Why Google & Verizon Won't Be BFFs Forever


Google and Verizon have teamed up once again, with its CEOs penning a jointly authored opinion piece in today’s Wall Street Journal that praises certain aspects of the National Broadband Plan. The article, from Ivan Seidenberg of Verizon and Google’s (s goog) Eric Schmidt, manages to gloss over areas where the two firms differ, and instead highlights the fact that both favor the plan’s proposals for faster speeds, its emphasis on universal access, as well as its push to move broadband deeper into the health, education and energy management fields.

This isn’t the first time Verizon and the search giant have worked together. They also joined forces to file joint comments on network neutrality (although they filed separately as well). I’ve long thought that it was more interesting to see where the two firms differ (much of their agreement on the net neutrality issue was superficial, especially when it came to wireless networks ), so why are they so visible teaming up?

It’s partly because neither firm wants to get the FCC even more involved in regulating them — Google is worried about the agency attempting to police Internet applications and Verizon, about its focus on anything above transmission itself. This debate in itself is enough to drive both firms closer, but there are other theories about their budding relationship.

I’ll start with the We-Both-Have-Fiber theory. This one is almost silly in my mind, because it views Verizon as a company focused on delivering fat pipes to all as a some sort of beneficent gesture, rather than a clear-eyed business decision to get ahead of the competition when it comes to broadband speeds, while making sure it doesn’t have to share its pipes with others. Verizon has in fact slowed its fiber expansion, and notably, has a history of dumping the lines that it doesn’t want.

This theory also implies that Google is a fiber provider, when in reality all it’s planning to do is wire up 50,000-500,000 people — not to become an ISP, but to hopefully show the FCC what an open competitive broadband market looks like. If the FCC or municipalities try to emulate the Google experiment or learn enough from it to build out their own networks, Verizon isn’t going to be too thrilled.

This leads me to the second popular theory — I call it The-Enemy-of-My-Enemy-Is-My-Friend theory — which views the Google-Verizon friendship as a counterbalance to that of AT&T-Apple (s t) (s aapl). I think there’s something to this on both sides. For Google, the Apple universe is threatening because Apple is trying to vertically integrate the world of mobile computing from the device all the way up to the apps. Meanwhile, Google is trying for a more horizontally integrated world that looks like the PC universe, with various partners being able to pick and choose what they want.

Verizon, having realized that it must open up some of its networks a bit and be less vertically integrated, will help push the vertically integrated model where it sees benefits to itself. Plus, since it doesn’t have a monopoly on the iPhone, with Google it has found an ally against AT&T, a rival on the wireless side and a foil on the wireline side whose slower DSL speeds can make Verizon’s FiOS business look good.

Unlike the relationship between Eric Schmidt and Steve Jobs, which leads to paparazzi-style photos and coverage of the two meeting for coffee, the friendship between Schmidt and Verizon Wireless CEO Lowell McAdam is less remarked upon (although the Wall Street Journal took notice in December). However, while the two are friends in public and in the occasional FCC filing, the mutual interests of these two companies may be sorely tested when it comes time for the FCC to really dig into net neutrality, as well as when Congress and the FCC get into figuring out how to regulate the web.

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Brett Glass

Stacey, you are apparently ignorant of the fact that Google owns one of the world’s largest fiber backbones — rivaling Verizon’s, in fact. But of course it wants others’ fiber to be regulated while its own is not.

You may also be unaware that Google has shafted virtually every entity that has ever formed an alliance or partnership with it. Google doesn’t believe that it needs to honor its commitments. It thinks it’s omnipotent because it is rich, and because it has as complete a monopoly as Microsoft but has not been challenged in court even when it attempts to maintain it and expand it. It has even had the gall to challenge one of the world’s largest sovereign nations (also going back on its word in that situation).

This behavior obviously doesn’t bode well for Topeka, Kansas, which is likely to get an unsustainable and unmaintainable fiber network courtesy of Google.

Richard Bennett

I’d like to suggest that you check out the panel discussion we held at ITIF on net neutrality at which Verizon and Google were both represented: http://itif.org/node/1317. The two firms have much more in common than your post admits, and a lot of it is fiber-based. Google is now the third largest American network operator by volume, accounting for 6 – 10% all all US Internet traffic. With YouTube, Google is capable of delivering high definition TV streams to American homes, provided that the home has a fat enough pipe to handle the content. And this is where FiOS fits into the picture, of course.

Perhaps it’s easier to follow if you step back and generalize a bit: do vendors of high-bandwidth apps have anything in common with vendors of high-capacity networks? The obvious answer is, well, “yes.”

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