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Wacky Google/Verizon net neutrality theory

Update: Google subsequently addressed part of the theory I lay out below in a post on their public policy blog, Facts about our network neutrality policy proposal, which is worth reading.

I agree with my friend Nelson that Google’s new stance on net neutrality seems really weird and out of character. Let me propose a total grassy-knoll/two-shooter conspiracy theory so you can talk me out of it.

What if Google agreed to Verizon’s stance on wireless net neutrality in order to keep Verizon from making a deal with Apple for the iPhone?

Rumors about Verizon and the iPhone are evergreens, and now that the iPhone 4 hype is dying down, those rumors are starting up again. Coincidental timing of “Huge CDMA chipset order” rumors and this net neutrality piece shouldn’t be anything other than coincidental.

But the news came out in such an odd way. Google’s participation in these talks was leaked, and Google rather strongly denied that the NY Times piece on the talks was accurate, but then it came out that it was. The artlessness of that announcement is very weird. Could someone on the Verizon side have leaked it to push Google towards taking that stance?

What does Google have to gain from agreeing to Verizon’s stance? It seems like little or nothing, or at least nothing obvious. And yet they’re investing a lot in Android and making a lot of progress. If a Verizon iPhone came out, would they lose the lead they’re just approaching or have just reached? Is there something they could give Verizon to keep that from happening?

Wacky theory. I’ll fully admit I’m unqualified even to guess. So, someone talk me out of it?

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  • RidleyGriff

    I’m going to go for a slightly more tame scenario:

    1. Google has never truly cared about being open, or Net Neutrality in and of itself. Google has only ever cared about what was best for Google’s interests.

    2. Times have changed, and Net Neutrality no longer aligns with Google’s interests.

    3. Google has been very effective at branding itself as the protector of freedom and purity.

    4. Because of #3, Google thought they could get away with acting on #2. They were wrong.

  • wildshovel

    Well, it’s out now: Google/Verizon proposes an to exempt all wireless traffic from net neutrality.

    Given that the future of networking is wireless, this is an utterly self-serving compromise, as everyone knows Verizon is far and away the best wireless network in the North American market.

    What a blatant attempt at an end-run.

    Our only hope is that the FCC will reject the Google/Verizon proposal, both for what it isn’t — a real compromise — and what it is — a naked attempt to circumvent the proposed net neutrality rules.

  • Dana Spiegel

    Marc,

    I don’t think this is the reason, but I think its close. Verizon wouldn’t give up the $billions that would come its way if it brough the iPhone on board just to have another big company “agree” with it with no sure outcome of that “agreement”.

    What I think is more likely is that Google got in bed with Verizon BECAUSE Verizon is getting the iPhone. By supporting non-NN on cell networks, Google can buy preferential carriage for its services to its phones, or possibly for any services to its phones, all at the expense of Apple. I’m sure if they pay enough, Verizon would be willing to lock Apple out of purchasing that preferential treatment as well.

  • Jack Campbell

    Big error in thinking here. Google wants as many web enabled mobile devices sold as possible, including iPhones. Google wants to *help* iPhone sales. Android only exists to give OEMs a lower cost track to put more mobile web devices into user hands. Android or iPhone, makes no difference to Google. Either way, it’s a new portal into which to serve ads.

  • Chris Gorski

    Of course Google cares if an iPhone or an Android phone is sold! An Android handset is linked in with every service Google offers–from Google Search to Google Maps to Google Voice to GMail to the Google Dating Service (OK so I made that last one up).

    The point is, an Android handset is far more linked to Google’s ecosystem and is not subject to Steve Jobs waking up one morning and deciding to throw all the iPhone’s search traffic to Bing (which, incidentally, is a very good search engine).

    It is distinctly in Google’s interest to funnel as much of what’s on your phone and in your life into Google’s cloud so they can index it and sell ads against YOU. Vic G’s over the top rhetoric re: Apple and the iOS are hardly over the top when seen in that light.

  • David W.

    You have to understand that Verizon is now in control of Android. Verizon, in fact, is now the strongest player in all of the companies that are in the mobile market.

    Verizon has both Motorola and HTC both competing to be the next Droid phone. This means that Verizon can pick and choose the best. And, since Droid is a Verizon brand, it is Verizon that does all the marketing. You can’t get a Droid X except through Verizon.

    Apple is now more in need of Verizon to sell iPhones than Verizon needs the iPhone. When the iPhone 4 was introduced, it didn’t cause an exodus of Verizon users over to AT&T like the the three previous incarnations of the iPhone did. The Droid is competitive enough with the iPhone, that Verizon customers won’t defect to AT&T’s inferior network.

    Most importantly, the Droid line is the main platform for Android. Back in January, when it was only five months old, the Droid constituted 1/3 of all Android phones. I would say that figure is now closer to 50%. Without the Droid, Android would be far, far behind the iPhone in terms of sales.

    So, Verizon is sitting very pretty. They can negotiate their own terms with Apple over the iPhone sales.

    But, the real power Verizon has is over Google. Verizon can screw Google over so many ways. For example, if Verizon gets the iPhone and marketing permission from Apple, they’ll simply market the iPhone over the Droid. Make the iPhone $50 cheaper than the Droid. Sell the iPhone for 2 for 1. This will cause Droid sales to drop, and Android’s market share will quickly sink. That’ll be a big setback for Google which is pushing Android as a better platform than iOS.

    Or, Verizon can tell Google they’re opening up a V Cast app store for Android. Verizon customers will use that instead of Android Marketplace for a wide variety of reasons. Verizon has already announced an API for Blackberry phones that gives Verizon a say over in-app ad revenue. They could do the same for Android and cut AdMob out.

