The End Of "Net Neutrality" Could Cost Google Hundred Of Millions

According to comScore, Google (GOOG) has almost 124 million unique visitors in the US. The pageview number is much, much larger. GOOG division YouTube now serves over 100 million video streams per day.

And, the Justice Department wants to end "net neutrality". The concept is simple. Cable companies and telecoms charge the same amount of money for all traffic. It does not matter if it is video, which takes up a great deal of bandwidth, of e-mail, which takes up very little.

The Wall Street Journal writes that: "The Justice Department said imposing a Net neutrality regulation could hamper development of the Internet and prevent service providers from upgrading or expanding their networks." And, D of J is concerned that if the big websites don’t pay the freight, it will get passed on to consumers. Justice wants regulators to stay out of it and let supply and demand take over.

The deal would be very good for the likes of AT&T (T) and Comcast (CMCSA) which pay to provide the infrastructure and bandwidth for much of the internet. They believe that they carry the entire financial weight of increasing internet traffic.

If the burden of bandwidth begins to shift to the large internet companies, the P&Ls of operations like AOL, MSN, Yahoo! (YHOO) and Google could take on water.

Verizon’s (VZ) cost of service was over $9 billion last quarter. It is spending $23 billion to build high-speed fiber-to-the-home. Capex at the phone firm was $8.5 billion during the period.

So, what could the freight be. For a bandwidth and pageview hog like Google, no one should be surprised if that number does not reach the hundreds of millions of dollars. The company better increase its marketing budget.

Douglas A. McIntyre