Google, Verizon Propose Net-Traffic Rules

Aug 9th, 2010 | By businessnews | Category: Business

August 09, 2010, 5:00 PM EDT

By Amy Thomson

(Updates with consumer group’s comments starting in 15th paragraph.)

Aug. 9 (Bloomberg) — Verizon Communications Inc. and Google Inc. urged U.S. regulators to leave wireless-Internet services outside most policies that are designed to prevent carriers from making some Web sites perform better than others.

The companies issued a “compromise proposal” for so-called net-neutrality rules. The plan would restrict Internet-service providers from selectively slowing content that travels over their wires, but wouldn’t apply such limits to Web use on mobile devices, according to a blog post by the companies today. They would also exempt new offerings beyond traditional Internet and TV services, such as health-care monitoring.

Google and Verizon argue that the mobile-Internet market is more competitive and changing rapidly, and therefore different from the wireline market. Critics say the proposal would let Verizon and other carriers discriminate against certain traffic, possibly favoring their own services.

“This is exactly what net-neutrality supporters have feared all along — an open door for Internet providers to control content indiscriminately,” said Josh Silver, executive director of Free Press, a non-profit group in Washington focused on policy and the media. “This is an attempt by Google and Verizon to self-regulate the same way the banks did in the run up to the banking crisis.”

Verizon and Google had been adversaries over the issue. New York-based Verizon was among the cable and phone carriers saying they need leeway on the delivery of Web content to protect performance of their networks. Google led content providers and advocacy groups that say restrictions are required so communications companies don’t favor their own online offerings or those of partners that pay for higher speeds.

Failed Talks

Last week, U.S. regulators ended closed-door discussions with companies on Internet regulation, saying they didn’t result in a “robust framework” to preserve the openness of the Internet. Among participants were AT&T Inc., Verizon, Google, Skype Technologies SA, and the National Cable & Telecommunications Association, representing companies led by Comcast Corp. and Time Warner Cable Inc.

The Federal Communications Commission negotiated with the companies over rules proposed by Chairman Julius Genachowski to regulate how phone and cable companies handle Web traffic such as Google’s YouTube videos. Genachowski told reporters in Washington last week that any resolution “that doesn’t preserve the freedom and openness of the Internet for consumers and entrepreneurs will be unacceptable.”

FCC spokeswoman Jen Howard declined to comment today.

Business Allies

Google and Verizon have become business allies through Verizon Wireless, the largest U.S. wireless carrier. Mobile phones that use software from Google, owner of the largest Internet search engine, helped Verizon’s profit this year.

Earnings for Verizon beat estimates last month as its wireless unit promoted phones running on Google’s Android software, including Droids from Motorola Inc. and HTC Corp., to compete against AT&T’s iPhone from Apple Inc.

Carriers such as Verizon, which have spent billions of dollars building high-speed networks, are trying to affect the FCC’s policies to be able to earn a return on their investments.

Google and Verizon’s exclusion of wireless services from the policy proposal veers from the FCC’s principles, which don’t make a distinction between wireline and wireless connections, said Sherwin Siy, deputy legal director for Public Knowledge, a Washington-based consumer watchdog for digital rights.

“There’s no reason the same rules of being fair and nondiscriminatory shouldn’t apply in the wireless scheme as well,” Siy said. Preserving the success of Android is “certainly foremost in their minds,” Siy said.

‘Still-Nascent’ Market

Google and Verizon said the Government Accountability Office would report to Congress annually on developments in wireless broadband and whether the rules protect customers.

“Wireless broadband is different from the traditional wireline world, in part because the mobile marketplace is more competitive and changing rapidly,” the companies said. “In recognition of the still-nascent nature of the wireless broadband marketplace, under this proposal we would not now apply most of the wireline principles to wireless.”

Consumer Watchdog, a consumer group based in Santa Monica, California, said the proposal “completely undermines the future of the Internet” because the wireless use of the Web is gaining in popularity.

Verizon already agreed to some net-neutrality principles when it obtained spectrum for its so-called fourth-generation wireless service, which will provide high-speed mobile broadband in some markets later this year.

‘Differentiated’ Services

Verizon and Google also proposed excluding “additional, differentiated online services” that might include new health- care, gaming and entertainment services and smart grids from the net-neutrality requirements. The companies said there would be safeguards in place to ensure that such services are distinguishable from traditional broadband access and that the rules aren’t designed to circumvent the FCC.

The plan would hurt consumers because it would create a two-tiered structure for the Internet, Consumer Watchdog said.

“There would be a so-called ‘Public Internet,’ but then the ISPs would be allowed to offer new premium services outside that basic service,” the group said in an e-mailed statement. “How long do you think anything of interest would be available on the ’Public Internet’?”

Verizon, which co-owns its wireless business with Vodafone Group Plc, rose 31 cents to $29.86 at 4 p.m. on the New York Stock Exchange. Google, based in Mountain View, California, gained $5.13 to $505.35 on the Nasdaq Stock Market.

–With assistance from Susan Decker and Todd Shields in Washington, Douglas MacMillan in New York and Brian Womack in San Francisco. Editors: Ville Heiskanen, Peter Elstrom

To contact the reporter on this story: Amy Thomson in New York at

To contact the editor responsible for this story: Peter Elstrom at

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