Verizon: If This Is Anything Like the IPhone, We Want In

Wireless Giant Puts Aside Feud With Google for a Chance to Use Its Mobile Operating System

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NEW YORK (AdAge.com) -- Shifting business models make for strange bedfellows -- and nowhere is that so clear as Google's potential linkup with Verizon, which is said to be negotiating with the search giant to carry phones equipped with Google's mobile operating system.
Larry Page, Google's co-founder, said mobile should be as open as the internet.
Larry Page, Google's co-founder, said mobile should be as open as the internet.

Consider just the past year: Verizon and Google have warred in front of Congress over the idea of net neutrality, and, more recently, Verizon sued the FCC after the regulatory body adopted two of Google's four suggestions for a coming wireless-spectrum auction.

So why is Verizon (along with Sprint and T-Mobile, both also mentioned as potential carrier partners) playing nice? To understand why these carriers don't want to dismiss Google's mobile ambitions too quickly, take a look at the effect the other ├╝ber-hyped mobile-phone play of the year, the iPhone, had on AT&T.

Will lightning strike twice?
"The iPhone was a phenomenal success; it acted as a steroid for our rebranding and exceeded our expectations," said Wendy Clark, VP-advertising, AT&T, at the recent Association of National Advertisers conference. She said half the second-quarter news coverage about the company was iPhone-related, which fostered its younger image. If the hype around Google's entry into mobile-phone software, dubbed the gPhone even though it's not a hardware play, is anything like the iPhone's, carriers aren't going to want to ignore it.

"Brands' images are impacted by the company you pick, just like people," said Landor Associates Managing Director Allan Adamson. "It's always best to hang out with the best brands you can because there's often some rub-off. Typically hanging out with Google can't be a bad thing."

But telecom brands linking up with Google are unlikely to get as much shine as AT&T did from Apple, according to a number of telecom analysts and brand strategists. Analyst Ben Bajarin of Creative Strategy said, "Young people think Google is good for search; they don't think it's much hipper or cooler." (The brand's value did jump 44% this year in Interbrand's annual best-brands report.)

Unlike Apple, Google is unlikely to ink exclusive wireless deals, which would fly in the face of the company's mantra of opening mobile standards. For Google, the key is to get its operating system in as many places as possible.

Opening up wireless
In an interview after Google's recent Zeitgeist event, co-founders Larry Page and Sergey Brin talked about their desire to make phones more open, much like PCs and the internet have been. Doing that, they believe, will help spur wireless innovation and get data access to more people.

"Google obviously benefits by having more and easier access to internet," said Mr. Page, who also lamented that search is "still pretty slow" on the phone. "To extend wireless devices [so they] work better will benefit us and people in general. If there's any way we can accelerate that we will."

Regardless of how Google goes about it and which telecom player it chooses, "the Google phone is a game changer," said Rob Enderle, principal analyst, Enderle Group.

For the carriers, there's more than brand image at stake. The new world order is particularly challenging for the big telecom companies, stung already by Google and Yahoo in the 1990s. The start-ups turned phone lines into dumb pipes that poured billions in ad revenue into internet companies rather than the telecoms that built the infrastructure. Verizon and other chagrined carriers are determined not to get burned again.

"We're talking about changing the fundamental revenue model underneath phones," he said. "If Google comes in with what would be a very aggressive advertising-based data plan, they could cut through this market like a hot knife through butter. The carriers are not agile. Google could do a substantial amount of damage to them before they have a chance to respond."
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