Sunday, August 02, 2009

The (historic) Battle of Google Voice - Enter the FCC

Bush laid waste to rational government, leaving a largely broken and corrupted mess.

Bureaucracies are hard to kill however. Bush could introduce incompetent or destructive leadership, but eight years wasn't long enough to kill all of the professional core.

... AT&T is pushing the antitrust envelope in a fierce and rational fight to stay alive. Apple has more ways to make money, but they’re in the game with AT&T and they too face disruptive threats...

... AT&T and Apple are behaving rationally in the face of a disruptive market entry. The best answer, after all, to the Innovator’s Dilemma is to identify potential disruptive forces and use economic warfare to destroy them – or, in the case of an opponent the size of Google, slow their advance...

... It's ... easy to see, given these precedents, the path AT&T and Apple will (must) take to eliminate competitive threats and maximize their future revenue streams ... It’s no good trying to argue Google/Apple away from their positions – they are entirely logical...
In the Bush era, I'd have been right. In that time the GOP's marketarian mixture of corruption and evangelical libertarianism meant there was no consumer representation in business battles.

I'd forgotten that we're not in the Bush era any more. We're in a fragile interlude where Reason has a voice in the executive branch. A higher power has joined the Battle of Google Voice.
The Obama FCC is no longer a mockery, it has an agenda (emphases mine) ...
Why The FCC Wants To Smash Open The iPhone
Erick Schonfeld, (Washington Post Online)

Right about now, Apple probably wishes it had never rejected Google Voice and related apps from the iPhone. Or maybe it was AT&T who rejected the apps. Nobody really knows. But the FCC launched an investigation last night to find out, sending letters to all three companies (Apple, AT&T, and Google) asking them to explain exactly what happened.

On its face, it might seem odd to some people that the FCC is investigating the rejection of a single iPhone app. After all, iPhone apps are rejected every day. But the Google Voice rejection caused an unusual amount of uproar, and there is nothing like a high-profile case to make an example out of in pursuit of pushing a bigger policy agenda. The FCC investigation is not just about the arbitrary rejection of a single app. It is the FCC's way of putting a stake in the ground for making the wireless networks controlled by cell phone carriers as open as the Internet.

Today there are two different sets of rules for applications and devices on the Internet. On the wired Internet, we can connect any type of PC or other computing device and use any applications we want on those devices. On the wireless Internet controlled by cellular carriers like AT&T, we can only use the phones they allow on their networks and can only use the applications they approve. This was fine when the wireless networks were used mostly just for voice calls. But now that they are increasingly becoming our mobile connections to the Internet and mobile phones are becoming full-fledged mobile computers, an argument has been growing that the same rules of open access that rule the wired Internet should apply to the wireless Internet.

While Apple and AT&T cannot be too happy about the FCC investigation, Google must secretly be pleased as punch. It was only two years ago, prior to the 700MHz wireless spectrum auctions, that it was pleading with the FCC to adopt principles guaranteeing open access for applications, devices, services, and other networks. Now two years later, in a different context and under a different administration, the FCC is pushing for the same principles.

In its letters requesting more information from all three companies, the FCC cites "pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497). That first proceeding on open access dates back to 2007 when Skype requested that cell phone carriers open up their networks to all applications (see Skype's petition here)…

… AT&T responded to this post with the following statements:

AT&T does not manage or approve applications for the App Store. We have received the letter and will, of course, respond to it. Customers can use any compatible GSM phone on our network, not just the ones we’ve approved and sell. And they also can use apps we don’t approve. We don’t approve iPhone applications.

So there you have it. You can use any mobile app you like on AT&T unless it is an iPhone app (that's been rejected by Apple). Does Apple ever reject apps at the request of AT&T though? Maybe they'll give the FCC a straight answer…

As’s Brainstorm Tech put it "Sometimes you’ve just got to love the government”.

Mobile communication companies lease a public good – frequency. In the Obama era there’s an active government role in aligning the public good with consumer interests through maximizing direct competition.

I recommend reading the 2007 Arrington article Schonfeld cited, particularly this section …

AT&T’s response to Google’s letter was breathtaking in its audacity:

… Not satisfied with a compromise proposal from Chairman Martin that meets most of its conditions, Google has now delivered an all or nothing ultimatum to the U.S. Government, insisting that every single one of their conditions “must” be met or they will not participate in the spectrum auction. Google is demanding the Government stack the deck in its favor, limit competing bids, and effectively force wireless carriers to alter their business models to Google’s liking. We would repeat that Google should put up or shut up— they can bid and enter the wireless market with any business model they prefer, then let consumers decide which model they like best…

Google lost that spectrum auction, but I dimly recall they did manage to get some rules on spectrum use added to the language of the auction.

I know some of my tiny readership felt I’d gone over the top when I wrote of the “Battle of Google Voice”. I even wondered myself if I’d been too dramatic. In retrospect, however, I called this one correctly.

This is big. I think, like me, Apple and AT&T forgot that the Bush era was over, and they foolishly gave the FCC the club they were looking for. They’ll now be turning to their Senatorial pawns, but Microsoft and Google will moving their Senators too.

Who’s to blame for the action and the blunder? At first Apple was leaking rumors that AT&T was to blame, but now AT&T is firmly and publicly blaming Apple. I though both had collaborated, but now I’m thinking Apple may have played the leading role. The timing of Steve Jobs return is obviously curious.

This really is a historic moment. We’ll either get an open competition that will deliver value to consumers in the near term, or we’ll be stuck in a ground war in cyberspace for the next decade.

Update 8/3/09: Al Gore is on Apple's board. I wonder what questions he's asking Steve Jobs now.


Anonymous said...

1. What's the minimum donation to Obama's re-election PAC to make an FCC probe to go away?

2. Does either Apple or AT&T have that much spare cash lying around?

Regardless of the answer to #1, the answer to #2 is certainly 'yes.'

American government has already passed the corruption, cronyism and rent-seeking point of no return.

Obesity said...

Sounds like some under the table deals are going on there. Definitely not above board.