.
"This statement is so wrong on so many levels."
No, it isn't. You proceed to give two examples, neither of which apply.
"£6m tax .. turnover £2.7bn" - Corporation tax is paid on profit, not turnover."
Which the original quotation also says.
" "profit margin 26%" - That's the worldwide profit margin, not the UK one. So it cannot be applied to British revenue in any way shape or form."
Why not? The markets that Google make most of their revenue from are similar to the UK, and since Google are not forthcoming with their real UK profit, the worldwide profit margin is a reasonable apoproximation. Indeed, this actually includes expenditure that doesn't take place in the UK, so it's entirely possible that the UK profit margin is *higher*. And anyway, the original quotation included the phrase "if applied to its British revenue". It is an order-of-magnitude calculation, which shows that the corporation tax that *should* be paid is of the order of £100m, rather than of the order of £10m.
"Oh, and when you do change the rules to tax companies on their turnover (if you manage to get it past the sensible accountants and not ones living in cloud cuckoo land), be prepared for massive recession as companies go bust or leave the UK."
Why? If a company doesn't make a profit then it goes bust. So a company does make a profit. Therefore it has a profit margin. If the profit margin is 5% then a corporation tax of 20% (say) becomes a turnover tax of 1%. A turnover tax of 1% on Google would deliver £27m, and for the majority of (law-abiding) companies would lead to a massive drop in their tax bill. Companies with a profit margin of less than 5% would go bankrupt, but completely unprofitable companies aren't that useful in society anyway. We would have a period of creative destruction as intermediaries and wholesalers rethink their business models, and the twenty-company chains are distilled into two-company chains to reduce taxes. However, normal companies would survive, and their accounts would be massively simplified. Transfer pricing is eliminated.
I'm just saying that a turnover tax isn't a completely stupid idea. If you are worried about startups, say it doesn't apply to companies with a turnover of less than £10m (say) like registering for VAT. Oh, and to stop abuse, the definition of a company here includes wholly owned subsidiaries, to get rid of that loophole.
Firstly, as far as I remember, most ISP's DID (do?) offer email. And, from experience, it was ALL rubbish. The problem being, once you've paid for it (usually on some lengthy contract), what's the incentive for them to improve it? Something like gmail DOES require (and get) continuous improvement as it's too easy for people to move elsewhere. As such gmail is INFINITELY better than ANY email solution I've ever used from an ISP! Come to think if it, so are most 'free' email packages online (hotmail, yahoo etc)
I'm sorry, but putting this kind of control BACK with the ISP is a really bad idea. The internet used to work that way - at least, more so than it does now. It didn't work then - so why do you think it would work now?
Another thing is that you're talking about generating €100bn - I take it from the UK only, as you're directly comparing this to the £2bn - £4bn UK tax figure. Well, that would mean than, on average, the internet would cost each online UK resident an equivalent of €2000/year extra!!! And this is a GOOD idea??? For a family of 3, I now have a €6K/y internet bill! Wow.
Finally, this deficit (€100bn?) currently simply comes from somewhere else. Advertising is/has/and will always be necessary. Currently, that money is is what companies pay to advertise their products. We indirectly pay for it by buying their products. If you're saying 'cut out Google', then fine - but it doesn't really change anything: companies will simply have to find another place to advertise! And we will still have to pay for that.
Cut out Google and create paid-for online services, I have a horrid feeling that all you'd end up (in the long run) with pressure from companies wishing to advertise to put adverts within paid-for services. Thus creating a world whereby we now PAY for using online services AND get advertised at!!! Can't wait.
Frankly I don't care -
Sure my ISP could offer me a mail service at 25p per year - but it wouldn't be as good or as available everywhere as the "free" offering I get from Google. Sure I could buy a TomTom and get a decent GPS solution for the car (been here done this) but it wouldn't be as reliable or up-to-date as the "free" offering I get from Google.
