AT&T Blamed For Google Voice iPhone Ban

Former hedge fund manager Andy Kessler said AT&T was the real villain behind Apple’s ban of Google Voice from its iPhone App Store

A former hedge fund manager made the most compelling case yet for who was behind Apple’s ban of the Google Voice call management application from its iPhone App Store. Here’s a hint: It wasn’t Apple.

In “Why AT&T Killed Google Voice,” an opinion piece published in the Wall Street Journal 18 Aug, Andy Kessler makes a strong case that exclusive iPhone carrier AT&T was behind Apple’s rejection of the Google Voice application, as well as the expulsion of third-party Google Voice applications such as GV Mobile and VoiceCentral. Readers can also access the piece from Kessler’s blog here.

Google Voice is a call management application that lets people call one phone number to reach friends or colleagues on their home, mobile and work phones. Apple rejected the version of the Google Voice application written for the Apple iPhone two months ago but declined to say why. Apple then booted GV Mobile and VoiceCentral from its App Store, ostensibly because features in those applications overlapped with those on the iPhone.

Many pundits have speculated that AT&T was behind the ban, but both Apple and AT&T were suspiciously quiet on the reason. Apple declined comment, while AT&T told media to ask Apple about what goes on int its App Store.

The Federal Communications Commission sent letters to Google, Apple and AT&T trying to determine why Apple banned the applications and what, if any, role AT&T as the sole iPhone provider played in the bans. The FCC asked the companies to respond by 21 Aug; the timing of Kessler’s piece, three days before that Friday deadline, is timely if not interesting.

While Google Voice overlaps with iPhone provisions such as SMS, Kessler points to how Google Voice’s free domestic calls and SMS and cheap international calls to Europe for 2 cents per minute can gouge AT&T’s business.

Kessler wrote: “How could AT&T not object? AT&T clings to the old business of charging for voice calls in minutes. It takes not much more than 10 kilobits per second of data to handle voice. In a world of megabit per-second connections, that’s nothing—hence Google’s proposal to offer voice calls for no cost and heap on features galore. What this episode really uncovers is that AT&T is dying. AT&T is dragging down the rest of us by overcharging us for voice calls and stifling innovation in a mobile data market critical to the U.S. economy.”

An AT&T spokesperson told eWEEK: “Wireless is an industry characterised by fierce competition, great choices in devices and plans, the lowest per-minute rates in the industrialised world, and the highest level of innovation in the world. The writer of this op ed piece doesn’t seem to understand any of this. His solution? Gut a system that is working very well, replace it with government regulation, and give everything away for free.”

Kessler, who has also written several books, goes on to note how AT&T, which reported declines in local voice, long distance and wireline revenues, is being carried by its wireless data services, which is up 26 percent per customer from text messaging and Internet services, such as Web browsing.

This is part of AT&T’s virtual pipe via spectrum, Kessler said, noting that Verizon Wireless, T-Mobile and others all joined AT&T in bidding $70 billion-plus for wireless spectrum in FCC auctions since the mid-1990s.

“That all gets passed along to you and me in the form of higher fees and friendly oligopolies that don’t much compete on price. Google Voice is the new competition,” Kessler wrote.

Market researcher iSuppli estimates that global revenue for wireless data services, excluding messaging, is projected to grow by 26.2 percent to reach $87.7 billion in 2009. This follows 57.1 percent growth in 2007 and a 60.3 percent expansion in 2008 for total data revenue among the world’s wireless carriers. Mobile applications, such as those on Apple’s App Store, are spurring data service revenue growth.

The most popular device that AT&T is using to connect its wireless data pipe to its customers is the iPhone. Google Voice, with free SMS and free U.S. calls, threatens to eat into this wireless data pipe, which is why Kessler believes AT&T killed Google Voice on the iPhone. “It’s inexcusable that new, feature-rich and productive applications like Google Voice are being held back, just to prop up AT&T while we wait for it to transition away from its legacy of voice communications,” Kessler said.

Enderle Group analyst Rob Enderle disagreed that AT&T was behind the Google Voice ban.

“I still don’t think AT&T pulled the plug because in other countries Apple has not pulled VOIP applications and no one, including AT&T, seems to have much say with regard to Apple’s App Store,” Enderle told eWEEK. “We also know that Apple regularly cripples or blocks things they think are competitive, and Google seems to have the platform that is currently the most likely to hurt the iPhone.”

However, Enderle did agree that AT&T and other carriers are counter-consumer and said he was happy the government is looking into this. “The citizen is overmatched at the moment, and the role of government is to ensure that this doesn’t happen,” he said.

ISuppli analyst Jagdish Rebello said the Google Voice ban represents an early dust-up in the escalating battle among wireless operators, cell phone makers and content providers over who will control revenue generated by applications and data services. Apple, Google and players such as Nokia, RIM and Microsoft are trying to muscle in on the wireless carriers for a share of the lucrative markets for mobile premium content, service and application.

“Clearly, mobile data revenue is key to the continued health of wireless carriers and the cell phone value chain in the future,” Rebello said. “In this battle, ownership of customers and who can monetise data services and applications are up for grabs.”

Kessler didn’t simply intend to start a war of words with his piece in the Journal. He proposed solutions, including end phone exclusivity; share airwaves; end municipal exclusivity deals for cable companies; and encourage faster and faster data connections to our homes and phones.