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If we paid even pennies for Facebook or Gmail, some interesting things would happen. The companies would no longer be quite so reliant on advertising, and so would start to treat us very differently. As paying punters, we'd be free to switch to alternatives. With real cash now circulating, instead of abstractions such as "attention" and "behavioural intent", investors would start to be interested in funding better Facebooks and Gmails. And with real market competition instead of an oligopoly of fairly cosy giants, everyone would have to raise their game. Who knows where this might lead... A healthier marketplace, perhaps?

Markets don't cure everything, but at the risk of being accused of sounding like Milton Friedman, new markets for internet content and services could be very helpful to the health of the interwebs. I'm not approaching it from an ideological position, but something much simpler. It is, very simply, the reality that you get what you pay for – and there is nothing inevitable about the ad-centric, free, Chocolate Factory vision of that which Google sells to policy makers (and regulators) as the One and Only Way.

The green, green bread of Google

As a thought experiment, imagine that – as if by magic – all our bread was left mouldering on our doorsteps each morning, and that it was usually too damp, too dry, or too mouldy to eat... and that was the only bread we could get. We'd soon start to wonder if we couldn't find something better to eat – perhaps a marketplace of bakers and delivery boys, or dedicated outlets to sell a new wonderbread? Imagine if we were told that this mouldy product was "an emergent property of the pavement", that bread would always be free (but rubbish). We'd think this absurd.

So treating people as paying consumers would even be good for Google.

Mountain View should also observe how Microsoft spent 15 years fighting the competition authorities and in the process became bloated, complacent and inefficient. Google appears to be gearing up for a fight of similar intensity and duration. Several hundred antitrust and privacy lawyers now work for the Chocolate Factory. Dozens more are engaged in lobbying. This is not Google's core business. This is not what its good at. Google may find it is defending an obsolete business model.

You'd think, employing as it does so many clever economists, that somebody at Google would be able to tell the management the benefits of helping online markets mature. Maybe they already have. But the current management (which has been there a very long time, and belongs to another era) either isn't listening, or doesn't want to know.

As for the Baby Bell "solution", we should note that Microsoft was formally given the same treatment, after Judge Penfold declared there should be two giant "Babysofts" – the splitting of Microsoft into Office and Windows companies. The industry reaction was that this would make the problem worse, not better. And as I pointed out the other day, after the AT&T split the many RBOCs simply coalesced back into two giants. It took over 20 years, but what was the point? ®

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