Google’s lurch: how to fix its monopoly

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The economist.

Hello and welcome to the Intelligence from the Economist. I'm your host Rosie Blore. Every weekday we provide a fresh perspective on the event shaping your world. Water pipes aren't the sexiest of items, but we all rely on them and it turns out that many of them are rather leaky. Our correspondent has a plan to solve that, and it's rather more useful than a spanner. And football inspires such love that it has an entire literature devoted to it. We recommend the best books on the beautiful game, But first, To most of us, Google is such a staple of life that we use it as a verb without thinking. But the U.S. department of justice doesn't approve. Last night it laid out plans to rein in the tech giant. Judges say that people are using Google not just because it's good, but because Google has a monopoly on search and is making sure that no one else can compete. Trust busters have been attacking Google's dominance for years and government has tried and failed to break up tech companies before. But in the long running fight between the government and Google, this round definitely seemed to go to the government.

On Tuesday evening, US Time, we got a big filing in the Google antitrust lawsuit about its search engine.

Alice Fullwood is host of our sister podcast Money Talks.

And this filing comes on the heels of the huge victory that the government had in August when it was ruled by a judge in the District of Columbia that Google was a monopolist in online search. And on Tuesday, the filing the government had to make was to outline its proposed remedies for that abuse of monopoly power.

Alice, let's step back here. The U.S. government is suing Google. How did we get to this point?

This case was actually filed in 2020 at the Tail end of the Trump administration's Department of Justice's term, But it's been litigated for the past four years under the Biden administration. And this case focuses on Google's search engine and its search monopoly. There are a handful of other cases that are making their way through the courts to do with various other parts of Google's business, as well as lots of other big tech cases that the Department of Justice and other agencies have pursued. But this specific case focuses on search. And Google is hugely dominant in the search engine arena in the States. It handles about 90% of search queries in America in total, actually 95% of those on mobile. And that it's so dominant is not necessarily the issue. You can dominate a market without abusing that monopoly power. You know, Google could be used for that many search queries because it was simply the best search engine and it has outcompeted all of its competition. But what Google's competitors and the Department of Justice have argued that Google is doing is doing various things, sort of block rivals and block competition to reinforce that monopoly status. And also it has used its monopoly power over search to extract monopoly rents, in particular from the search advertising market.

So I'm afraid I'm old enough to remember when there were actually quite a number of different search engines. So how did Google manage to blast its competitors out of the way, then keep that monopoly position?

There are lots of little things that the Department of Justice and lawyers have been able to point to that indicate some degree of monopoly power or blocking of competition. But the really important problem that was alighted upon in the trial were these agreements that Google has with phone makers and browser developers. They're called the default search agreements. And essentially the deal is that Google pays these browsers and these phone makers a huge amount of money to be the default search engine when you power up whichever browser you're using. So when you pull up Safari on your iPhone, the search engine that returns results when you type something into that search bar will be Google. And the reason it's Google is because Google pays for that privilege. The payments it made to be that default search engine in 2021, the trial revealed, amounted to $26 billion, which obviously is an enormous amount of money. And roughly $20 billion of that went to Apple alone. And there are a couple of ways in which being the default and maintaining that market share sort of block competition. One is that the more search traffic you get, the easier it is to improve your search engine. And so at a certain point, it becomes very, very difficult for a new competitor to break into this market. At the same time, it's able to make very large payments to phone makers and browser developers. At least the court alleged, and it was ruled in part because it's able to extract monopoly profits from its search engine. It essentially has a monopoly over the advertisements you see when you search for things. And that's very lucrative. And these arguments convinced the judge in this case. He said that Google used the fact that it was the default search engine to block rivals and to raise prices for ads beyond free market rates.

So these arguments convince the judge. What then did we learn last night about what the Department of Justice is going to do?

What we've just learned are the remedies that the Department of Justice intends to seek in this case to correct that monopoly power. So I'll just caveat this at first by saying these are the proposed remedies. And the actual remedies that will be put in place and enforced by the court will be decided in another trial early next year. But there are a couple of big ones that I want to focus on. One is that the Department of Justice seems to be targeting specifically those default search agreements, saying that it might limit or end Google's ability to use them and its ability to make these payments to other browsers or other handset makers. And the reason that this is supposed to help correct for the. The monopoly power is if Google couldn't pay to be the default, then there wouldn't necessarily be a default at all. Maybe consumers would instead be offered a choice of different search engines rather than just being served Google by default. But the other big reason this might help competition is what those other companies might do if those payments were to either stop or be tapered off over time. And you can think here about how Apple might react. Say it's ruled that Google is no longer allowed to pay it $20 billion a year to be its default search engine for its browser. It might well build its own search engine. And the other sort of big solution is to do with Google's accumulation and use of data. Obviously, it's hugely valuable to be the search engine. Seeing 90% of queries in the United States, it can use that data both to improve its search engine and to better target things like ads. And one of the remedies that authorities might end up asking the court to do is to essentially force Google to make that available for competitors.

So, Alice, as you say, this is the latest in several rounds of cases between Google and the government, and it does look like the government won this round. But presumably Google's still got quite a lot of fight left in it. What obstacles might it yet try to put in the government's path?