It is not AT ALL the case that Google is stifling competition - all it means is that the other players need to learn how to compete - if all they can do is offer a substandard service - they made their own beds.
We are talking about a web company - and the one sure thing we all know about web companies - is they can fall just as fast as they can rise.
Seems to me like it would be more sensible to take a small top line tax - lets say 2% rather than try to milk profits (which shareholders/owners etc are incentivized to maximize). Then you can say "invoice issued from country X pays has the country X tax". The problem with that is governments taxation then becomes very clear and they are then obviously the people hiking up prices. This is quite clearly seen now with the various aviation taxes if you fly. more often than not on long haul flights the taxes cost more than the flight.
So governments want the money, but they don't always want to be seen to take the money, or add it onto everyone else's bill.
> the annual consumer surplus of free services such as Facebook and Gmail at €100bn a year
This is the economics of the record companies. Assuming that a "thing" that someone downloads for free would be a "thing" they would have paid full price for and therefore the lost revenue is whatever they say it is. We all know (except the lawyers in record companies and the judges they own) that there's not a single shred of reality in this argument and that the difference between giving (or getting) something for 0 pence and having to pay 1p for it is huge, massive, enormous, possibly infinite!
So no, I don't buy the idea that Google and its ilk are blocking a more profitable internet market - one where people would pay for what they now get for free. If everything that Google "gives" away had a fee attached, the internet would be back in the 1990's, with a level of e-commerce to match. Now that might suit the bricks and mortar shops, with their unsustainable overheads and staff levels. But for consumers the internet is the best thing since slicedbread.com (although as websites go, that one is pretty poor, and noisy).
Google might not pay much tax directly - though it does pay what it's requireed to by law. However the amount of tax revenue it has enabled through internet buying and all the online businesses that have grown up simply by being successful and satisfying searches for whatever goods or services they sell, is huge, massive, enormous, possibly infinite. It's justa shame that so few of those companies are in the UK.
Shame on McKinsey for pretending that you wouldn't get the same accounting run around once the corporate tax rate was 15% everywhere. Generally acceptable accounting practices and double entry bookkeeping (with a single set of books) prevent embezzling not tax minimizing.
Have you thought about all the opportunities of making money that got killed because of the advent of Internet? How many billions would people agree to pay for services that have become completely unnecessary because the Internet exists and has made them obsolete? Google even had the unmitigated gall to make Internet easy to use! All that money drained from the global economy!
And don't forget how the invention of the damn telephone killed the letter delivery business, and killed off so much tax revenue.
Saying that '25p per account isn't much but spread over millions of users it is enough to run a business' is not a reasonable assessment. If we assume that this is capitalism then 'enough to run a business' is not a successful implementation of the philosophy. The idea is to create wealth and in a service economy the only way to so this is to generate more than necessary in order to fund future growth and profits for stakeholders. Few businesses are founded on the idea of 'getting by', most are hoping for a big win. If giving away a service results in growth in other areas of that business and users/customers accept it then so be it, the market has spoken. Hobbling potential competitors in an attempt to get as much money as possible is the very essence of capitalism whereas imposing arbitrary limitations on 'enough' is getting creepily close to a much different and social form of commerce.
Additionally, the potential for business of $(x)Millions if businesses didn't give certain services away is the RIAA argument reversed. The value of the services provided is exactly zero, the value of information from those services is immense but is a different 'line item'.
I'm not a big fan of anything that lets the market create difficult-to-compare plans - mobile phone plans are already a pain in the arse. The current system mostly works - if you want better, ad-free email, you can pay for it.
If the idea is simply to create an easy micropayment mechanism, then fine - a cheap, easy to use and integrate, ubiquitous Paypal alternative would be fantastic. I'd prefer it not be linked to my ISP though, as the other reason people (including me) use services like Gmail is to avoid roadblocks transferring ISPs. If your email address, Steam library, and Netflix account are tied to your ISP, changing supplier becomes a major hassle.
