Google Defends its Verizon Net Neutrality Deal

Richard Whitt, Google senior policy director, defends Google's agreement with Verizon, and inplicitly its belief that the compromise makes sense as a wider framework, for any number of reasons, not the least of which is that it moves the ecosystem forward at a time of apparently "intractable" obstacles.

"At this time there are no enforceable protections, at the Federal Communications Commission or anywhere else, against even the worst forms of carrier discrimination against Internet traffic," he says.

As is true with all grand compromises, the Verizon-Google deal represents "the best policy solution we could devise together," says Whitt. "We’re not saying this solution is perfect, but we believe that a proposal that locks in key enforceable protections for consumers is preferable to no protection at all."

Whitt likely is right about the "best achievable policy solution" angle. Given the serious business repercussions, no endurable solution is possible that fails to give key participants key victories.

If adopted, this proposal would for the first time give the FCC the ability to preserve the open Internet through enforceable rules on broadband providers. At the same time, the FCC would be prohibited from imposing regulations on the Internet itself, says Whitt.

Though ISPs might prefer another outcome, including unrestricted ability to create new tiers of service that optimize end user experience for real-time services, the Verizon-Google compromise does not preclude such Internet-based services. But the decision is left in the hands of application providers, and is a prohibited option for ISPs. That is a big deal.

Nor is Google foreclosing its ability to act later on wireless network neutrality, should it become necessary, and also gains an important regulatory precedent. "In the spirit of compromise, we have agreed to a proposal that allows this market to remain free from regulation for now, while Congress keeps a watchful eye," says Whitt.

The deal also implicitly creates other precedents. The logic implies that network neutrality is needed when markets are not robustly competitive. Some observers would strongly contest the notion that the fixed broadband market is functionally uncompetitive. But the point is that Google gets recognition that, in the future, if wireless networks become less competitive, rules might need to be extended.

Whitt argues that the wireless market is more competitive than the wireline market, given that consumers typically have more than just two providers to choose from. Whitt also concedes that wireless carriers need to manage their networks more actively for several reasons that make wireless technologically more challenging than fixed networks.

"In our proposal, we agreed that the best first step is for wireless providers to be fully transparent with users about how network traffic is managed to avoid congestion, or prioritized for certain applications and content," says Whitt. "Our proposal also asks the Federal government to monitor and report regularly on the state of the wireless broadband market."

The other angle is that the compromise does not prevent Congress from acting to impose new safeguards on wireless broadband providers. Whitt further argues that the new fourth-generation networks already are more open than 3G networks have been.

"So consumers across the country are beginning to experience open Internet wireless platforms, which we hope will be enhanced and encouraged by our transparency proposal," says Whitt.

There is no danger of Internet "cannibalization" because all Internet access services would have to remain "best effort" services. Non-Internet services could be offered. The best examples likely are the voice and video entertainment services consumers already buy, or private network services businesses buy.

"So, for example, broadband providers could offer a special gaming channel, or a more secure banking service, or a home health monitoring capability, so long as such offerings are separate and apart from the public Internet," he says.

If needed, the FCC could step in, should abuses in those separate areas occur.

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What's in the Deal for Google?

The recenlty-announced agreement between Google and Verizon Wireless on network neutrality has just a couple key provisions: the exemption of wireless services; "best effort" as the only service level Verizon can offer for fixed consumer broadband, Google's ability to do so if it chooses, and Verizon's ability to create new managed services that do feature quality-of-service guarantees (such as today's voice or video services).

Some might wonder why Google would agree to a deal that many network neutrality supporters think is too generous to Verizon. Others might wonder why Verizon would agree to permanently limit its fixed consumer access services to "best effort only."

The short answer is that it is a compromise giving each company something each considers important for its own future revenue growth, while trading away other provisions that might have been nice, but which are less central to the future business.

