FCC’s Google Voice Inquiry Welcomed by Public Interest Groups

The letters, signed by acting Wireless Bureau Chief James Schlichting and sent late Friday, ask the three companies a battery of questions about the service, which is not a standalone service but a message management tool that piggybacks on other phone service. “Recent press reports indicate that Apple has declined to approve the Google Voice application for the iPhone and has removed related (and previously approved) third-party applications from the iPhone App Store,” Schlichting wrote. “In light of pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497), we are interested in a more complete understanding of this situation.”

The bureau letter asks AT&T, among many other questions: “What role, if any, did AT&T play in Apple’s consideration of the Google Voice and related applications? What role, if any, does AT&T play in consideration of iPhone applications generally? What roles are specified in the contractual provisions between Apple and AT&T (or in any noncontractual understanding between the companies) regarding the consideration of particular iPhone applications.” An AT&T spokesman said the company as received the letter and will reply.

The letter to Apple asks whether the company acted alone or in consultation with AT&T. “Why did Apple reject the Google Voice application for iPhone and remove related third-party applications from its App Store?” the letter asks. “In addition to Google Voice, which related third-party applications were removed or have been rejected?” The letter to Google asks for information on any discussions with Apple or AT&T about the application. “What explanation was given (if any) for Apple’s rejection of the Google Voice application (and for any other Google applications for iPhone that have been rejected, such as Google Latitude)?”

A wireless industry source said Monday the investigation may open the door to FCC regulation of what software must be made available in application stores.

The FCC letters suggest “potential new exposure” for wireless carriers’ voice and data revenues, wrote Paul Gallant, an analyst at the Washington Research Group. “The applications blocked by Apple -- Google Voice and at least one other mobile voice application -- enable free or low cost voice and SMS service,” Gallant wrote. “If the FCC aggressively pushes network neutrality policies on wireless carriers, the proliferation of voice and SMS applications could negatively impact wireless carriers’ voice and SMS revenues.”

Gallant also said the letters show that the FCC will “closely scrutinize carriers’ explanations for any role in blocking wireless applications. … President Obama made network neutrality the centerpiece of his technology platform, and his top tech advisor now heads the FCC. So the FCC starts this inquiry with a strong belief in networks being open platforms for innovation.”

The rejection of Google Voice became a “cause celebre” last week on tech Web sites and blogs, wrote Craig Moffett, a Sanford Bernstein analyst. “The risks posed to AT&T’s business by the Google Voice app are self-evident; Google Voice enables a user to make unlimited free domestic voice calls, low priced international voice calls, and send an unlimited number of free text messages.”

“Consumers everywhere should be pleased at the quick response of the Federal Communications Commission to the reports that Apple was blocking access to the Google Voice application,” Public Knowledge President Gigi Sohn said Monday. “This is exactly the type of aggressive, pro-consumer, pro-competitive action that we want to see from the FCC, and which has been long missing from the Commission’s policy agenda. We look forward to reading the official responses to the Commission’s letters from Apple and AT&T.”

Timothy Karr, Free Press’ campaign director, said in an article on the group’s Web site that the FCC seems determined to look much more closely at anti-competitive practices in the wireless industry than it has been. “At a time when carriers seek to become gatekeepers to the next generation of Internet access, the agency must re-assert our right to an open Internet -- whether accessed by desktop computer, laptop or mobile phone,” Karr said. “The right solution is to allow access to all applications and services without discrimination via any Internet connection.”

Joel Kelsey, a Consumers Union policy analyst, said the FCC is right to ask questions. He related the inquiry to the commission’s handset exclusivity investigation. “In the past, when carriers wanted to block an application, they would leverage their exclusive relationships with handset makers,” Kelsey said. “Google and other software innovators have found a way to get over that hurdle, but their applications are still being blocked. If consumers don’t like it, they face high switching costs and are forced to give up the investment they have made in their phone.”

Apple CEO Steve Jobs called Schmidt a good board member and said his departure was agreed to by their companies. “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest,” Jobs said. “Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple’s Board.”

The FTC has been investigating Google’s and Apple’s interlocking directorates and it told them that sharing directors raises competition issues as Google and Apple increasingly compete with each other, said Richard Feinstein, director of the FTC Bureau of Competition. FTC will keep looking into the companies’ interlocks, he said.

Sling Media’s SlingPlayer Mobile application for iPhone is also being blocked, though other similar video streaming applications have been approved, said a spokesman for Sling’s corporate parent, EchoStar. The company is encouraged that the FCC is looking into how decisions are handled on iPhone applications, he said. EchoStar said it wants the process to be fairer and more open.

This won’t be the last FCC inquiry into applications, said Yankee Group analyst Carl Howe. The new FCC is involving itself more in mobile-competition matters, he said. Apple rejected the application because it’s trying to keep its phone from getting too complicated and to protect its carrier partner’s voice revenue, said Shaw Wu of Kaufman Bros. The FCC action surprised Forrester analyst Charles Golvin. The government hadn’t stepped in on previous complaints about Apple’s decision-making about applications, he said. The letters signal a trend for the FCC to encourage a more open market with easier consumer access to mobile offerings, he said.