Taking Back the Market

FCC Investigation of Apple's Google Voice Rejection Could Become a Political Mess

Tim Nash - 2009.08.14

The FCC's reaction to the Google Voice banning looks like a new chairman wanting to establish himself. What better way to show the difference with the previous administration than this quick take-up of an issue generating noise on the Internet?

Unfortunately, in the rush to question and demand answers by the end of August, some fundamental issues were overlooked or ignored.

Apple vs. Google Voice

Google Voice would be a new service on the iPhone, as it is on other cellphones. It is not a 911 or other emergency service. There is no urgency to see it available everywhere.

The millions of iPhone users don't have a long-standing right to Google Voice and didn't sign contracts because it was available.

It is available on the other major smartphones. Why not let the market decide how many people want Google Voice? If there are enough, AT&T and Apple will start losing customers, and it will quickly become available.

Google responded appropriately to the banning. It will make Google Voice available to iPhone users as a web app. So iPhone users who want Google Voice won't lose out, they just won't have the ease of use of an installed app. Since Google's future is cloud-based, it is arguable that it should have made Google Voice available like this in the first place, but Google wanted the exposure from being in the App Store and was rejected.

Google Voice vs. AT&T

If Google Voice had been split into a VoIP app for international calls, which only worked over WiFi, and a switch app on the iPhone to ring the telephone you want, then both would probably be in the App Store now along with Skype, TruPhone, and Fring. Since Google Voice is an attack on AT&T's business (covered in The Unwritten Rule behind Apple's App Store Rejections), maybe Google thought its partnership with Apple through Eric Schmidt, Al Gore, Arthur Levinson, etc. was more important than Apple's business relationship with AT&T.

From Apple's point of view, the risk is that developers who use or could use Google Voice will move to other platforms. Since Google is trying to build up Android to make sure that Windows Mobile fails, whatever happens is a win for Google.

FCC vs. Apple and AT&T

Apart from this, the noise about Google Voice is unlikely to bother Apple. The banning, if not AT&T inspired, could have been Apple showing separation from Google despite Eric Schmidt being on the board. The worst that is likely to happen: The FCC will try to tear up the Apple/AT&T iPhone exclusive and give a present to T-Mobile, the other US GSM operator. That, if anything, will increase iPhone sales in AT&T bottlenecks like the Bay area.

The big problem is AT&T's monetizing and investing in a network that in a few years risks being just another data pipe. Naturally, AT&T wants to put off turning into a mobile ISP for as long as possible, and the exclusive iPhone contract is one of the ways. Keeping up network investment in the current slowdown so the US doesn't fall further behind more densely populated countries, like Japan and South Korea, should also be a more pressing problem for the FCC than Google Voice.

Apple Values Partnership

Even though AT&T has been slow in adding support for tethering and MMS and Apple would probably gain from an end to the agreement, it will support AT&T as it did Orange when the French courts ruled against the exclusive contract. This is because Apple needs to show carrier partners that it will live up to the agreements in place and back them when there are any regulatory problems.

Other cultures value partnership much more. It is looked on as more than a pure short-term business relationship. Good partnerships let both sides plan for the long term, which means both sides can make investments that need time for payback. If Apple is to keep growing in smartphones, it needs these relationships.

FCC Flexing Its Muscles

The real issue here is the FCC trying to use its powers to regulate the physical communications infrastructure to move into new areas. It is the usual bureaucratic land grab. The FCC is trying to set precedent so it can show the other bureaucracies it is responsible in this area.

The FCC can't pretend that it is looking into VoIP as part of the Senate requested inquiry into cellphone exclusives. If it were, similar questionnaires would have been sent to other carriers. Apple could reasonably ask why the FCC believes Congress granted it the powers to demand a reply to questions like these. The situation is akin to the Federal Highway Administration asserting authority over bricks-and-mortar stores because people use roads to get there and then sending a questionnaire to Walmart asking why their stores don't stock Target brand goods.

