Google, Verizon, and the Real Cost of Net Neutrality

Ever since the New York Times reported that Google (GOOG) and Verizon (VZ) were near a deal that would undercut net neutrality, there has been a general tech and media frenzy, with all manner of commentators taking sides on right versus wrong and good versus evil.

But those in the industry (and outside of it) shouldn't be fooled into thinking that there is an ideological war going on. The clash and then rapprochement of Google and Verizon is hardly surprising. They are business partners, and the real argument is not one of noble unfettered access to data, but who will make money where.

However, that doesn't make the stakes any lower. There are a lot of smaller businesses that could find themselves even more beholden to behemoths if net neutrality disappears.

The Times was strong and clear in its claim that Google and Verizon were near a deal that would allow the latter "to speed some online content to Internet users more quickly if the content's creators are willing to pay for the privilege." In other words, Google could tip some, or a lot of, cash Verizon's way, and the carrier could then clear the decks for whatever was coming through, including video from YouTube.

Verizon claimed that the Times story was mistaken:

It fundamentally misunderstands our purpose. As we said in our earlier FCC filing, our goal is an Internet policy framework that ensures openness and accountability, and incorporates specific FCC authority, while maintaining investment and innovation. To suggest this is a business arrangement between our companies is entirely incorrect.

A Google spokeswoman told the Guardian: "The New York Times is quite simply wrong. We have not had any conversations with Verizon about paying for carriage of Google traffic. We remain as committed as we always have been to an open internet."

The amusing highlight of my day was Nick Saint in Business Insider arguing that " unless both companies are flatly lying, the Times was way off base."

Oh, dear, Verizon and Google lying? Please, say it can't be! But it was just yesterday that Google CEO Eric Schmidt said that when he talked of net neutrality, he meant within the same type of content, like everyone's video getting the same shake, not some types of traffic not getting a better shake than others.

Could that be related to Google's almost immediate waffling over China? And, of course, I suppose paid video would be a different type from the unpaid variety. As for Verizon -- just another carrier that doesn't get invited to cocktail parties because it loves the phrase "double dip," at least when it comes to revenue.

This is all a financial dance. (As my BNET colleague Ben Popper explained in the Digital Daily blog, the nature of the smartphone and tablet business guaranteed that Google would have to give in on mobile net neutrality.) Who gets to move data and reach consumers is a big honking deal. It's also not one-sided, with the evil carriers (and anyone who deals with them) on one side and the free world on the other. Running infrastructure is expensive. Many tech businesses have planned on unlimited data transmission, no matter who else gets the bill.

It's not going to work. Net neutrality is not a test of political purity, but a balancing between opposing economic interests. To hope for all of one thing or another is naïve. Smart business planning will require a more nuanced approach to strategy as well as tactical alternatives when things go right where executives don't expect them to land.

Related:

• Google: Smoke Clears and the Waffling Starts
• How to Broker a Net Neutrality Deal: Take It To the Back Room
• Net Neutrality Doesn't Go Far Enough To Rescue the Internet
• Carriers Hate Net Neutrality Because They Want to Double-Dip Revenue
• FCC Plan To Regulate Broadband Is -- *Gasp* -- Good For Internet Business