Yeah, there are a couple of things to note. One is that Google is obviously going to appeal the verdict in the first trial. That process is going to take many years. The other big point, and this is one that Google might try to argue more forcefully in its defence going forward, is the rise of artificial intelligence and generative AI, chatbots, things like ChatGPT, Claude and others. Now, these obviously didn't exist in 2020 when this lawsuit was filed. Google might try to argue that generative AI is a potential new competitor or a rival. And there's some evidence that that is true. There was a survey by Evercore, an investment bank, that found that about 8% of Americans said ChatGPT was their go to search engine. Other big way in which AI is relevant is that the authorities and seemingly the judge are both worried that Google might be able to use its monopoly in search to extend that into a monopoly in generative AI as well. And one thing that the Department of Justice has pointed to is that Google is using its search platform to distribute its AI tools. You now see these AI summaries at the top of Google search results. And Google has a huge advantage in building those kinds of tools because it has all of this proprietary search data. And this is certainly something that the authorities are watching. It mentions proposed remedies for this kind of problem in the filing that it just made, although they do seem a little vague at this point. So it's not entirely clear what they might seek to prevent that from happening, but it's certainly something that they're paying attention to.

Alice, thanks so much for coming on the show.

Thank you for having me.

Foreign.

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When you live in Britain and when you've had a year as rainy as we've had, water shortages can seem like a faraway problem. Yet in fact, on these shores as well as elsewhere in Europe and beyond, water is often rationed. And yes, part of that is because the weather is ever more volatile. But it's also about something far more mundane than climate change.

Leaking water pipes is becoming a global problem.

Kate Parker works for the Economist Intelligence Unit, our sister company.

When I started looking at the issue, two things really struck me. Firstly, the actual sheer quantities of water that are lost through leaky pipes. And secondly, there aren't that many examples of best practice with countries that don't lose much. Almost every country loses lots and lots of water every year through leaky pipes.

Why are leakage levels so high?

Leakage levels are really high for two reasons. Firstly, it relates to what the pipe has been made of. Lots of them have been made from metal, iron corrodes, and that has caused cracks and leaks. And also not enough money has been spent in terms of maintenance. So we tend to find the countries with lower leakage levels. People pay more for their water. So there's been more funding available to fix leaks when they've come.

And we've known that there are leaky pipes for a long time, I think. Is the problem actually getting worse?

I think it is getting worse. Partly it's a problem because these pipes are underground. That's very much the extent to which it's out of sight, out of mind. You occasionally get these major pipe bursts and we see water. We're all familiar with the telltale signs of water flooding down the road when it hasn't been raining. Those leaks are fixed quite quickly. But the problem is that most of this water that is lost through leakage isn't lost that way. It's lost through really small leaks and the water just doesn't surface. So I think part of the problem is that it's just not immediately visible on the road. So we're not aware that we're losing all this water. And so utility firms find it quite difficult because essentially they have to dig up the road to locate leaks. So it's actually quite difficult to locate them and it's also difficult to fix them.

And why does it matter if they're leaking?

This is water that could otherwise have been built. So they're paying to treat the water. To all intents and purposes, it's ready to drink, but it doesn't arrive at customers taps. So in terms of the lost revenue, we're talking billions of doll globally that is lost.

And why is it so hard to fix?

Partly because it's difficult to locate exactly where these pipes are leaking. In Europe alone, There are over 4 million kilometres of drinking water pipes. Just to visualise that, that is over 100 times around the equator. It's also hard to fix because it's expensive in terms of manual labour to dig up the roads. Often it involves shutting off roads to do so. So it's just tricky for water companies.

But am I right in saying that there are some technology that may now be helping?

Yeah, I think the good news is that there are lots of new technology options that are coming to the market that look like they might do a decent job in tackling some of these problems, which have been long standing for many decades. This kind of technology broadly falls into two areas. Firstly, products that are used outside of water pipes. And then secondly, products that actually work inside the pipes themselves. Just turning to examples of tech that operates outside the pipes, there are products that are called leak noise loggers, and these are essentially very sensitive microphones that are placed on top of the water pipes themselves. And then they pick up the sounds that leaks make, and that's a sort of hissing noise. And because they're placed at regular intervals along the pipe network, they can pinpoint the exact location of a leak. There are also other options that operate outside of the pipe network. We are seeing some companies using satellites and radar to detect underground water leaks. And then turning to the other category that I mentioned, so products that work inside the pipes themselves. Now, there are some firms that manufacture products that travel through the PIP and they are kitted out with acoustic sensors and GPS so they can spot leaks and they can also pinpoint where those leaks are. There's a product called the Smart Ball and it looks very Much like a small tennis ball, and that functions in that way. It travels through the pipe network and it spots where there are problems. And I suppose taking that a step further, there are also mini robots that are also being trialled and they do a similar kind of thing.

So that all seems to be about detection. How do you actually fix a leak if it's underground?