Well said. After all that the internet promised, it's disappointing to note that the biggest internet company in 2013 is an ad-broker who wants to own all your books, own all your photos, spy on your family, and listen-in to every conversation. I guess their constant lobbying against private ownership of data must be an example of not being evil.
I didn't call the article nonsense at all. I was trying to point out that The Register relies on an advertising-funded model where the product is "free" to the end user, in the same way that Google provides its services. That's not even a criticism; it's difficult to see what other revenue model would work. However if you do want to debate the issue this article is about, as one of the moderator comments above suggests, then it does seem pertinent to discuss why it is that many other businesses, including your own, and mine, rely on the same model that you are criticising Google for using.
Ah, but Google's model isn't purely based on advertising; large chunks of their model relies on exploiting users' personal data through services like Gmail, YouTube, etc and displaying targeted ads, as well as flogging your interests off to advertisers. The Reg's model is mainly display advertising - we don't go examining our users' privates for cash, like Mountain View does.
Yes, there are similarities in the two models, but, after all, ours also relies on us creating content that brings readers back so we have the metrics to show the advertisers. Unlike Google, who merrily leach off everyone else in the guise of a benevolent parent guiding us to our intended destination.
Google's revenue model is almost entirely based on advertising. The differences between a site like The Register selling display ad space and Google are that Google have more than one property/product where they can gather data and display ads. The breadth of data they acquire from having multiple sites and products enables them (they hope) to target ads more effectively, but it's a qualitative difference; after all, you presumably compile statistics such on page views, number of unique IPs, duration of visit, interaction with the site, geographic location of browser, etc when negotiating with your advertisers.
The suggestion that you create content and Google merely leech is disingenuous; Google create services which many people clearly find as valuable as your content.
People find Google's services valuable, yes, but those services amount to a set of shop windows which the end-user fills themselves, be it with emails, videos, popular search results, or whatever. I say Google are leaches because all they do is build a framework and let users do the hard work of content creation - and it's the content that brings more users in. Oversimplified? Hugely, of course, but the basic point stays the same.
We do all the hard work of creating _and_ packaging our content, unlike Google. Yes, the sales team gather data, but we don't rely on other people doing the hard work for us.
As far as I know, Reg does not rummage through my data (like Gmail), shoplift authors' property (like Google books), data-mine my activities (Google search), re-identify my logins (Youtube), or follow me round the internet like a footpad, while running a world class tax avoidance operation and telling everyone else not to be evil.
Reg generates clicks through valuable content. Google is contentless.
Google is content poor, but feature/service rich. News sites in general are content rich (some more than others), but feature/service poor. Where is it ordained that content is more valuable than services? I suggest that most people would value Google Maps (say) higher than the Daily Telegraph, for example.
Certainly the aggregated data that Google hold is a bit spooky, but that's not the point of the article.
El Reg is dipping into tenuous territory (which, admittedly, it can't legitimately avoid) with these articles examining what we all give away as the creators of 'Big Data'. In the case of The Register, which I have faithfully followed for about 11 years, we aren't just the product, we are also the entertainment. We gather together and amuse each other, with a huge number of us just reading enough of the article to be able to enjoy the comment threads. If there ever is an 'awakening' among the previously-grateful adherents of Facebook, Twitter etc, that awakening will inevitably include all those sites, such as this one, the value of which is primarily provided for nothing by its readers. Or, should I say, 'contributors'..?
This isn't a pop at The Reg - I love this site (though I'd be glad of the option to subscribe to it at a moderate price and turn all ads off). I just feel that the day is coming when the best of us men 'on the Clapham Omnibus' might realise that we are giving away something marketable for free, and have been doing so for a very long time. And no, I wouldn't count myself among the best, but you guys know who you are.
Our viewing stats, number of comments per thread, number (ironically) of Facebook and other Social Media 'Likes', 'Retweets' etc, are all inevitably trotted out to advertisers and potential advertisers to maintain or raise the price of MPU and leaderboard campaigns. Without us, there is no 'conversation' (though I vomit at another ordinary English word being appropriated and poisoned by marketing folks). And without that conversation, there is no money - and no site.
