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Google in Carolina

February 04, 2007

Google's veil of silence trembled a bit this weekend, as the company confirmed that it continues to explore the possibility of building two huge data centers in South Carolina, one near Charleston and one near Columbia, in addition to the one it has already announced it will build in North Carolina. The site near Charleston, a 520-acre plot, is already in the process of being cleared in preparation for construction, according to the Associated Press. The AP report continues:

"We hope to have more details soon," Google spokesman Barry Schnitt said. The two South Carolina properties are not competing for the same project or jobs, Schnitt said. He said the Mountain View, California-based company also is looking at sites around the world. "Some we will begin construction on immediately," he said. "Some may be held in reserve to be used if a site does not work out somewhere else or as business needs dictate."

Google's sudden announcement regarding its South Carolina plans comes on the heels of a story in last Thursday's Raleigh News & Observer, by Jonathan Cox, that was highly critical of the company's aggressive negotiating tactics in North Carolina. Google, according to Cox,

tried to silence lawmakers and pushed - at times with a heavy hand - to influence legislation designed to bring the company to Caldwell County. The company demanded that legislators never speak its name, and had them scolded when word of its interest in North Carolina leaked out, according to records made public this week.

As work proceeded on the bill to remove much of its tax burden, Google threatened to end negotiations because legislative staff didn't write exactly what it wanted. State Commerce Secretary Jim Fain was asked to "prevail upon" the bill writer.

Cox reports that the newly released state documents "reveal a company obsessed with secrecy and not above bullying, tactics that helped get it tax breaks that could top $100 million over three decades." One of the documents quotes an email sent by a Google executive, Rhett Weiss, to the state's commerce secretary complaining about the state legislature's consideration of a Google-pushed bill granting special tax breaks to Internet data centers: "This legislation has remained cursed with unfortunate and petty dickering from the legislative drafting side - mainly refusing to reinsert better word choice. ... Without the legislation being passed with its correct substance, our project will not proceed in North Carolina. ... I always believed North Carolina to be a good state in which to do business. But the legislation's long saga increasingly concerns us. Will creating and operating a North Carolina facility continue to be so hassle-prone?" CNET's Michael Kanellos says Google's actions reveal an attitude of "effete disdain."

Some of North Carolina's elected officials, including legislators, gave in to Google's demand that they sign nondisclosure agreements to keep the company's identity secret. As Cox reports:

That posed challenges for elected officials, charged with conducting the public's business in the open. As the tax measure wended its way through the legislature, some lawmakers began linking it to Google. That prompted a strong rebuke from Weiss. "We respect the legislature needs to conduct its business, to deliberate on bills," Weiss wrote in a June 7 e-mail to Hobart. But legislators must understand that the project likely will be canceled if anyone "mentions the company's interest in the bill, North Carolina, or the project itself."

Based on Cox's reporting, it seems that Google sought to steer the North Carolina legislature's deliberations while keeping its influence secret. That goes beyond tough bargaining. One senses that this story may get a whole lot bigger. Where else is Google using such tactics?

UPDATE: More here and here and here.

Comments

....and also maybe why these tactics are necessary. Is there something geographically attractive about the North Carolina plot - cheap power, shortest route to lay fiber to Africa, etc.? Is there a resource battle here, similar to the acquisition of hydro in the Northwest?

Posted by: Mark Ontkush [TypeKey Profile Page] at February 4, 2007 02:21 PM

hello...have you or Jonathan ever negotiated with an entity xxx times your size? You are talking about a $ 5 b company versus a US state/local authority consortium...who has the bigger battery of attorneys and experts at their disposal?

Maybe Google should start doing what Disney did in Florida...bought up a bunch of land in names of multiple anon entities when it decided Orlando was its next major location...

no reason why Google should announce its intentions to you or me, or indeed much of the world...

Posted by: vinnie mirchandani [TypeKey Profile Page] at February 4, 2007 04:16 PM

Vinnie,

You're right that it's fine for companies to keep their plans secret, and it's fine for them to drive hard bargains, too. (Though if they're trying to sustain an image as a kinder, gentler corporation, strong-arming public officials may be counterproductive.) But getting legislators to sign nondisclosure agreements while they're considering a bill beneficial to your interests and into which you're demanding that particular language be inserted? That's troubling, don't you think?

Google's market cap, by the way, is about $150 billion. (Its annual revenues are $10.6 billion.)

Posted by: Nick Carr [TypeKey Profile Page] at February 4, 2007 04:27 PM

yes, point missed. Obviously big companies have sway, they also have good PR departments. The leaked NDs, the brand damage, why muck it up when you don't have to? I wonder if there is something more.

Posted by: Mark Ontkush [TypeKey Profile Page] at February 4, 2007 09:53 PM

Nick, the games corporations and governments play around re-los are sickening...I was reading recently about the incentives Office Depot extracted for moving HQ less than 10 miles within Florida...or the stuff countries do to attract companies...Google is not the first or the worst ...kinder, gentler? You really don't buy that - do you? I admire Google for their agility, but the evil stuff is just to rile MS , Oracle etc...

Posted by: vinnie mirchandani [TypeKey Profile Page] at February 4, 2007 10:52 PM

The interesting question for me is what is the impact of a data center on the local economy. A home depot could add $50 million to the local economy and an IKEA store, say $150 million. Has anybody studied the impact of a Google data center on the local/ state economy?/

Posted by: Arthgallo Wachs [TypeKey Profile Page] at February 7, 2007 01:05 AM

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