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Tech Companies, Google Sold You Out

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Today’s compromise between Verizon (s vz) — one of the nation’s largest ISPs (and largest wireless provider) — and Google (s goog) 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 (s 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?

58 Responses to “Tech Companies, Google Sold You Out”

  1. Terry Black
    You Tube
    Saturday, August 21, 2010
    Google’s agreement with Verizon to speed certain Internet content to users opens the door to the complete sterilization of the world wide web as a force for political change. Under Google’s takeover plan, the Internet will closely resemble cable TV, independent voices will be silenced and the entire Internet will be bought up by transnational media giants.

    The net-neutrality ending deal with Verizon is just the beginning of Google’s plans to kill the open and free Internet as part of their takeover agenda to completely control the world wide web and force independent media websites, radio and TV shows out of existence for good. Call your MP’s and PM Harper [email protected] and protest!

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  2. Compromise:
    “…an agreement or a settlement of a dispute that is reached by each side making concessions”
    “the acceptance of standards that are lower than is desirable”

    In this case, the dictionary hits it on the head. The later more likely than the former for the Google-Verizon CoOpoly. If the FCC and congress do not light up this issue, and quickly, we are going o find our Internet selves looking like those satellite pictures of the Korean Peninsula at night. The South: all bright and modern, full of activity (the world) and the North, dark as coal and devoid of economic life (United States).

    I go on and on here…
    “Raw Economics: Google-Verizon CoOpoly Galvanize Net Neutrality”

  3. TahoeBlue

    Did Google sell out the tech world and appease Verizon just to protect itself ?

    Were Google and Verizon just trying to pre-empt the FCC, or to lull them into thinking that rapprochement is possible to delay FCC rulings ?

    Is a workable and optimal compromise between content-providers and internet service providers possible ? Or have the players become so large and at such cross-purposes that the self-repairing competitive market mechanisms have been jammed ?

    Just how elastic is the end-to-end system in tolerating and bridging the gap in the rapid growth in consumer expectations versus the ability of vendors and the infrastructure to catch up and supply the demand ?

    Just how much tea should the tillerman get to carry us across the river?

    Discussed at:

  4. I think the time has come for us all to consider what power the people have.
    It is time to make a stand.
    Consider this,…
    What if everyone who believed the net neutrality is paramount, and on September 1st 2010 made a stand.
    All of them dropped verizon phone, verizon wireless, verizon fios and verizon fios tv.
    What if all of the people who believe this is important, did a similar thing to google? Stopped using google for anything. No Searches, no email, no google voice, no google maps, no buzz etc?
    Do you think they would take notice?
    Not just for a day, but a huge slap in their face. No more google , no more verizon ever. If the people take a stand. the companies will surely fail quickly.
    While I would not want to see companies fail, I would prefer they live up to their word. When they don’t and they think they are bigger than life, it is time to take them down a notch.
    Verizon as a company can be wiped off the map in mere months if just 40% of the people canceled their accounts.
    Google may take a bit longer, but keep in mind, the share holders would tell google what to do if they noticed a difference.
    If people saw verizon fail then sprint and att would not attempt such an idiot idea.
    I will be leave everything google and everything verizon on September 1st 2010.
    Please join me.
    Make a stand!
    On September 1st, 2010, stop using Google for anything. Cancel your Verizon accounts.
    Start to set everything up now to work around.
    Some people simply can not, and have some requirements and may only be able to cut some of the services. Others can cut them all as there is other alternatives.
    I will cut all their services on September 1st 2010.
    Instead of verizon wireless I will use sprint.
    Instead of verizon phone services I will use vonage.
    Instead of verizon fios internet I will use time warner cable.
    Instead of Fios TV I will use time warner Cable.

    Instead of google maps I will use Bing.
    Instead of google search I will use bing search.
    Instead of google gmail I will use windows live or

    On September 1st, 2010 I will remove all things google or verizon from my cell phones and computer.

    I will not come back to Verizon as I believe they overstepped their bounds.
    I will not come back to google as I believe with this mistake they should fail.

    Good Bye Verizon
    Good Bye Google.

    You signed my cancellation when you ended, or tried to end, net neutrality.

    Please join me and make a stand on September 1st 2010.

  5. Hamranhansenhansen

    You shouldn’t be surprised. This was not the first time Google sold out:

    the WebM and VC-8 release sold out ISO and video publishers and consumer electronics manufacturers and users, who universally follow the widely-deployed ISO standards: MPEG-4 and H.264, creating market confusion that leads to YouTube as de facto video standard, in spite of the fact that there is not a single consumer electronics device, computing device, or operating system that lacks ISO MPEG-4 H.264 support (not even Windows or Ubuntu)
    integrating Flash into Chrome and Android sold out HTML5 and Web developers, Web browser makers, computing device makers, and Web users, who all have equal access to HTML5, but who have to go begging to Adobe for FlashPlayer (usually unsuccessfully) or use Windows or Intel specifically to get FlashPlayer, or pay $599 for the one practical Flash authoring tool which wraps open HTML, CSS, JavaScript, and MPEG-4 up in a proprietary binary
    they sold out Gmail users with Buzz
    they sold out Apple and GSM by cloning iPhone for closed networks such as Verizon

    When have they ever taken a hit to do the right thing?

