Google-Microsoft war of words begins

THE ink is barely dry on Microsoft’s US$45 billion (A$50 billion) bid for search company Yahoo! and rival Google has already cranked up its awesome public relations machinery to try and stop the deal.

In a direct communication with customers and users, Google, which dominates the search market with a global share of more than 70 per cent, questions whether Microsoft can be trusted not to use the deal to crush competition and innovation.

“Microsoft's hostile bid for Yahoo! raises troubling questions,” said Google’s senior vice-president for corporate development and chief legal officer David Drummond in a post on the company’s official blog.

“This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation,” Mr Drummond said.

Microsoft on late Friday made a hostile takeover bid for Yahoo! offering US$44.6 billion for the number two search company.

Google’s response has been immediate, pushing for regulators to closely scrutising any take-over.

“Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies – and then leverage its dominance into new, adjacent markets,” Google’s Mr Drummond wrote on the official blog.

“Could the acquisition of Yahoo! allow Microsoft – despite its legacy of serious legal and regulatory offenses – to extend unfair practices from browsers and operating systems to the Internet?”

Microsoft general counsel Brad Smith issued a statement yesterday countering the Google suggestions, saying the combination of Microsoft and Yahoo would create a more competitive market by establishing a more credible number two search company.

“Today, Google is the dominant search engine and advertising company on the Web. Google has amassed about 75 percent of paid search revenues worldwide and its share continues to grow,” Mr Smith said. “According to published reports, Google currently has more than 65 percent search query share in the U.S. and more than 85 percent in Europe.”

“Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals,” he said.

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EU clears IBM-Cognos merger

European competition regulators have given the green light to IBM’s US$5 billion (A$5.7 billion) acquisition of Canada-based business intelligence software developer Cognos.

The European Commission yesterday ruled the acquisition would not significantly impede effective competition.

The Commission examined the effects that the proposed merger would have on the business analytics sector and its various sub-divisions.

“In each instance, the Commission found that the horizontal overlap between the parties' activities would not give rise to competition concerns, since the parties' combined market share would be moderate,” the Commission said in a statement.

“The combined IBM/Cognos entity would continue to face several strong competitors and customers would find sufficient alternative suppliers of such software products,” it said.

The Commission's investigation found no significant risk that the merged entity would be able to close off competitors from the market.

IBM's and Cognos' positions in their respective segments of enterprise application software (EAS) would not provide sufficient incentives to prevent standalone business analytics software vendors from integrating with their EAS platforms.

The acquisition is expected to be completed during the current quarter. Cognos employs 4,000 people globally and generated revenue last year of just under US$1 billion.

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ACCC dismisses Telstra broadband “bluster”

THE competition watchdog has dismissed as “noise and bluster” Telstra’s claims that regulatory uncertainty in the industry was hampering investment and causing a broadband drought in Australia.

Australian Competition and Consumer chief Graeme Samuel told a telecommunications conference in Sydney yesterday that far from suffering drought conditions, broadband in Australia was booming.

Mr Samuel said Telstra claims that Australia was lagging the world in broadband take-up were disingenuous, pointing to Bureau of Statistics numbers that say more than 1.8 million broadband customers were added from March 2005 to September 2006 – growth of more an 50 per cent in 18 months.

He argues that too much is made of OECD figures that say Australia ranks 17th out of 30 developed countries for broadband take up.

The same survey found that Australia’s rate of growth in broadband subscribers is the second fastest in the OECD, suggesting it is now moving up the rankings, Mr Samuel said.

Increased market competition had spurred carriers – including Telstra – to roll-out ADSL2+ services, which were now available to about 46 per cent of households.

“In addition, mobile broadband is now available to 98 per cent of the population,” Mr Samuel said.

“This suggests broadband is booming,” Mr Samuel said. “But despite this, Telstra argues we are in a ‘broadband drought’.”

Addressing the annual Australian Telecommunications User Group (ATUG) conference in Sydney, Mr Samuel also chastised Telstra over its claims that regulatory uncertainty made it difficult for the company to invest in higher-speed broadband services.

Telstra has said regulatory problems meant it was unable to roll-out ADSL2+ technology to exchanges that did not already have an ADSL2+ competitors’ equipment installed.

“Telstra argues that without regulatory certainty, it cannot offer ADSL2+ in exchanges where its competitors do not already offer this service,” Mr Samuel said.

“However there is a very easy way for Telstra to receive absolute regulatory certainty – by asking for an exemption from regulation for ADSL2+,” he said.

“Let me be perfectly clear: if the ACCC is satisfied that an exemption should be granted, it will not force Telstra to give access to its competitors to this particular service.”

“You can't get much more certainty than that,” Mr Samuel said.

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