AT&T, Apple Can't Win Fight Against VoIP

The FCC is now investigating Apple’s decision to ban the official and several unofficial GrandCentral Google Voice applications from the iPhone App Store. The blatant nature of Apple’s decision allows the FCC to extend its existing probe of exclusive handset deals.

In the meantime, Google is working on usability of the web application for iPhone and iPod Touch users that Apple can’t block. It also plans to release (but apparently hasn’t yet) apps for Android and BlackBerry users.

PaidContent has the text of letters sent by the FCC to Apple. Here is the crux of the letter to Apple:

2. Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications? If the latter, please describe the communications between Apple and AT&T in connection with the decision to reject Google Voice. Are there any contractual conditions or non-contractual understandings with AT&T that affected Apple’s decision in this matter?

3. Does AT&T have any role in the approval of iPhone applications generally (or in certain cases)? If so, under what circumstances, and what role does it play? What roles are specified in the contractual provisions between Apple and AT&T (or any non-contractual understandings) regarding the consideration of particular iPhone 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?

While most of the Google letter focuses on Google as a victim, it also asks essentially the same questions about the Android Marketplace as it asks Apple about the iPhone App Store:

Please provide a description of the standards for considering and approving applications with respect to Google’s Android platform. What is the approval process for such applications (timing, reasons for rejection, appeal process, etc.)? What is the percentage of applications that are rejected? What are the major reasons for rejecting an application?

There are at least three things that make it hard to understand why Apple chose to confront the FCC after the agency began fishing for information to justify meddling in locked handsets.

• Apple had earlier approved two Google Voice clients — GV Mobile and VoiceCentral and then yanked them after they had been on the app store for several months.
• Skype was approved for the iPhone — even as telcos make a futile effort to block its adoption.
• Finally, if the GV app — like Skype — were Wi-Fi only, it seems like this would play into the successful efforts by AT&T with iPhone 3.0 to shift traffic to its Wi-Fi hotspots, using them both as a cost-effective way to provide bandwidth and “a competitive differentiator.”

Given all this, why did Apple crack down? An Information Week article hints at why Google Voice app is much, much worse from an AT&T standpoint:

The Google Voice app will allow users to use their mobile phones to access their inbox, place calls and send SMS messages with their Google Voice number, and make low-rate international calls.

When sending SMS messages in this manner, users don't have to pay SMS charges levied by their mobile carriers because the SMS messages are sent by Google.

The experience of using Google Voice through one of these mobile apps is much more seamless, said [GrandCentral co-founder Vincent] Paquet.

The Google Voice apps will allow users to set whether all calls, only international calls, or no calls get routed through Google Voice.

In other words, while the GV app may share a back-end transport layer with the web app, the business impact is dramatically different: it makes it intuitive for iPhone users to bypass AT&T for all their communication needs. Even worse, a hotspot-enabled iPod Touch becomes as useful as an iPhone, without the minimum $800/year AT&T contract.

In the short term, Google Voice users will use the web application. The developer of one of the third party apps, GV Mobile, is going back to the pre-App Store safety valve — working with jailbreak phones.

But even without an Obama’s hand-picked activist FCC, Apple and the other operators are fighting a losing battle against the inevitability of mobile VoIP service.

After Google Voice joins Skype in the App Store, along will come home-use Wi-Fi client apps for Vonage and cable company VoIP services — the same services that are helping destroy AT&T and Verizon’s landline business and may force them to cannibalize their 100-year-old cash cow.

Perhaps all that’s happening here is that AT&T hopes to wring out another quarter or three worth of revenue before the FCC steps in, and Apple is trying to keep its sole U.S. distribution channel happy in the final year of being lashed together at the waist.

Comments

[D_Virginia:]

SMS (text message) charges have been outrageous and uwarranted for some time now, I can see why AT&T would be protective of that cash flow.

Also, AT&T's data network can barely handle iPhone users downloading farting apps all the time -- it will never bear the burden of lots of VoIP traffic (which isn't exactly what GV does, but whatever) and voicemail streams.

However, if AT&T would invest all the highway robbery money from SMS charges into network bandwidth, and cut down on stupid moves like revenue sharing with Apple, they wouldn't have these kinds of problems.

Aug 01 04:57 PM

[nmelendez:]

When Google comes out with it's own network plus apps, Apple and AT&T are gonna be toast. An i am not even mentioning sprint, palm and vonage.