I wonder how long the situation will remain this unilateral?
The old lady and banker pay the same for the internet.... If they are on the same package! Hence data caps on cheaper packages.
But wait people can watch free to air tv channels and those cost the same to everyone! Outrageous!
If you do not pay for the product then you are the product. If you use gmail do not bitch about their data harvesting. If you choose not to use gmail then there are many paid (and free) alternatives. Just because they can not compete in terms of volume does not mean google is in the wrong for offering it for free (Yahoo were offering free mail long before google).
Middlemen have existed for as long as commerce. Does the author buy all his fruit and veg direct from the farm? does the farm buy (or make) all its fertaliser locally? somewhere there is always a middleman and the value add can be nothing to massive.
Bashing El Reg? Why do you think so? Bashing the idea, yes, but is it the same thing?
Now, why do I think the idea is bad - as I explained in another post, if you *want* to kill independent internet entrepreneurship, then this is exactly what you need to do. Get ISPs to decide what you can and cannot get through them.
They will sell you packages *they want*. As a content-making website to get into the package you will have to promise them promotional spending programs, share of the margin (40%-50%), exclusivities. In return you will get a chunk of bandwidth which can be withdrawn at their discretion without much recourse at any moment.
No independent, small upstart etc will be able to afford any of that, except a small lucky few, who know the right people or have experience of how things work by being insiders in the industry. Only large guys will thrive - the Nestles and Coca-Colas of the Internet.
If you have any doubts - this is exactly how the supermarket "multiples" work in the brick-and-mortar world. You are welcome to check it for yourself if you don't believe me.
So, next time you wonder, on your way to Tesco, what's happened to that grocery corner shop that used to be on the corner - that is what's happened.
I know it isn't my comment but I do have an opinion on the bundling issue. I relate my ISP to any basic utility provider (electric, water, sewer, etc...) and they don't limit what I can do with those things. Other laws might limit me but if I want to run a 1Tw LASER in my basement the electric company isn't going to prevent me from doing so, likewise with the water company with filling up my swimming pool everyday & running my lawn sprinklers non stop. Not that I do those things but I could if I chose to.
An ISP bundling things is a fast track to tiered hell where in order to make the Internet function as I want I have to subscribe to whatever package(s) meet my requirements at a direct cost to me. Not to mention screwy issues with vendor contracts: What if Comcast decided not to partner with Google for Gmail and chose Yahoo! instead. I'd have to pay extra to keep my previous address and we all know partnerships are fluid.
No. I like my Internet piped straight into my house with the power to use it as I see fit.
Where do you get that I was bashing El-Reg??? I'm bashing the article and I'm saying it's the worst idea I've ever read here... ALL about it's content... nothing about it's container. Had I seen it on my local paper, or other tech outlet, or even in a comment... my reaction would have been the same.
As for why? I think it's pretty freakin'obvious!
The article argues that Google and others are taking consumers for a ride by providing free services thus keeping people (like ISP's) from being to monetize the services by charging for them.
Well... actually, Google gives the services and pass the bill to advertisers instead of consumers. And that's the way it SHOULD be!
Treating the Internet like cable TV would result in the same thing we get from cable TV. You get "basic", which is small, flat and uninteresting. Then you have to pay extra for "good" stuff. And then well, you really want only channel X... darn it only comes "packaged" with Y, Z and you have to pay extra extra for that.
Same as... you want access to El-Reg.. well it comes packaged with ZDNet, and SemiAccurate, and blogger... that'll all be extra.
I remember a time when specialty cable channels, that the consumer had to pay extra for, had no commercials because they were EXTRA and made money from subscription. Where did THAT go??
Actually, giving ISP control of where you're allowed to go online would be the BEST way of keeping the little companies OUT and killing innovation. Plus... it would force the ISP's to check and keep very careful track of where people go on the net... you think Google's privacy policies are a problem??? Yeah... sure... I trust big telcos with my personal stuff... sure...
