Google's deal on equal Internet access opens door to new clout

By Cecilia Kang
Washington Post Staff Writer
Tuesday, August 10, 2010; A01

Google has long presented itself as looking out for the little guy. It easily could have used its wealth and power to gain preferential treatment from Internet providers but always said it would not because that could prevent the next start-up in a Silicon Valley garage from enjoying similar success.

But as Google has gotten bigger and entered new lines of business, it has revised some of its principles -- and it is drawing criticism from start-ups and public interest groups along the way.

Google and Verizon Communications on Monday confirmed that they've put aside their differences and agreed that rules ensuring equal access to the Internet shouldn't apply to mobile phones. They also said a company such as Google could strike a deal to pay for more capacity on a carrier's network for zippier downloads of its own sites over those of competitors.

That means Verizon could block an application such as Microsoft's Bing search service from its subscribers' mobile phones, or it could charge consumers extra for access to certain popular applications delivered at better quality than other Web sites.

Google chief executive Eric Schmidt said in a conference call with news media that though Google has agreed to these changes in principle, the firm wouldn't actually pay for preferential treatment on land-based broadband networks. He said that Google would only operate on the "public Internet" that is accessed by any user and that it would not cut special deals to deliver YouTube or other services to fixed-wire consumers at a higher rate.

But analysts pointed out that even if Google doesn't take up that practice, its agreement could lay the groundwork for other companies. Firms could pay providers such as Verizon for extra space on their "pipeline" into American homes, they said.

"We both recognize that wireless is in a slightly different place than wireline," Verizon chief executive Ivan Seidenberg said in a news media call. "What we're concerned about is the imposition of too many rules up front that would not allow us to optimize . . . the supercharged growth we've seen in the past."

Closing ranks

The announcement illustrates a shift in direction for Google, which has been the corporate evangelist for open network practices, particularly on wireless networks. Three years ago, Google's top executives were lobbying the Federal Communications Commission to break open the closed nature of wireless networks, with rules that would allow a consumer to put any wireless device on any network and access any software or Web site.

But now that Google has partnered with Verizon Wireless to make cellphones based on its Android software, the fastest-selling smartphone platform currently, the search company says it understands the unique bandwidth constraints on mobile networks. This is the big frontier, where analysts say Google needs to extend the cash-machine ad service that has experienced such great success with desktop Internet users. In their announcement, the Internet giants said that "net neutrality" rules, as they are called, would be too "onerous" for the mobile phone market.

"There is a lot of concern that the flexibility that Google is willing to give on wireless is . . . because they feel they have a path forward in their commercial dealings," said Rebecca Arbogast, head of tech-policy research for investment firm Stifel Nicolaus.

The companies' proposal is meant to be a legislative blueprint for a law overseeing broadband service providers such as AT&T, Comcast and Verizon. The companies said Congress should empower the FCC to be the traffic cop making sure consumers have equal access to Web content from their home computers, and meting out fines of up to $2 million on companies that block or give priority to some Web sites on the Internet.

Other companies have argued for the same rules to apply on mobile networks. Skype, for example, has argued in meetings with the FCC that the agency should prevent carriers from blocking services such as its own from the iPad and from the Droid or other smartphones.

The embattled FCC, which saw its authority over the Internet challenged by a federal court ruling earlier this year in a case involving Comcast, has been hoping for an industry-led proposal to be adopted by Congress.

An open divide

Some public interest groups said the Google-Verizon pact comes up short on the mobile side of the equation.

"The companies' plan puts wireless Internet service into a regulatory no-go zone and offers only toothless protection," said Leslie Harris, president of the Center for Democracy and Technology.

A spokeswoman for FCC Chairman Julius Genachowski declined to comment on the deal. But Democratic Commissioner Michael J. Copps criticized the chairman's negotiations, saying the agency should push forward on a proposal to re-regulate broadband providers.

"Some will claim this announcement moves the discussion forward. That's one of its many problems," Copps said. "It is time to move a decision forward -- a decision to reassert FCC authority over broadband telecommunications, to guarantee an open Internet now and forever, and to put the interests of consumers in front of the interests of giant corporations."

Google's statements stand in stark contrast to earlier ones made by the company's executives, who have expanded the company's policy and lobbying shop in Washington in recent years to battle in favor of net neutrality against telecommunications and cable giants. But as new business opportunities emerged, Google's perspective on the policy seemed to change.

In 2007, founders Larry Page and Sergey Brin lobbied then-FCC Chairman Kevin Martin to attach net neutrality rules to its auctions of wireless airwaves. Google officials have testified at FCC and congressional hearings that fair rules of the road need to be in place to keep Internet service providers from becoming "gatekeepers" of the Web, favoring their own business interests. Google in 2008 bid $4.6 billion for airwaves with open-access conditions to underscore its commitment to a future open mobile wireless industry.

"We believe it's important to put our money where our principles are," Schmidt said in a news release on Nov. 30, 2007.

Then, in November, Google announced a broad partnership with Verizon Wireless to jointly develop and market Android phones, a then-nascent software platform hoping to eat into the success of Apple's iPhone. Since then, Schmidt has changed his tune, analysts said.

Schmidt and Seidenberg jointly filed comments to the FCC in November on proposed net neutrality regulation, saying they had reached "common ground" on some aspects of network management. At that point, Google didn't say that it endorsed unregulated wireless network rules but that the partnership had opened its eyes to the unique technical constraints of mobile networks.

As their partnership deepened, so did their agreement on policy. In a March guest op-ed jointly penned for the Wall Street Journal, Schmidt and Seidenberg said they agreed that the federal government should abstain from overstretching rules in the fast-growing broadband industry.

"While our two companies don't agree on every issue, we do agree generally as a matter of policy that the framework of minimal government involvement should continue," they said.

© 2010 The Washington Post Company