Aug 01 05:17 PM

[jammur:]

Does this give Apple an "out" from AT&T? not immediately of course, but I could see something like, "AT&T wanted us to not allow this app. We disagreed, but our contract with them....."

What it does do is put Verizon, and all other carriers in a better position in discussions with Apple. Of course, Apple/AT&T might be able to get away with higher monthly charges for data plans.

I believe there was an article on SA not too long ago that said because of VOIP, market caps for wireless carriers were now at their peaks. This may very well put an exclamation point on that.

Aug 01 05:24 PM

[Nettligent:]

Apple..Execute the right things for your customers. Stay focus. Do not stain by AT&T.

Aug 01 06:57 PM

[Hayweed:]

Steve Jobs has said that the telecoms are just dumb pipes. Apple should have no opposition to VOIP, but the telcos do. Google has a seat on Apple's board. I would think Apple knows what Google is doing and the rejection will start a firestorm and a possible ruling that VOIP is allowed. Then Google and Apple both win while the telcos lose. Never underestimate Jobs ability to negotiate with unconventional methods. Remember that Apple talked to Verizon about the iphone but they would have never done a deal with Verizon. This was needed to get AT&T to pay thru the nose.

Aug 01 07:32 PM

[kaka belly:]

Google is working on usability of the web application for iPhone and iPod Touch users that Apple can’t block

Aug 02 12:53 AM

[daniel3582:]

Am I missing something here? Didn't AT&T spend years and years and tens of billions of dollars to build a wireless network from the ground up? What right does Google or the US government have to come in and tell them what to do with it?

I'm really searching for a good answer here... feedback appreciated.

Aug 02 10:35 AM

[David Lentz:]

Last timer I checked, ATT was a regulated utility, granted EXCLUSIVE rights to certain markets and being guaranteed profits in exchange for agreeing to abide by some form of public control. If they want to compete in the open markets, abandon those rights and compete with Verizon on to-your-home connections.


On Aug 02 10:35 AM daniel3582 wrote:

> Am I missing something here? Didn't ATT spend years and years
> and tens of billions of dollars to build a wireless network from
> the ground up? What right does Google or the US government have to
> come in and tell them what to do with it?
>
> I'm really searching for a good answer here... feedback appreciated.

Aug 02 11:40 AM

[David Lentz:]

Check out GOOG's available cash and then check Sprint's market cap. It's a doable purchase, easily done via a combination of stock and cash.

If/when that happens, ATT will use every trick in its (very large) book of bribery and political influence to block it. But eventually, ATT will face genuine competition, if not from Google or Verizon, then from a foreign telecom company willing to spend the money to install technology that is far superior to the penny-pinching inadequate band-aids that ATT touts as being "technology".

Wireless makes it easy to put up a national network in a very short time that negates the 50-year-old copper infrastructure (plus a little fiber) that ATT continues to milk for all its worth, all the while charging some of the highest rates on the globe to its captive customers.

On Aug 01 05:17 PM nmelendez wrote:

> When Google comes out with it's own network plus apps, Apple and
> AT&T are gonna be toast. An i am not even mentioning sprint,
> palm and vonage.

Aug 02 11:50 AM

[zuluflyer:]

To a man, bloggers and commenters I've read have left out the one glaring omission to the story: Truphone is an iPhone VOIP app that, thankfully, operates over AT&Ts 3g network everyday. It costs twice as much per minute as Skype, but is worth it because you can make VOIP calls worldwide from your car or other spots that do not have wi-fi available. Truphone works the same way Skype proposed to work, that is when you dial, say, a phone number in Namibia, your call is routed first to a landline number in the USA, then to a computer, and then to Namibia. You are using up your iPhone minutes and you are using up your Truphone minutes. But still the call is almost 40 times cheaper than what AT&T would charge you to use their long distance service. The only question I have, is where the heck is Namibia?

Aug 02 12:32 PM

[zuluflyer:]

Can we conclude from this article seekingalpha.com/artic... it is all about those SMS charges, which Google Voice would have given iPhone users for free, and which would have been money out of AT&Ts pocket, which is why AT&T persuaded Apple to take Google Voice off of their app store???

Aug 02 12:42 PM

[zuluflyer:]

Namibia: in SW Africa on the Atlantic coast, about 1/3 bigger than the state of Texas, drier than Texas, with about 1/10 as many inhabitants, and 3 times as many miles of coastline.

