Telegraph What?

Susan Crawford a commenter over at Public Knowledge has opined a piece on Google, Verizon and the perception of a high stakes poker game of openness. I have to say that reading the piece it does make for high drama of near David and Goliath proportions if you believe the meme.

But I hate to disappoint. It is really something much more plebeian than that. Culture for one, assets for another. Let’s take the bull by the horns shall we?

• Financial. Google has the enviable position of a near blank sheet of paper as it comes to all things telecom. It is not in their purpose to route bits around the planet in any sense prior to the auction. Google comes to the 700mhz auction as a birthed baby to which everything is wondrous. So every $$ they place into infrastructure will be new/the latest/no baggage/no sunk cost considerations to cloud the decisions. That will come 5-7 years from now when the next great leap in telecom comes.

  But Verizon has no such opportunity. The ole V has to consider the sunk cost factors and cannibalization issues of the new vs. the old. V has to maintain old legacy systems because in some cases their federal customers demand retention. Poor V even has to consider which arm of V will actually do a 700mhz bid. One side of V is regulated, guaranteed a return of course, but at rates that in some cases 5yr CD’s beat. Or give the bid to the nonregulated side and hope that their crap shoot pans out. Especially considering that FIOS for all its wonderment is not as financially appealing as it hoped to be.

  Verizon’s prosaic announcement to open up their network had less to do with Google and more to do with legacy retention. Absent from your piece Susan was any mention of the selection of LTE as Verizon’s 4G stance for the future. Or the fact that the US cellular market is at saturation. That has a direct bearing on the openness issue. In the period between continuing CDMA operations and full LTE deployment is probably 5 years. So in a bid to maximize profits during this period and suck every last $$ off the depreciation schedule they can, the best option IS to open the legacy network to new devices and stolen customers. To not do so would place Verizon customers in a ‘wait till LTE is here’ mode in the last 2 years of that 5 year period. Has nothing to do with ‘telegraphing’ and everything to do with financial considerations on the technological ‘S’ curve.

• Culture. Verizon is mostly Bell Atlantic writ large. The former GTE, those darlings that knew how to wrest profits from thinly populated territories is long gone. Now Verizon is attempting to cross breed management styles from the Wireless side over into the Wireline. Whether it will work I have my doubts. But irrespective of this, Verizon is a telco with a telco mindset. They live and breathe a landlord mentality in how they operate their business. As a telco, Verizon has to provide certain public announcements in order to stay in business.

  Google, wholly different animal. Google’s entire history up until recently has been more like the Kremlin than a publicly traded company. This clannishness is a result of their customer relationship. It would not bode Google well to be brandishing in public the contents of specific AdSense revenues of clients or the internal email of specific customers. Mums the word is their path to profits. For Google has stuck to a very narrow band in their public relations — service updates, new services, connector code. The Android announcement has been one of the few to be outside that realm.

I will grant that Verizon’s opening up their networks may have had a slim chance of wooing Google. But it is such a slender thread on which to hang a hope. The first hurdle being that the period of time that Verizon stated this position and Google’s announcement that they WILL bid at the FCC auction is less than a week apart. Clearly insufficient time to react considering both parties will have been securing Wall Street financing long before both announcements were made. The second of course being the realization of rent vs own. In a case where the field is wide open comparable entrants have a parity shot at winning the bidding. As a consequence there is no tactical advantage for Google to see if Verizon wins a bid then negotiate a deal when Google itself can do so. Last from a operations perspective it is in Google’s interest to be the owner/purveyor of the network. He who owns sets the rules. Being the owner means no complications with Android being accepted for example on a non-Google network. Besides if Google really did talk to Verizon about Android several months ago and was rebuffed. Of what interest would Google therefore have in using Verizon’s network? Google would already know that there would be barriers from Verizon at the retail CPE level and as it relates to support for their kind of devices on Verizon’s network.

From the ThirdPipe perspective what we have here mutually inclusive events that on their own signify little. The die was cast several months ago most assuredly. The people who could tell us, the Wall Street types, aren’t talking.