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Google paying wireless carriers billions of dollars to keep their app stores from competing

@Google

To be honest, wireless carrier app marketplaces have never been particularly good. After years of underperforming customers, Verizon’s attempt to build its own app store was shut down in 2012. The storey at the time was that, in the face of Google’s dominance and innovation, Verizon didn’t think it was worth the work. While it is mostly true (wireless providers have always struggled with innovation and adaptation due to their lack of familiarity with competition), it turns out there was another reason.

Specifically, that Google was paying Verizon and other major wireless carriers a large sum of money to stay out of the Android marketplace. They were also paying phone manufacturers to supply devices without competing app shops. Both nuggets were buried in a freshly unredacted copy of Epic’s antitrust complaint (pdf) against Google, first spotted by Jeremy Owens:

This arrangement to pay wireless providers 20-25 percent of app revenues came at a time when Google executives were openly backing away from consumer-centric concerns like net neutrality. This included collaborating closely with Verizon to persuade the FCC to adopt inadequate, loophole-ridden “compromise” net neutrality guidelines in 2010 that completely excluded wireless. Verizon then successfully sued the FCC to have those restrictions abolished, resulting in improved rules in 2015 that were also repealed a few years later, albeit due to lobbying rather than the courtroom.

Google’s path from enormously creative disruptor to entrenched, elbow-swinging turf guardian has been an ugly and historically unexpected one. Around 2010, they drew a line in the sand and decided to abandon many of the guiding principles that had made them successful and popular. Around 2016, the company’s executive leadership changed again, bringing with it increased trepidation (see: the company’s abrupt decision to give up on expanding Google Fiber and many other exciting moonshot ideas). Then there’s the recent AI ethical controversy, which speaks for itself.

To be fair, Google continues to accomplish a lot of interesting and popular things, but it’s very evident that the company’s initial principles and boldness were obliterated some time ago.

I have to believe that the disclosures that Google paid wireless carriers and smartphone makers not to compete with it would lead to a slew of antitrust investigations and lawsuits. Perhaps telecom carriers would have always failed to create interesting app stores due to incompetence, but it’s harder than ever to do so when Google is paying you billions of dollars to not even try. Then, if those competing app shops flourish, they can bribe phone makers not to sell them in the first place, even if they grow popular.

As a side note, the fact that Google has been paying wireless carriers billions of dollars to do nothing puts a dent in FCC Commissioner Tom Wheeler’s ongoing, blunder-ridden claim that “big tech” gets a “free ride” on telecom networks. AT&T has been promoting the concept of getting paid to do nothing since around 2003. It’s the kind of blunder that sparked the net neutrality argument in the first place. Antitrust lawyers will have to evaluate whether the payoffs were legal, but the fact that Google has frequently ignored its fundamental founding principles speaks volumes in either direction.

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