From Verizon's point of view, the agreement puts pressure on the Federal Communications Commission not to adopt rules that could be worse. The deal also protects Verizon's ability to manage its wireless networks, which always will have less physical bandwidth than its fixed networks, and therefore poses the more-difficult network management challenge.

Though it might like to have had the ability to offer something other than "best effort" levels of service on its fixed network, Verizon does retain the ability to create new managed services that are more like today's voice and entertainment video services, which must have quality of service measures, even if it cannot do so for Internet access services.

Google's wins might be more complicated to assess, on the surface. Some might argue Google gains recognition of a sort of asymmetrical framework: it can create quality-assured services (such as a streaming video service), if it likes, but Verizon is blocked from ever doing so. That importantly means Google can shape its own destiny without worrying that Verizon might create some form of paid quality assurance service that would raise Google's costs of doing business.

In a business sense, that is at the heart of much of the network neutrality position. Since Google's suite of businesses are based on the Internet, not managed or private network services, that means the whole gamut of things Google might want to do, now and in the future, in terms of services or applications that control latency, remain subject to its exclusive control. Equally important, Verizon cannot do so.

You might argue Google gave up too much in allowing more network management on wireless networks, but those networks always face bandwidth and congestion challenges that might technically require much more management. Google always can take up those issues later, should abuses arise.

The other angle is that if Google decides it wants to create a low-latency service of some sort, and deploys it for wired access, it also will likely work on mobile as well. As users routinely encounter options for "low bandwidth" or optional "high bandwidth" application interaction, so they might be offered a lower-bandwidth mobile experience and higher-bandwidth fixed access versions. The point is that if it goes to the effort and expense of creating low-latency applications, the same techniques should allow such apps to work on mobile networks as well.

But it is the "cost of doing business" angles that likely are equally important. As matters now stand, if consumers decide they want to consume lots more bandwidth, then it is Verizon's problem to make the investments, without direct hope of offsetting the investment costs by essentially getting video providers to pay some of the cost (creating video tiers that cost more, for example).

Verizon might hope to create and sell lots of accounts that feature higher bandwidth and cost more, but that's it. Verizon cannot expect to receive business partner revenues for doing so. As most observers think that is an essential requirement for mobile operators and telcos going forward, that means in the broadband access business, Verizon will be restricted to an end-user-only revenue source.

Verizon will have to hope it can create such partner revenue models in other ways. The agreeemnt does not specifically "commoditize" the broadband access business, but it does complicate matters for Verison to the extent that it bans any effort to create higher-priced "quality assured" access services.

On the other hand, should consumer demand for such services arise, Google retains the ability to create them. At the same time, Google gains assurance that, at least for Verizon users (and it likely hopes the agreement will ultimately apply to all broadband ISPs), Google does not have to worry about the cost of paying for upgraded access bandwidth demand and capabilities the ISPs surely will have to keep providing.

That said, there are always reasons why grand compromises are reached in the communications or other businesses: each of the key parties gets something really important, and avoids something that could be dangerous.

The Google-Verizon compromise is such an agreement. Each gives up something important; and each gains something equally important.

Android is Really Growing, Fast

Android sales are really growing fast, globally, according to Gartner. In the most-recent second quarter of 2010, Android notched a 17-percent market share gain.

A year ago, Android had just 1.8-percent share.

Verizon Thinks Customers Will Pay a Premium for LTE Access

Verizon Wireless executives beleive they will be able to charge customers a premium for access to the new Long Term Evolution network. John Killian, Verizon Communications CFO, says the company has said in the past, and continues to believe, that consumers will pay a premium for LTE quality and premium speed.

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Others are not so sure. But one way of describing the potential impact  is to look at Clearwire net additions in the second quarter of 2010.

As of June 30, 2010, 52 percent of the company's wholesale subscribers resided outside of Clearwire's currently launched markets, Clearwire says. That's the impact of revenues paid by Sprint Nextel HTC Evo users who live in areas where all they can get is 3G network access.