  6. This is not exactly your best piece of work at GigaOm, Stacey. In fact, it’s a bit shrill and counter-factual.

    The proposal doesn’t take mobile off the table, either now or in the future. It says transparency is enough for now, and we can revisit the issue in the future. This is Europe’s position as well.
    The managed services thing is nothing new, it was part of the AT&T – Bell South merger agreement and essentially allows the telcos to offer triple play without contention. In the example you gave, it would be cheaper for BreakMedia to buy managed service than to try and build a CDN like the one Google has for YouTube.
    The FCC doesn’t need rule-making authority under the proposal because the rules it is to enforce would be contained in the enabling legislation. The FCC would have the full enforcement power, but control of the policy would be in the hands of Congress.

    It’s a proposal for godsakes, not a rewrite of the Ten Commandments, and it’s intended to get Congress off the dime. That’s a good thing, and throwing around charges that the good guys have “sold out” just because they’re taken a sober, adult course isn’t helping anybody.

    The proposed framework protects the open Internet of today, and tries to do so in a way that allows the Internet to improve in the future. It’s not desirable to freeze the Internet into the 1996 mold that the extremists want, and there’s a tendency in all regulation to prevent change.

    We’re going to do things on the networks of the future that we don’t do today, unless law and regulation forbids network improvement as a matter of regulation or by killing the investment environment with creepy uncertainty. Congress need to get a law passed that puts clarity around broadband regulation, and any law will not make everybody happy. Politics is the art of compromise, not just an exercise in fire-breathing rhetoric.

    • You can’t argue religious ideology with an ideologue. And Net Neutralityism is just like any other rigid religious ideology – inflexible to compromise, hostile to facts and reality, and intolerant of disagreement.

      No solution that does not have the ISPs losing something, and paying their comeuppance to compensate the zealots for their petulant, under-informed grievances, will be satisfactory to them.

      Google didn’t sell tech companies out; tech (web) companies are busy trying to figure out how to compete with Google, while depending on them for traffic, and they hold no illusions of Google as the merciful, compassionate, non-profit savior that will deliver society from the evil clutches of private enterprise and the pursuit of profits.

  7. Those who invested and built the pipes should have the right to manage it the way they want. Just because others rely on that pipe doesn’t mean those property rights should go away. If they arent happy with how the pipe is managed, find a different pipe, or build your own.

    Stacey, shame on you if you ever thought Google had the “greater good” as its biggest concern. Google is like anyone else, trying to grow and protect itself. There is nothing wrong with competition until they get the government to protect them with rules and regulations.

    Fight Google, Verizon and net neutrality in general!

  8. Bob Ennis

    I applaud the two giants for releasing this position statement. We all know that we’re not going to get “pure” net neutrality and the debate is now percolating out of the tech space. The more players that put their cards on the table, the sooner we can have meaningful discussions about the real-world ramifications of the proposed rules; hopefully sans the ad hominems.

  9. Don’t pretend to be so naive that EVERY company in the existence of time, will in fact, sell out, if the opportunity presents itself.

    Do people REALLY believe that Google is this big cuddly teddy bear that wants to keep you warm at night and looks out for your well being? Seriously, business is all about money, and if you’re not making money, then what’s the point of being in business? People fed the Googleplex…to the point that it was an unstoppable beast, and now that it’s got the power, people think that a company is going to do the right thing. Businesses in the position that Google is in, do the money making thing.

    “That’s usually how these compromises work” pretty much sums it up, and that people are surprised by it, baffles me.

  10. I see Google as another carrier in this equation – building its own fiber optic network. These are (effectively) two large carriers trying to manipulate the FCC.

  11. Legislation must quash this and any further “agreements” like this. However, present (published last Fall) FCC proposal for legislation is equally faulty.
    The only answer is to follow the Founders and define negative rights, both for Government and Business. Law could be less than a page long protecting any information exchanged over Internet against meddling, obstructing, falsifying,… Maybe “every information is equal” amendment?
    Otherwise we will get either BigBusiness machinations like this one or BigGovernment “bright idea” where unelected political appointee implements law interpretation dearest to the party in power.

  12. I hope it was good Goggles, I hope VZ at least lubed you up and you enjoyed your debutante’s ball as the biggest whore of them all.

    Note to HP: I’m not going to be the only ex-Android user looking for an alternative in a few months, put Palm to good use.

  13. 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.

    • 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.

  14. 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

  15. 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.

  16. 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.

  17. 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.

    • Gazoobee

      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 …