The recenlty-announced agreement between Google and Verizon Wireless on network neutrality has just a couple key provisions: the exemption of wireless services; “best effort” as the only service level Verizon can offer for fixed consumer broadband, Google’s ability to do so if it chooses, and Verizon’s ability to create new managed services that do feature quality-of-service guarantees (such as today’s voice or video services).
Some might wonder why Google would agree to a deal that many network neutrality supporters think is too generous to Verizon. Others might wonder why Verizon would agree to permanently limit its fixed consumer access services to “best effort only.”
The short answer is that it is a compromise giving each company something each considers important for its own future revenue growth, while trading away other provisions that might have been nice, but which are less central to the future business.
From Verizon’s point of view, the agreement puts pressure on the Federal Communications Commission not to adopt rules that could be worse. The deal also protects Verizon’s ability to manage its wireless networks, which always will have less physical bandwidth than its fixed networks, and therefore poses the more-difficult network management challenge.
Though it might like to have had the ability to offer something other than “best effort” levels of service on its fixed network, Verizon does retain the ability to create new managed services that are more like today’s voice and entertainment video services, which must have quality of service measures, even if it cannot do so for Internet access services.
Google’s wins might be more complicated to assess, on the surface. Some might argue Google gains recognition of a sort of asymmetrical framework: it can create quality-assured services (such as a streaming video service), if it likes, but Verizon is blocked from ever doing so.
That importantly means Google can shape its own destiny without worrying that Verizon might create some form of paid quality assurance service that would raise Google’s costs of doing business.
In a business sense, that is at the heart of much of the network neutrality position.
Since Google’s suite of businesses are based on the Internet, not managed or private network services, that means the whole gamut of things Google might want to do, now and in the future, in terms of services or applications that control latency, remain subject to its exclusive control.
Equally important, Verizon cannot do so.
You might argue Google gave up too much in allowing more network management on wireless networks, but those networks always face bandwidth and congestion challenges that might technically require much more management. Google always can take up those issues later, should abuses arise.
The other angle is that if Google decides it wants to create a low-latency service of some sort, and deploys it for wired access, it also will likely work on mobile as well. As users routinely encounter options for “low bandwidth” or optional “high bandwidth” application interaction, so they might be offered a lower-bandwidth mobile experience and higher-bandwidth fixed access versions.
The point is that if it goes to the effort and expense of creating low-latency applications, the same techniques should allow such apps to work on mobile networks as well.
But it is the “cost of doing business” angles that likely are equally important.
As matters now stand, if consumers decide they want to consume lots more bandwidth, then it is Verizon’s problem to make the investments, without direct hope of offsetting the investment costs by essentially getting video providers to pay some of the cost (creating video tiers that cost more, for example).
Verizon might hope to create and sell lots of accounts that feature higher bandwidth and cost more, but that’s it.
Verizon cannot expect to receive business partner revenues for doing so. As most observers think that is an essential requirement for mobile operators and telcos going forward, that means in the broadband access business,
Verizon will be restricted to an end-user-only revenue source.
Verizon will have to hope it can create such partner revenue models in other ways. The agreeemnt does not specifically “commoditize” the broadband access business, but it does complicate matters for Verison to the extent that it bans any effort to create higher-priced “quality assured” access services.
On the other hand, should consumer demand for such services arise, Google retains the ability to create them. At the same time, Google gains assurance that, at least for Verizon users (and it likely hopes the agreement will ultimately apply to all broadband ISPs).
Google does not have to worry about the cost of paying for upgraded access bandwidth demand and capabilities the ISPs surely will have to keep providing.
That said, there are always reasons why grand compromises are reached in the communications or other businesses: each of the key parties gets something really important, and avoids something that could be dangerous.
The Google-Verizon compromise is such an agreement. Each gives up something important; and each gains something equally important.