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Summary:

Today’s compromise between Verizon and Google on network neutrality is a big story, not because it’s going to change the policy discussion much, but because it marks Google selling out the tech and startup community so it can advance it’s own economic interests.

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Today’s compromise between Verizon — one of the nation’s largest ISPs (and largest wireless provider) — and Google on network neutrality is a big story, not necessarily because it’s going to change the policy discussion much, but because it marks Google selling out the tech and startup community so it can advance its own economic interests. If you weren’t aware of it by now, Google’s going to play the regulatory game for itself, not for the broader tech community.

Even if the Federal Communications Commission can muster up the political will to ignore this agreement — which is really just a highly amplified (and influential) comment in the net neutrality proceedings and probably won’t have any impact on policy unless the FCC or Congress decides its the optimal way to go — it’s worth looking at the implications were such an agreement to be made law. Why? Because this agreement is a perfect example of self-regulation, whereby those with the most to gain (and lose) present a proposal that’s not terrible in the present, but has huge implications when it comes to the future.

First, go read the seven principles of the proposal, then come back. The three biggest items that will affect technology firms and consumers are:

  • Taking wireless out of the equation for network neutrality regulations and inserting “transparency” as a salve
  • The proposal allowing for “advanced network services”
  • The utter emasculation of the FCC in the section headed “case-by-case enforcement”

I hit on the first two in my story earlier today, but the wireless compromise will likely have a huge impact on firms like Skype, Pandora and mobile video services that are relying on the growth of the mobile Internet to boost their businesses. The inability to enforce network neutrality on wireless devices opens the gateway for carrier blocking of certain applications delivered via the web to wireless handsets. Sure, the framework notes operators have to be transparent, but firms have been transparent about blocking VoIP services like Skype from their networks for years.

Another possibility is that operators could seek deals with certain service or app providers to get paid for delivering certain traffic on their handsets, but not others. If you’re Pandora and AT&T has a deal with Slacker, you may see your stunning growth slow. Consumers may or may not realize what’s going on depending on how many layers of legalese is wrapped around the transparency this framework requires.

This brings us to the issue of managed services, or as the framework labels it, advanced network services. This is a real issue for startups because it creates a dual-class system for the Internet. As I wrote earlier:

This is theoretical today, and is where the potential for big controversy lies. Google’s Eric Schmidt stressed that Google wouldn’t send its traffic over an additional online service, and suggested that if Verizon did end up degrading the “public internet” that competitors would arise to address the problem, something that’s pretty hard to believe given the costs associated with building a network. However, when Verizon’s Siedenberg said on the call, “Who knows what new services technology will bring in the future?” and suggested that 3-D content or any other service needing certain quality of service guarantees might be delivered over such a specialized service, it doesn’t take a lot to see Verizon angling to protect its ability to profit over its control over its pipes.

This is a big issue for startups. Google isn’t worried because it has both the brand and economic ability to ensure that it’s infrastructure is optimized to deliver its traffic via the public internet without resorting to becoming an advanced service. But what about a fledgling 3-D startup that wants to become a broadcaster of 3-D content online as Break Media does? Break, which nominally competes with YouTube’s 3-D efforts, might suddenly find consumers complaining about its service, with ISPs reluctant to help out because it’s not an advanced network service partner. Or maybe a company can’t establish itself as a provider of content because consumers have no way to see its content without paying extra for 3-D broadband.

This brings me to the final aspects of this framework worth exposing: it utterly strips the FCC of power to regulate violations of network neutrality or to even act as a watchdog for consumers. From the framework:

The FCC would enforce the consumer protection and nondiscrimination requirements through case-by-case adjudication, but would have no rulemaking authority with respect to those provisions. Parties would be encouraged to use non-governmental dispute resolution processes established by independent, widely-recognized Internet community governance initiatives, and the FCC would be directed to give appropriate deference to decisions or advisory opinions of such groups.

So the FCC has the power to fine violators up to $2 million, but anyone with a grievance is encouraged to go before a non-governmental dispute resolution process. IF the person or business with the complaint decides to ignore that encouragement, if the FCC sees a problem, it can fine, but it can’t actually take steps to ensure that it doesn’t happen again by making any rules.And by the way, those case-by-case hearings at the FCC take a long time and it’s possible the courts will find the FCC’s actions illegal, much as what happened when Comcast was blocking P2P files.

So Google sold the tech world out as it hopes to keep one of the largest pushers of its Android operating system happy. Even AT&T doesn’t seem to hate the deal, releasing a short statement that reads:

“We’re not a party to this agreement, but will examine it closely. We remain committed to achieving a consensus solution to the net neutrality issue, either with the FCC or with the Congress. In that sense, the Verizon-Google agreement demonstrates that it is possible to bridge differences on this issue.”

