One by one, carriers succumb to Google Voice

Verizon, AT&T now allowing app on their smartphones

Ever since its launch this summer, Google Voice has presented carriers with some potentially thorny issues.

The biggest potential pitfall for carriers is that widespread adoption of Google Voice could render their networks "dumb pipes" that don't offer users any value-added services. Google Voice was designed in part to make it easier for users to change mobile carriers without sacrificing their phone numbers and also to give users several add-on features that are not offered by carriers. For example, Google Voice can provide simultaneous ringing for both landline and wireless devices using the same phone number and it can serve as a hub for SMS as it lets users send text messages from any of their devices or even right over the Web on their computer. Net neutrality proponents such as the media advocacy group Free Press have met Google Voice with enthusiasm, as they think it could give users the ability to seamlessly switch carriers if their current carrier is too restrictive of what they can and cannot use on their mobile devices.

However, America's top two wireless telcos this week indicated that they had no problem supporting Google Voice on their networks. During a joint press conference with Google on Tuesday, Verizon CEO Lowell McAdam said that all Verizon phones based on the open-source Android platform would give users access to the Google Voice application. AT&T, meanwhile, said Tuesday that it was changing its tune and allowing iPhone users to utilize VoIP applications such as Skype on the AT&T 3G network.

How Google Voice could change the wireless industry

Although AT&T didn't mention Google Voice specifically as an application that it would allow onto its network, it's very likely that Google Voice will soon be available to iPhone users since it doesn't present the direct threat to cellular service revenues that other VoIP applications and services do. The reason for this is that when you make a call using Google Voice, it initially goes through the standard public switch telephone network to the Google cloud, where it is then sent out as a VoIP call. So while Google Voice will enable users to save money on typically expensive long-distance calls, it won't be an alternative to using up minutes from your standard wireless carrier in the way that Skype is.

But even if Google Voice won't harm carriers' ability to charge users for cell phone minutes, Gartner analyst Peggy Schoener does think it could harm carriers' profitability if users come to rely upon it for services.

"It is a threat to their business model to some degree," she says. "But right now the demand for openness is trumping that. Carriers are looking at how the world is shaping up and they have to demonstrate openness and cooperation with industry newcomers."

FCC action in the background

While neither Verizon nor AT&T will say it out loud, one factor in their decision to allow Google Voice onto their networks could be the more active approach that the Federal Communications Commission has taken this year under new chairman Julius Genachowski. For example, this summer the FCC asked Google, Apple and AT&T to explain why the Google Voice application was not yet been made available for the iPhone. More recently, Genachowski has also proposed new network neutrality rules that would bar carriers from blocking or degrading lawful Web traffic and that would force carriers to be more open about their traffic management practices.

ABI Research analyst Jeff Orr thinks that the government's more aggressive stance toward regulating the wireless industry has been a key factor in the telcos' decision to allow Google Voice on their networks despite whatever misgivings about the application they may have.

"I think that they're looking at the talk going around at the FCC looking for net neutrality, and they figure that they'll need to back off and pick the battles they want to fight," he says. "By allowing Google Voice and other VoIP applications onto their networks they say to the FCC that they can monitor their own practices and that there's not a need for legislation mandating net neutrality."

Schoener agrees that FCC action is part of the reason why carriers are showing more openness on their networks right now, but she also thinks that carriers are being forced by market trends to embrace more openness as well. For instance, the past decade has seen large Internet companies such as Google and Skype become major market players with the clout to push for net neutrality regulations.

"There's not a direct cause and effect between the FCC’s actions and the carriers' decisions," she says. "But the FCC's stance is a part of the current trend that openness is better, and the telcos figure they can be better off in the long run if they embrace it rather than playing hardball."

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