Aug 02 01:11 PM

[Apple Diner:]

Apparently none of you have actually used neither Google Voice, nor have an iPod touch. If you did, you'd realize you CAN use GV on an iPod touch with no issues over a Wi-Fi connection. Get your facts straight before piling on, people.

Aug 02 07:31 PM

[PeterB:]

I have not used Truphone, but Tel3 provides a VOIP service that we use for all international calls on both my cell phone (T-Mobile) and my wife's cell phone (Verizon), as well as our landline, and get rates about the same as Skype, and pretty good service. Our phone bill totals about 1/3 of what it did before. Namibia is not on our frequent-call list, but Canada, the UK, Czech Republic, Spain and Germany are.

Aug 02 09:02 PM

[KenC:]

Google Voice, aka Grandcentral, is NOT VoIP.

Aug 03 12:33 PM

[Premarupa:]

Hmm - the taxpayers DID subsidize the internet infrastructure, if you recall ..

www.tispa.org/node/14

$200 Billion Broadband Scandal, by Bruce Kushnick
...
Broadband Scandals is a well-documented expose, 406 pages and 528 footnotes. Using the phone companies' own words (and well as other sources), the book outlines a massive nationwide scandal that affects every aspect of state of the Internet. Not only the web but broadband, municipalities laying fiber or building wifi networks, not to mention related issues such as such as VOIP, cable services, the cost of local phone service, net neutrality, the new digital divide, and even America's economic growth.

The fiber optic infrastructure you paid for was never delivered.

Starting in the early 1990's, with a push from the Clinton-Gore Administration's "Information Superhighway", every Bell company - SBC, Verizon, BellSouth and Qwest - made commitments to rewire America, state by state. Fiber optic wires would replace the 100-year old copper wiring. The push caused techno-frenzy of major proportions. By 2006, 86 million households should have had a service capable of 45 Mbps in both directions, (to and from the customer) could handle over 500 channels of high quality video and be deployed in rural, urban and suburban areas equally. And these networks were open to ALL competition.

In order to pay for these upgrades, in state after state, the public service commissions and state legislatures acquiesced to the Bells' promises by removing the constraints on the Bells' profits as well as gave other financial perks. They were able to print money - billions of dollars per state - all collected in the form of higher phone rates and tax perks. (Note: each state is different.)

* ADSL is not what was promised and paid for. It goes over the old copper wiring, can't achieve the speed, has problems in rural areas and is mostly one-way.

* 0% of the Bell companies' customers have 45 Mbps residential services.

Harms and Outcomes
This investigative book isn't just a history, but a warning - the Bell companies can not be trusted with our digital future. Worse, what they have done has resulted in serious repercussions to local, state and national economy.

* The public subsidies for infrastructure were pocketed. The phone companies collected over $200 billion in higher phone rates and tax perks, about $2000 per household.

* The World is Laughing at US. Korea and Japan have 100 Mbps services as standard, and America could have been Number One had the phone companies actually delivered. Instead, we are 16th in broadband and falling in technology dominance.

* Harm to the economy. Five trillion dollars was lost because new technologies and services that America would have developed, happened in Korea. Municipalities around America are waking up to the fact that the phone companies failed to deliver and are now doing Wifi and fiber-based work-arounds.

Broadband Scandals delivers serious revelations. In fact, the book has been designed as the data source for Teletruth's complaint to the FTC against SBC and Verizon.

* The promised networks couldn't be built in 1993 and state laws were changed based on "deceptive speech". The technology today still has problems delivering 500 channels.

* The phone companies pulled a bait and switch. In order to offer DSL over copper, it was not necessary to have state regulation changed. Their plan was to get rid of regulations and enter long distance.

* The Bell mergers resulted in the death of the state plans for fiber optic broadband. Over 26 states had fiber optic projects closed when the mergers of SBC and Verizon were completed. That affected almost 80% of all phone customers in the US.



On Aug 02 10:35 AM daniel3582 wrote:

> Am I missing something here? Didn't AT&T spend years and years
> and tens of billions of dollars to build a wireless network from
> the ground up? What right does Google or the US government have to
> come in and tell them what to do with it?
>
> I'm really searching for a good answer here... feedback appreciated.

Aug 03 02:10 PM