ATT, Apple can't win fight against VoIP

The FCC is now investigating Apple’s decision to ban the official and several unofficial GrandCentral Google Voice applications from the iPhone App Store. The blatant nature of Apple’s decision allows the FCC to extend its existing probe of exclusive handset deals.

In the meantime, Google is working on usability of the web application for iPhone and iPod Touch users that Apple can’t block. It also plans to release (but apparently hasn’t yet) apps for Android and BlackBerry users.

PaidContent has the text of letters sent by the FCC to Apple. Here is the crux of the letter to Apple:

2. Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications? If the latter, please describe the communications between Apple and AT&T in connection with the decision to reject Google Voice. Are there any contractual conditions or non-contractual understandings with AT&T that affected Apple’s decision in this matter?

3. Does AT&T have any role in the approval of iPhone applications generally (or in certain cases)? If so, under what circumstances, and what role does it play? What roles are specified in the contractual provisions between Apple and AT&T (or any non-contractual understandings) regarding the consideration of particular iPhone applications?

4. Please explain any differences between the Google Voice iPhone application and any Voice over Internet Protocol (VoIP) applications that Apple has approved for the iPhone. Are any of the approved VoIP applications allowed to operate on AT&T’s 3G network?

While most of the Google letter focuses on Google as a victim, it also asks essentially the same questions about the Android Marketplace as it asks Apple about the iPhone App Store:

Please provide a description of the standards for considering and approving applications with respect to Google’s Android platform. What is the approval process for such applications (timing, reasons for rejection, appeal process, etc.)? What is the percentage of applications that are rejected? What are the major reasons for rejecting an application?

There are at least three things that make it hard to understand why Apple chose to confront the FCC after the agency began fishing for information to justify meddling in locked handsets.

• Apple had earlier approved two Google Voice clients — GV Mobile and VoiceCentral and then yanked them after they had been on the app store for several months.
• Skype was approved for the iPhone — even as telcos make a futile effort to block its adoption.
• Finally, if the GV app — like Skype — were Wi-Fi only, it seems like this would play into the successful efforts by AT&T with iPhone 3.0 to shift traffic to its Wi-Fi hotspots, using them both as a cost-effective way to provide bandwidth and “a competitive differentiator.”

Given all this, why did Apple crack down? An Information Week article hints at why Google Voice app is much, much worse from an AT&T standpoint:

The Google Voice app will allow users to use their mobile phones to access their inbox, place calls and send SMS messages with their Google Voice number, and make low-rate international calls.

When sending SMS messages in this manner, users don't have to pay SMS charges levied by their mobile carriers because the SMS messages are sent by Google.

The experience of using Google Voice through one of these mobile apps is much more seamless, said [GrandCentral co-founder Vincent] Paquet.

The Google Voice apps will allow users to set whether all calls, only international calls, or no calls get routed through Google Voice.

In other words, while the GV app may share a back-end transport layer with the web app, the business impact is dramatically different: it makes it intuitive for iPhone users to bypass AT&T for all their communication needs. Even worse, a hotspot-enabled iPod Touch becomes as useful as an iPhone, without the minimum $800/year AT&T contract.

In the short term, Google Voice users will use the web application. The developer of one of the third party apps, GV Mobile, is going back to the pre-App Store safety valve — working with jailbreak phones.

But even without an Obama’s hand-picked activist FCC, Apple and the other operators are fighting a losing battle against the inevitability of mobile VoIP service.

After Google Voice joins Skype in the App Store, along will come home-use Wi-Fi client apps for Vonage and cable company VoIP services — the same services that are helping destroy AT&T and Verizon’s landline business and may force them to cannibalize their 100-year-old cash cow.

Perhaps all that’s happening here is that AT&T hopes to wring out another quarter or three worth of revenue before the FCC steps in, and Apple is trying to keep its sole U.S. distribution channel happy in the final year of being lashed together at the waist.

Update Sunday 10pm: Links to the official Android and BlackBerry apps are available on the Google Voice website.