Blatant Intervention

The FCC questions below could be seen as a blatant intervention on behalf of Google, a company which will be one of the cloud shapers for years to come.

2. Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications?

4. Please explain any differences between the Google Voice iPhone application and any Voice over Internet Protocol (VoIP) applications that Apple has approved for the iPhone. Are any of the approved VoIP applications allowed to operate on AT&T's 3G network?

It is not that the questions are unreasonable. After all, bloggers and other journalists had already asked similar questions. Apple, however, can choose if it answers journalists.

What is unreasonable is the demand for answers by August 31 when the FCC knows it lacks the authority but does have the power to delay approval for a new iPhone, iPod touch etc.

Authority

When the FCC Chairman was interviewed by Ars Technica and asked if he thought that the FCC has the statutory authority to tell Apple to allow Google Voice on the iPhone, Genachowski said,

"At this point we're trying to understand the situation. What we read about in the last week or so is relevant to some proceedings at the FCC. The agency is the country's expert agency on communications. And it needs to be proactive to understand what's going on in the marketplace that's relevant to its proceedings."

In other words, as a lawyer who clerked for Supreme Court Justices Brennan and Souter, he knows he doesn't.

In another interview, this time with Om Malik, Genachowski said,

"In 1996, when Congress passed the Telecommunications Act, the law did not have the word Internet in it. So the governing statute that lays out the regulatory landscape was written just before the Internet really took off. And that regulatory structure is what continues to govern. It has a lot of room in it for the FCC to apply the language of the Communications Act as amended by the 1996 Act to ongoing facts and circumstances. But I think a lot of people would say that the changes in the industry and changes in technology have moved faster than the changes in the regulatory landscape."

Net Neutrality

Comcast has already appealed the ruling on net neutrality because it believes the FCC's order falls outside its "statutorily mandated responsibilities". Following the FCC's order, Comcast changed its network management procedures, and regardless of the success of the appeal, they will stay the same. So at least part of the reason for the appeal must be knowing that sooner or later the FCC will issue an order that seriously affects Comcast's business model, and when Comcast refuses to comply, there is a risk Congress will pass enabling legislation without proper debate.

The oral arguments for the appeal won't be heard until next year, but the FCC net neutrality ruling is certainly closer to its responsibilities than the questionnaire sent to Apple.

The timing of the questionnaire too is so poor. Sending it out in August, when there is less political news to drown it. It's not as if the Web goes into recess like Congress.

Scandal

The Republicans are in retreat and looking less and less relevant. They are desperate for issues to motivate their base. A government agency over-stretching like this, exceeding its authority, is perfect. They will trumpet any FCC ruling against Apple and AT&T as more government interference in a free market, and this risks becoming a full blown political scandal if they can tie it to campaign contributions solicited by Genachowski.

The Obama administration and America have deeper concerns, like the economy, getting more people back to work, and the reform of healthcare, so the FCC Chairman should find a way to sideline the Google Voice inquiry.

Now that Eric Schmidt has resigned from the Apple board, Google and Apple are shaping up as competitors, even though they will continue to cooperate in areas like WebKit for their browsers. Google Voice will be on the Web for iPhone users.

This is how a market that works operates.

Julius Genachowski, with a display of political ineptness, has put himself and the FCC in the crosshairs. Will the Republicans pull the trigger? Are the Democrats and the President - his friend since Harvard Law School - willing to spend political capital to defend him?

Two questions certainly not in the published FCC questionnaire. LEM

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Tim Nash is a Director of WattWenn which has a new approach to scheduling the production of TV and movies to make the most of budgets. The views in this article are his own and are prejudiced from spending more years working for computer companies than he cares to remember.

Tim lives with his wife, her website on the area ariege.com, two daughters, a cat, and a dog in the French Pyrenees. He lapsed for a while after the Apple II, but became a Mac fan when his wife introduced him to the Macintosh IIsi. If you find his articles helpful, please consider making a donation to his tip jar.

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