    Verizon could play extra dirty and simply prevent customers from downloading apps from the Android Marketplace. (If there are 20,000 apps in the V Cast Android store, why not?) And, then work out exclusive agreements with app developers to make V Cast the only store where there apps are listed.

    What we saw was Google caving into the demands of Verizon. Sure, they agreed that Wired Internet will still follow the old definition of Network Neutrality, but they might as well agreed to extend Network Neutrality to dialup networks and to UUCP networks too. This is the old technology and will have little growth.

    The biggest growth will be wireless networks, and Google is giving up the idea of Network Neutrality on these networks because Verizon has Google’s manhood in the palm of their hands, and Verizon gives them a squeeze once in a while to let Google know who’s boss.

  • Inky69

    Here is my theory. Apple and google are not at odds. It’s a fake fight. They really are trying to keep Microsoft out of the business. Apple sells hardware, google gives android for almost free. What’s balmer to do with that stacked against him?

  • EU

    What if the “huge CDMA” chip order is just for a Verizon iPad?

  • brian g

    I’m not going to talk you out of it, but here’s some more mindless speculation. If the whole net neutrality exemption thing fails for Google, they’ll be forced to buy Verizon. Which means they’ll have to put off buying Sony.

  • Alex Wilson

    First of all, your article and all of your comments have impressed me. You and your readers no their *stuff*.

    Alright, here’s the scenerio in my opinion. Google does not care if iPhone goes to Verizon, and here’s why; Android is not meant to be the best, its meant to be the most popular. No matter what happens with Apple, Android will dominate the entire phone marketplace. It is open-source, so up-and-comers as well as established brands can use it to make low-cost, high-feature phones. (Sorry about the hyphens) Symbian and RiM will be the big losers, Apple will maintain. Win Mo is the wildcard.

  • tony

    my theory:

    google and apple were once aligned on a long term strategy to see wireless data service become commodified, turning over the big apple cart of the incumbent carriers.

    then something happened.

    apple overplayed its hand with at&t early on, wresting too much extra cash from the deal, and the carriers got wise. this is why apple can’t close a deal for another domestic carrier. verizon and at&t are aligned in wanting to keep the iPhone as exclusive to a single carrier (at&t) as it A) affords time for competing platforms (carrier-exclusive android devices) to catch up as effective hedges against apple’s long term commodification strategy and B) further reinforces the the exclusive-to-carrier device paradigm which makes the colluding oligopolistic carriers seem like they are each selling a very different product/service (which when you look at the similarities of monthly bill totals and 2yr service contract terms becomes a hard myth to swallow).

    google at some point decided that apple had blown it. then google blew it themselves with their failed half-baked multi-carrier direct sales model. now they’ve moved the goalpost and decided that apple’s iOS dominance is a bigger strategic threat to their interests than the incumbent carriers stranglehold on last-mile access to the internet.

    …and in my nuttier speculation:

    I think in the longer term google will spin up their own 4G LTEs atop the massive amount of backbone they own and attempt to force a new commodity-ish pricing model on the carriers via direct competition.

    I suspect that google feels that being exempted from net neutrality in these new wireless services they will offer (perhaps atop new spectrum) will allow them to to bootstrap new classes of services that outweigh other don’t-be-evil concerns and speed us towards mobile data commodification.

    crazy theory, I know, and presumes a tremendous amount of hubris on the part of google brass. but I’m failing to come up with any other explanation that squares with google’s interests.

  • Alex Tolley

    What if Google wants to lock up access to bandwidth making it the only viable player for video on Verizon? Cut a deal whereby both Google and Verizon can get a piece of the profits from this, perhaps to distribute paid tv?

  • Karim Yaghmour

    My wacky theory is that this is actually about Facebook: http://www.karimyaghmour.com/blog/2010/08/is-android-googles-t1000.html

  • Clay Claiborne

    How can you say the NYT article turned out to be right. That article said their was the deal for tiered pricing. There was no deal and no trail of tiers.

    So Google got together with Verizon to make a proposal to the FCC. Big Deal. Why are people being driven into panic mode? I’m beginning to think that some might find it useful to declare the death of the Internet now and blame it on Google. I wrote a blog about this today on the Daily Kos.

    End of the Internet As We Know It!

  • Robert Young

    The issue, was/is/always will be, that the USofA is wasting billions of dollars of capital with incompatible networks. Do you have 6 water companies with pipes in the street in front of your house? Do you pick to use one for a couple of years, then pick another??

    Of course not. The network has to be either socialized, or heavily regulated onto one protocol. Unless it is, the internet will become AOL versus MSN. And the corporations keep a vast amount of consumer surplus, i.e. they get richer while the populace gets poorer.

  • John

    Google has been in the news lately for all the wrong reasons. Instead of focusing on features and usability, we hear about back-room deals and efforts to tilt the playing field away from their smaller competitors.

    If fast access to web apps is doled out according to which vendor can pay the most to connect to their customers, it stands to reason that smaller competing vendors of online applications will be at a severe disadvantage in their ability to distribute and operate their products.

    These bad deals will place a virtual choke hold on smaller web application providers by ensuring that products such as Google docs, and Blogger have the best possible connection to the end user, while sites such as DocsFree.com, Zoho, Sheetster.com, WordPress, and other alternative services are delegated to the slow lane.

    more about on my article here: http://extentech.com/uimodules/docs/blog_detail.jsp?meme_id=123141&page_meme_type=23