This is the crux of it. So a lot of these solutions that are currently on the market at the moment still require humans to come in and fix the problems. But actually that's where the robotics get quite interesting because some of the trials that are underway at the moment, the intention is that over time, the robots actually might be able to carry out some of the maintenance and repair work themselves. The robotics are not currently on the market, they are undergoing trials. A lot of the in pipe solutions, it's tougher to get regulatory approval because the regulators are concerned that that drinking water might become contaminated. So in some ways there are greater hurdles to overcome. But certainly the intention is that some of these robots will be able to carry out repair work themselves. But also some of the sensors that they are equipped with can spot areas of pipe that haven't actually cracked, but are thinning. So actually that raises a very interesting possibility that they actually might be able to flag areas that might be prone to cracks. And then to prevent that from happening.

Is anyone going to be able to afford to do this? Is anyone actually going to pay for this to happen?

So in terms of cost, I think it's a very difficult question to answer, partly because the firms that manufacture this type of equipment are pretty tight lipped about their prices. I think broadly speaking, the acoustic equipment, so the microphones that we spoke about, they do tend to be cheaper, the more sophisticated you go in terms of the technology, the types of sensors these products are equipped with, if they're integrated into AI systems that interpret the data, that sort of thing, it does get more expensive. And but I do think that one thing is pretty clear. This technology does pay for itself over time, simply because once leakage is reduced, utility firms can charge for water which would otherwise have been lost. The counter argument is that these water providers still need the money upfront to finance this investment. But what we are seeing is governments making these kind of funds available under the auspices of green transition funding. So I think this money is becoming more easily available. But I think it's not necessarily about simple cost benefit analysis. I think with climate change and water shortages in many countries, it's no longer acceptable to lose such vast vast quantities of water through pipe leakage. I think there's growing public pressure to think about ways and finance ways that might provide a solution to what has been a really long standing problem.

Thank you so much, Kate. Great to talk to you.

Thank you, Rosie.

Football is the world's most popular sport.

Vishnu Padmanabhan is our Asia Correspondent.

It can provoke all sorts of emotions, from happiness to heartbreak and everything in between. Books rarely match football's beauty and drama, but I'm going to recommend some which come close and also show why many people consider it more than just a game.

Football Cliches by Adam Hurry My first.

Selection is about the language of football. Every sport has its own jargon, but perhaps no sports lexicon is as big as football's. In this fun book, Adam Hurry takes us on a journey through the words and phrases used in the sport. It is a forensic examination. For instance, he describes 73 ways a goal can be scored. A shot can be drilled, rifled, lashed, thundered, smashed or belted into the back of the net. Those may sound like synonyms for the same thing, but football fans will know the subtle differences. The book also highlights fans behaviour, like the reaction when the opposition striker misses an easy chance or the referee falls over.

The referee's taking a tumble always gets.

A round of ironic applause from the fans.

But though such language and behaviour may be cliched, Mr. Hari argues that they are crucial for bringing fans together and football is better for it.

Fever Pitch by Nick hornby.

Published in 1992, it is a memoir of the author's relationship with football, and in particular his club, Arsenal. He chronicles his obsession with Arsenal and the challenge of balancing it with other parts of his life. Such obsession was once looked down upon, but the perception changed in the 1990s, thanks in part to this book, which was a huge hit and it legitimized football fandom. It heralded a new era of football writing and expanded the sports literature. Fever Pitch was adapted into two films, one released in 1997.

Don't say that, please.

That is the worst, most stupid thing anyone could say.

But it quite clearly isn't.

Only a game and one released in 2005.

Soccer against the Enemy by Simon Cooper.

Sports and politics are intertwined, but this was perhaps the first book to examine the relationship between football and politics. Simon Cooper, who is a journalist at the Financial Times, regales us with footballing tales from 22 different countries and shows how football can shape national identity and culture. Much has changed since 1994, when this book was published, including the game itself, but the role of football in the world remains undiminished.

This love is not for salvation and Soccer in Ciudad Juarez by Robert Andrew.

Powell Powell is an American journalist who spends a year in Ciudad Juarez in Mexico in 2009. At that time it was the world's most dangerous city with a huge homicide problem. He follows Indios de Ciudad Juarez, the city's team, and his fan group, El Cartel. The team is awful and struggles, but the fans remain devoted. The book shows how football can offer a distraction from violence and the struggles of daily life. The club has disbanded since, but the book reminds us why football matters so much to so many.

A life too. The Tragedy of Robert Enke by Robert.

Reng My final selection is a biography. In 2009 the German goalkeeper Robert Encke took his own life just as he was approaching his sporting peak. The tragedy shocked football Renk. The author, describes Robert Enker's journey powerfully. It is an account of self doubt, depression and the burdens of high level sport.

To see Vishnu's full selection of football books, click on the link in the show notes or find it in the Economist Reads section of our website where you can also see recommendations on everything from climbing mountains to the Indian economy. That's it for this episode of the Intelligence. But you know, a lot of our other shows are great too. With a subscription to Economist Podcast plus, you have access to all of them. Subscribing helps make our journalism possible, so thank you for a free trial. Search Economist Podcast plus and if you have any comments on today's show, you can get in touch@podcastseconomist.com we'll see you back here tomorrow.

Sam.