WATPA: FW: Verizon Says Google, Microsoft Should Pay For Internet Apps

From: Norm Jacknis <norm@jacknis.com>
Date: Wed Feb 08 2006 - 17:38:14 EST

About a month old, but yet another sign of what may be coming ...



Verizon Says Google, Microsoft Should Pay For Internet Apps

CEO Seidenberg says content companies who provide advertising-supported
applications should share operational costs with owners of broadband

By Paul Kapustka
TechWeb News

Jan 5, 2006

LAS VEGAS, Nev. -- There's no such thing as a free lunch on the Internet,
according to Verizon CEO Ivan Seidenberg, who said Thursday that providers
of bandwith-intensive Internet applications, including Google and Microsoft,
should "share the cost" of operating broadband networks.

According to Seidenberg, Verizon and Google are already talking about how
such compensation might be structured, striking a tone far more diplomatic
than AT&T CEO Ed Whitacre, who last year openly criticized Internet
application providers like Google and Voice over IP provider Vonage

"We talk to them [Google] all the time, and they understand the issue," said
Seidenberg, in a question-and-answer period following his keynote speech
Thursday at the Consumer Electronics show here. Google, which already offers
a bevy of online apps like email, instant messaging, voice and satellite map
searches, is expected to announce a video-download service here Friday.
(Google could not be reached for comment immediately.)

While Seidenberg said Verizon "intuitively" believes that the Internet
should be open to all applications, he also said that "we need to make sure
there is the right economic model," especially in regards to so-called
"free" or advertising-supported applications, which generally do not offer
any direct compensation to the network service provider.

"We have to make sure that they [application providers] don't sit on our
network and chew up bandwidth," Seidenberg said. "We need to pay for the

Unlike Whitacre, who has previously called Internet application providers
like Vonage "free riders," Seidenberg seems far more amenable to
negotiations and partnerships. "Google and Microsoft are our partners," he
said, crediting the companies for creating huge markets with their
applications and services, which all need networks like Verizon's to thrive.

But Seidenberg also noted that despite the explosing of Internet
applications and devices, all content providers ultimately need a network to
reach customers, and he said Verizon is "one of three or four [companies]"
with a widespread reach across multiple access platforms.

"Those guys [Google and Microsoft] gotta use a network," Seidenberg said.
"But it's also incredible when you see the innovation that a Google, a
Microsoft or an AOL can create. In the long run, Google won't work without
us, and we won't work without them."

Tom Tauke, Verizon executive vice president for public affairs, policy and
communications, said Verizon would not block specific applications, an issue
that emerged early last year when a telecom service provider briefly tried
to block Vonage's VoIP services.

"We would not do that [block specific applications], and it shouldn't be
done," said Tauke, who said that Verizon is actually in favor of codifying
so-called "network neutrality" rules, as long as there are provisions for
parallel private networks, like Verizon's nascent fiber-based television
services. At CES, Verizon announced plans for an online gaming network that
would also likely be segmented away from the "open" Internet, so that
Verizon could better control the performance of the network.

As for open Internet applications, Seidenberg said it's still too early in
the game to try to make definitive statements about how service providers
and application providers can co-exist, partner, and compete.

"When we offered 800 numbers, our network got flooded and we responded by
choking the network," Seidenberg said, adding that the company then
negotiated with 800-service providers to help pay for their usage in a
manner that made sense for both parties.

"Now it's a new game, and Google and Microsoft are great at creating
markets," Seidenberg said. "It's too early to draw a line in the sand," he
added. "I don't think I'd ever say these guys are not going to ride on my
Received on Wed Feb 8 17:38:22 2006

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