FTC’s Timothy Wu Says Dominant Internet Firms Should Not Add Monopolies

Timothy Wu, an information industries scholar hired by the U.S. Federal Trade Commission, said in his first interview since joining the regulator that dominant Internet companies should be barred from monopolizing more than one market.

“We just take it for granted the Internet is always going to be vibrant, always going to be moving,” Wu, who joined the FTC in February, said in an April 18 interview. “It may require some oversight and also may require that the government itself doesn’t become the guarantor of monopoly.”

People familiar with the agency have said it’s weighing a probe of Google Inc. (GOOG), owner of the world’s most popular Internet search engine. Wu said the FTC may consider how to prevent the more powerful Internet firms from gaining multiple monopolies, which would make them hard to displace.

He cited as an earlier example AT&T, which controlled local, long-distance and wireless telephone service and switching before it was broken up in 1984. International Business Machines Corp. (IBM), which dominated computer hardware, software, operating systems, accessories and repair businesses, is another example, Wu said, adding that his comments reflect his own views, not the commission’s.

Wu, 38, is on leave from Columbia University in New York, where he teaches telecommunications and copyright law. He is working on preliminary investigations and formal probes, and running a weekly internal discussion group that examines how companies come to dominate the Internet business.

Google Expansion

Google, facing increased scrutiny by regulators as it bolsters its search business, is expanding into mobile-phone services, display ads and software for business and government. Officials in Texas and at the European Commission have started investigations into Google’s search dominance and advertising policies, while Ohio Attorney General Mike DeWine said he is considering such a probe.

“What I’m interested in is whether the next Google could come along or whether the environment has become one where it’s hard for the next deck-clearing innovation to make its impact,” Wu said.

Wu is “precisely the type of person the FTC and other agencies involved in competition policy should be bringing into the mix,” said Spencer Waller, a professor of antitrust law at Loyola University in Chicago and director of its Institute for Consumer Antitrust Studies. “He understands the history and the policy and the technology and is extremely valuable at strategic and policy levels in thinking about these ideas.”

Buzz Settlement

The Washington-based commission on March 30 settled with Mountain View, California-based Google over allegations that it used deceptive tactics and violated its own privacy policies when it introduced its Buzz social-networking service last year. The FTC has also been taking “a very close look” at Facebook Inc.’s privacy policies, Chairman Jonathan Leibowitz told Bloomberg News in June.

“We have ongoing conversations with regulators and agencies around the world and do not comment on specific interactions,” said Andrew Noyes, a spokesman for Palo Alto, California-based Facebook in Washington.

Google’s spokesman, Adam Kovacevich, declined to comment.

FTC Chairman Leibowitz said in a telephone interview that he’s pleased with Wu’s contributions to the agency’s work, “particularly with respect to technology markets, which is a critical area for competition and where competition has brought enormous benefit to consumers.”

“It’s great to have someone like Tim who can think outside the box,” said Leibowitz, who declined to comment on any current or future investigations.

‘The Master Switch’

Wu is the author of “The Master Switch: The Rise and Fall of Information Empires.” The book, published last year, documents how information empires shut out innovation as competition erodes. Wu is also known for coining the term “net neutrality” to refer to giving access to the Internet unrestricted by equipment, service providers or any other element.

Bert Foer, president of the American Antitrust Institute in Washington, said it was “logical” the FTC would use Wu to develop the ideas in his book.

“These are the issues of our time,” Foer said. “An agency like the FTC, that sees where the action is, wants that kind of expertise.”

Wu said he has been leading weekly meetings with Ed Felten, a professor of computer science and public affairs at Princeton University in New Jersey who started as the FTC’s first chief technologist in January. The meetings include University of California, Berkeley, professor Joseph Farrell, director of the FTC’s Bureau of Economics, and Howard Shelanski, another Berkeley professor who is deputy director of the Bureau of Economics and head of the bureau’s antitrust division.

‘Pool of Expertise’

“There is an enormous pool of expertise here,” Wu said, joking that he and Felten enjoy tracking Washington food carts at lunchtime with a mobile-phone application.

The FTC had been waiting for the Justice Department to complete its review of Google’s acquisition of travel information software company ITA Software Inc. before deciding whether to proceed on a larger probe, two people familiar with the situation said earlier this month. The department cleared Google’s $700 million purchase of ITA on April 9.

Wu is also watching developments in the mobile-telephone market as Apple Inc. (AAPL) and Google compete for supremacy in the growing market for smartphones and tablets. Google’s Android operating system -- used by Samsung Electronics Co., Motorola Mobility Holdings Inc. and other companies -- will account for 39.5 percent of global smartphone shipments this year, compared with 15.7 percent for Apple, according to market research firm IDC.

“Now the whole issue is whether people can start businesses on the Web, on mobile, or tablet platforms,” Wu said. “No one imagined the telephone industry in the 1920s would become a stagnant industry, but it happened. What do the conditions for competition look like as the Internet reaches middle age?” he said.

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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