Of course, that is an indirect indicator, as the net additions were driven by consumer demand for the Evo device, which does require an additional $10 a month payment--not directly for the 4G network, Sprint is quick to point out.

Still, now having had a chance to use the 4G and 3G networks Sprint and Clearwire operate, there is a clear latency advantage for the 4G network, which should be experienced on the Verizon LTE network as well. Sites load noticeably faster on 4G than they do using the 3G network.

Killian says Verizon Wireless LTE speeds will be eight times to 10 times the speed of the 3G network. If that turns out to be true, and there is every reason to believe it will be, consumers likely will make the same value-price decisions they already make for fixed service, namely that there is an expectation higher speed costs more than lower speeds.

Devices also will make a difference, though. Obviously, enough people thought the Evo was worth buying that a $10 a month surcharge did not seem to deter many of the earlier adopters. And though the surcharge is not specifically related to 4G access, more than half of Clearwire's wholesale net adds (Sprint is a wholesaler) were from customers unable to get access to the 4G network immediately.

That is more a test of Evo demand than 4G, but it is illustrative. Consumers might well value faster mobile broadband enough to pay more, especially when bundled with attractive new devices.

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3D is Mostly Hype; Action is in Apps

Despite all the current hype about 3D TV, it doesn't appear most consumer electronics suppliers think much sales volume will happen anytime soon.

At least that's the conclusion you might draw from plans exhibitors now seem to have for the huge Consumer Electronics Show to be held in January, 2011.

Some observers say there will include be almost no talk of 3D TV but plenty of talk about “apps” for TV, or "interactive TV" using a different name.

The immediate perceived business value seems to be creation of app stores for TVs the same way app stores have become strategic for mobile devices. Whether this will work or not is hard to say.

It is pretty easy to conclude that 3D sales volume remains far off into the future. Few consumers are likely to want to invest in expensive new display technology with little content so soon after making a switch to HDTV and flat screens.

3D A Relative Flop, TV Manufacturers Talk Up Apps

Game-Capable Mobile Sales to Swamp Game Consoles, Handhelds

Sales of game consoles and hand-held gaming devices will be swamped by sales of game-capable mobile devices over the next four yeas, according to analysts at iSuppli.

That probably does not mean that mobile devices will displace the existing game console market, anymore than tablet PCs will replace laptops or smartphones will replace laptops. More likely is the creation and growth of new use cases for mobile devices that extend gaming, but in ways adapted to the form factor and user interface a mobile offers.

FT.com / Technology - Industry split over net neutrality

Facebook, Ebay, Skype and Amazon say they are opposed to the Google-Verizon agreement about network neutrality, which makes "best effort" access the way broadband will be sold to consumers, but which also exempts wireless networks from the rules and allows application providers to create their own tiered, quality-assured services if they choose.

As part of the deal, Verizon gives up the right to create its own quality of service tiers for broadband access.

But the application providers also seem to object to creation of new managed services that are not classic "Internet access" services, much as a single pipe now supports Internet access, multichannel video services or business services with all sorts of quality assurances.

The area of disagreement seems to involve some differences of of opinion over regulation of networks and services of various types.

Lots of networks these days use IP technology. The public Internet, private business and organizational networks, plus separately-regulated video entertainment services are examples.

Each traditionally have been regulated using entirely different rules and principles, and at least one issue here is which models of regulation are "best," going forward.

The opponents do not want Internet access to regularly be available in a "best effort" and quality-assured or optimized versions. The Google-Verizon compromise preserves the best effort access, but does allow for development of private network or managed services.

One analogy, though many will not like it, is that opponents of the compromise do not want to see creation of a "two-tier" or "multiple-tier" access regime, while proponents of the compromise do not want to foreclose development of new managed services that are more akin to cable TV or private business network services than best-effort Internet access.

FT.com / Technology - Industry split over net neutrality