Google gives a little but wins, Verizon gives a little, but wins, and consumers and innovation ultimately lose. That’s usually how these compromises work.

Related GigaOM Pro Content (sub req’d): The New Net-Neutrality Debate: What’s the Best Way to Discriminate?

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  1. Tech Companies, Google Sold You Out – GigaOm (blog) | How To Use Android Monday, August 9, 2010

    [...] Tech Companies, Google Sold You OutGigaOm (blog)So Google sold the tech world out as it hopes to keep one of the largest pushers of its Android operating system happy. Even AT&T doesn't seem to hate the …and more » [...]

    1. Sugar? And you are spot on, although I do think wireless will have to have slightly different net neutrality rules than wireline. But to give it up entirely is asking for trouble.

    2. Hey Brian, I have an uncle Brian, who is older than you so maybe you could give him some “sugar” since you’re using his name and he of course thought of it first. I mean, where do you get off using “Brian” as a name when clearly others have used the same name before you???

      Oh, and that thing you wrote in third grade about “what you did on your summer vacation?” I wrote on that same topic when I was in 2nd grade, so …

      1. Stacy’s a lucky gal to have you rushing to protect her from the likes of me.

  2. Et tu Google?

  3. The net effect of this is you could very easily see Google pushing more of its FREE SOFTWARE up the food stack from handset OEMs to Carriers, which would have a two-fold effect.

    One is that by minimally pushing the Google cache to the mobile carriers’ edge, they could offer up a better experience than those without the same strategic position – irrespective of a preferred QOS relationship.

    Two, given that Google now sees virtually every segment as one that they have a valid play in (ala Microsoft), they could offer carriers the ability to roll out their own Google-branded managed services, which in practice would be a lot like the “Embrace-Extend-Extinguish” play perfected by Microsoft during the PC Era (i.e., using Free and Bundled to secure market share and squeeze off the revenue oxygen of competitors).

    To be clear, I don’t fault Google as a big company from pursuing what’s in its best interests; what I fault is the sanctimoniousness of wrapping themselves in “we’re more open” suit, when it truth, the emperor’s wearing no clothes.

    1. True all big companies are one and the same lol

      1. That doesn’t make it right.

  4. Am I totally wrong, or doesn’t the FCC already have the power to enforce net neutrality over wireless networks? The court decisions were about broadband, but wireless is something that the FCC explicitly has had control over since, oh, its inception. So this proposal would do more than deny them new powers, it would completely strip them of their current powers.

  5. Good analysis of both motivations and likely consequences, thanks.

  6. Steven O’Brien Monday, August 9, 2010

    Screw you Google.

  7. Doesn’t verizon already have a deal with skype to pipe it’s voip through their line of android phones? Google can’t sell out other tech companies when they’ve already sold out themselves.

  8. Counting their Evil moves…

    SAI writes on how Brin and Page fought over Internet Ads privacy and finally, Brin had to agree with Page — Evil n

    Eric & Verizon compromise on Net Neutrality —- Evil n+1

  9. EntrepreNerd Monday, August 9, 2010

    I am deeply saddened to see Google’s name on this bit of tomfoolery.

    That being said, the only thing that I have an issue with is stripping the FCC of all its ability to regulate in a meaningful way. Though, even that is a hard case for me because I am very much against governmental regulation. The trouble is that mega corporations are the new world Government and the need to keep them in check out weighs my loathing of big Government. At least with government we can find some comfort in the illusion of civilian control. When it comes to these planet sized companies you are lucky if you reach something other then a recording, let alone hold them accountable for there actions in a way that will impact their willingness to repeat said action.

    That being said, I think companies need to have the ability to control the traffic that hits there pipes to some extent, and every day that passes proves that more. How many companies are going to spring up that have piss poor compression code for a service that uses massive amounts of bandwidth? With everything moving to the cloud this is already becoming a big issue. Should the internet service providers be forced to kneel to shoddy cloud services? Would we all be better off if those services were forced to make their code and service pristine, based on some sort of globally excepted cloud service efficiency guide lines? (I am very much for forcing a standard of quality)

    While a total lack of control on cloud services will have a devastating impact on service providers, I think what Google & Verizon put forth is a steaming pile of crap. A pile of crap that is meant to kill off the issue instead of putting forth the effort needed to make it all work.

    I will say it again. I am deeply saddened to see Google’s name on this thing.

    1. In many ways it shows how far apart the ISPs are on the issue from those relying on their pipes and how much power the purveyor of the pipe has. And frankly, I’m not against reasonable network management, an believe there are plenty of legitimate cases for an ISP to interfere with packets, my issue is because the lack of competition means access to the web is controlled by a few, those few have every incentive to profit off the innovation occurring in broadband, not by adding value (faster pipes, innovative services that compete fairly with other services), but by charging more for access or taking advantage of the pipe itself to make their services better than the competitions either by prioritization or by pricing.

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