There is just so much flawed with the arguments presented in this article. The supposition that a significant number of users are prepared to pay for service just doesn't hold water. The music / movie / games industry have for years tried to claim that they are losing billions with every pirated download equivalent to a lost sale. This has never been shown to be true, at best you have a ten to one ratio of people willing to pay and that is for being persuaded to not engage in an illegal activity.
With free email / maps and so on people are even less likely to be persuaded to pay for a service. The main thrust of the argument that Google / Facebook providing it for free robs other providers / "the economy" also doesn't gain any real traction. Email and maps services have always been available for free. Before hotmail started the whole web email service for free, my ISP provider used to give me "free" email in order to persuade me to remain as part of their service. Similarly MultiMap / StreetMap have long provided free mapping services before Google based on an advert supported model. The only way to stop the "free" model from occurring would be to outlaw it and effectively turn the internet into many walled gardens.
The article just smacks of corporation bashing when really it's the leading governments in the world who can't sort out their own tax regimes.
Pretending that Google is blocking the development of an internet economy is quite laughable. Try to remember the good old days, when the providers held control over what you could access and how you could do it. Remember the mobile phone companies trying to push their service? Things were quite unusable AND expensive. It was only the unexpected rise of the free internet and the fact that Yahoo, Google, and company wrestled control from the providers that gave rise to the free internet as we know it. I can quite imagine the kind of service some non-google company would like to sell to me, and it's not 25 ¢/year ad-free email. It's the exclusive (as in use it or bugger off) access to the great online ALDI store, with an exclusively low 15% extra margin for the convenience of using said exclusive service. It's Google who freed us from that kind of exclusivity and gave us easy access to the full internet (including Amazon, Alibaba, and millions of other contributors of wares and information).
How again does Google keep the competition at bay? They don't have exclusive access to anything, I can even use my Google/Android phone without stumbling over garden walls. They simply offer an unrivaled quality of service for information retrieval. The internet is open for the competition, so don't whine about their dominance, but invent better ways if you believe they are there.
Currently we have cheap internet service for all. This might not be fair for the small-time users (although they might simply use a cheap low-bandwidth service), but if you start to fragment the market with a lot of 'specialized services (you great 'bundles'), you'll just end up with a great overhead for everybody and expensive + lousy service for all. Keep the pond open and watch out for the sharks!
"Google and Facebook - so-called "over the top" players who piggyback the world's expensive network infrastructures - give away their services for free. They'd prefer us to believe it's through benevolence. They like to promote the idea of a sharing hippy utopia, and slack-jawed academics applaud this"
I suppose you would like to see all the Linux/Apache servers shut down for using all the bandwidth.
While you're at it, all FOSS should be made illegal.
"Google and Facebook - so-called "over the top" players who piggyback the world's expensive network infrastructures - give away their services for free. They'd prefer us to believe it's through benevolence. They like to promote the idea of a sharing hippy utopia, and slack-jawed academics applaud this. But I would argue that another motivation is that said free services are a powerful barrier to competition, and ultimately, the emergence of a real digital economy."
"Imagine two Gmails. One remains free and advertising-supported, the other is available to you for 25p a year via your ISP. The designers of the latter system, let's call it "RealMoneyMail", wouldn't need to show advertisements, obviously. They would need to invest in carrying your emails efficiently rather than in a vast behaviour-processing server farm. They wouldn't need to pry. 25p isn't a lot per person, but spread over millions of users, it would be enough to run a business. And the "RealMoneyMail" team would be acutely aware that if they did a lousy job, consumers would walk: the market would shun their product. So their incentive is to make it a great one."
HHHHhhaaaahhhhhhaaaaaahhhhhaaaaaaa..... Oh Boy! That was a REAL good 'un. Now, I have to go pay my cable TV bill, BRB.
What a load of bollocks!
Imagine where you have two Gmails. One sucks, is "free" and is actually called Hotmail. Another is alright (at best) but costs money and is called Outlook. A third is called Gmail, pretty good, and is "free". A fourth is alright, free, and is called Thunderbird. A fifth [etc....] The one that the consumers considers the best value is the one that the consumer will use. That's called competition.
I agree it's sad that since everything has moved to ad-based cloud services, there's no competition in the market. Or to be more clear, I would, if it weren't a complete delusional fantasy spawned by a FREE AD-SUPPORTED media site.
The entire concept that content providers are forcing consumers to have unlimited access to the internet is completely ludicrous. Limited access plans are common, and becoming the norm with mobile access. I am unaware of how it's content providers and not service providers who are forcing unlimited access onto consumers, nor am I really clear on how it hurts. The cost for internet is almost completely overhead, and is therefore distributed equally. The amount or duration of usage is pretty much equal. Person A uses the internet for porn for an half-hour, and downloads 100MB, compared to Person B who uses the internet for 3 hours playing a game, and downloads 500MB, are actually equal. They both used the internet once. Nonetheless, even though I don't understand how the author thinks that the days of pay-as-you-go service plans were better, they are certainly welcome to use a pay-as-you-go service, since Google, et. al., have been unsuccessful in completely destroying the internet access industry.
Although I'm completely confused as to the point, I have a suspicion it's that there's no tax on free products, despite the fact that someone is paying for them, and that Google makes loads and loads of money. If that's the point, then the article could have skipped all the bull, fantasy, misinformation and outright lies, and just said, "We should tax Google and other corporations."
Wait. You're suggesting carving, ehem, 'bundling' my internet content like my FORMER cable company bundled channel packages? The one where I want 7 channels but HAVE TO BUY 3-FREAKING-HUNDRED CHANNELS?!?!?!?
That's the whole reason for the cut the cord movement. I PROUDLY and with great fiscal responsibility no longer subscribe - indenture myself - to CTV.
ARE YOU HIGH?!?!?!?!?
I don't understand the point of this article. We all have to use Google services because they're free and nobody can compete with them?
Bollocks. Google is in all sorts of markets with prior (and current) competition, and said competition was already free. Hotmail was free. Mapquest was free. Facebook is free. Amazon cloud services are, if not free, at least cheap. Google made dramatically better products than the former too and that's why they dominate those markets now. They don't dominate the latter two markets after years of trying.
Seems like the conclusion to draw here is that Google isn't getting a free ride. These services are all competing on quality, there's no indication that people won't change from one to the other, and nobody is being forced to use Google services.
As a tech-savvy person I choose to use GMail because it's vastly better than the many alternatives that are available, at least for my needs. Huge storage quota, good uptime, integrates well with all my IMAP-compatible devices, fair web interface if I need to use that in a pinch, etc. I don't see why everybody is in a privacy tizzy. Maybe if somebody at Google was reading all my email. If they want some idiot algorithm mining my email for advertising keywords then how is that a privacy issue exactly?
This post has been deleted by its author
"As a tech-savvy person ... I don't see why everybody is in a privacy tizzy. Maybe if somebody at Google was reading all my email ... then how is that a privacy issue exactly?
Hilarious, keep it up."
Nice, you're like a copy and paste ninja, managed to change the meaning of that sentence to the opposite.
What utter nonsense. "a banker in a Docklands apartment" (boo, hiss) who downloads 24/7 pays WAY more than the average grannie. She'd be on one of those Dodo plans whereas Richy Rich would have his own microwave link if he wanted it. None of that by the way has anything to do with Google. Foxtel offers a service that is slightly different to Telstra's which is slightly different to Google's. So? Each party lobbies government to legislate against the other to create a natural monopoly. Lawfare has always been part of doing business. As long as new companies are not prevented from offering new services, the market is free. As long as customers are not prevented from taking up those services, the market is free. In both cases, the market is not exactly free, and it's the government's fault, not Google's.