Google's frenemies

The Merc Q&A with Eric Schmidt Sunday didn’t say much, but given how secretive Google is, it spoke volumes, particularly about two key frenemies.

Wikipedia (that most reliable of all sources) defines “frenemy” in part:

It is commonly used to describe two people who are apparently friends, but actually dislike each other. This may be because they feel the need to keep up appearances, or because they do not want to lose mutual friends.…

Alternatively, two people who are apparently enemies may actually be friends in private, with the apparently hostile relationship portrayed in order to deceive third parties, or for other forms of gain.

For Google, a good example of the former would be Microsoft, while Apple would perhaps fit the latter. (In strategy, we have the more precise term “coopetition”).

From the Schmidt interview, here’s the relevant excerpt about Microsoft

Schmidt: Google has recently announced a product called Glook and that product allows Outlook users to use Gmail as their back end. How is that going? And the answer is it is going pretty well.

Q: How did the relationship go? The companies had to work together to make that happen.

Schmidt: Not very much. I don't want to overstate it. Because of the historic tension with Microsoft, we do not have a lot of collaboration with Microsoft. (This interview was conducted before the search partnership between Microsoft and Yahoo was announced.)

Q: You and Steve Ballmer have not smoked a peace pipe?
Schmidt: That is correct.

And the final exchange:

Q: You recently gave Bill Gates some advice on handling the media. If you were Steve Ballmer, how would you compete with Google?

Schmidt: I am not going to give Steve Ballmer any advice. He is doing just fine without my advice.

Of course, Schmidt built his career as right hand man to Scott McNealy — then CEO (now chairman) of Sun Microsystems — who pursued Microsoft as though it were Moby Dick. At least Schmidt (unlike McNealy or Ahab) has a chance of winning.

Meanwhile, Google seems to get along just fine with its Cupertino-based smartphone rival.

Q: Google and Apple are increasingly in the same businesses, namely operating systems for mobile phones and now with the announcement of the Chrome OS, personal computers. Is it also becoming increasingly problematic for you to be on Apple's board?

Schmidt: I am not sure about the board question. The board question can be solved by recusing yourself, which I do with the iPhone.

It is also important to remember that unlike Microsoft and Google, Apple and Google have a lot of technical partnerships. The underpinnings of Chrome are the same as that of Apple's Safari browser. There is a lot of collaboration around Web standards. We collaborate on the maps area. We have a large number of iPhone apps.

There are significant benefits to Apple and to Google for me to be on both boards with the caveat that you mentioned that you have to be very careful.

This fits one of my basic points: in business as in geopolitics, there are no permanent allies, just permanent interests. Their interests are clearly aligned in supporting WebKit’s continuing success, while Google provides a lot of complements for the Mac and iPhone platforms. More broadly, like many other ICT companies they have collaborated in defining and implementing interoperability for key Internet technologies.

Obviously there’s a lot warmer relationship — both at the corporate and personal level — between Google and Apple. Schmidt and Jobs started out much better off than McNealy and Gates (now Schmidt and Ballmer) ever managed in the best of times, even if there is speculation Schmidt will have to resign the Apple board seat.

Update Monday 1pm: Oops, I obviously underestimated how soon Schmidt would be leaving the Apple board.

Odd unbundling decision

This morning brought is the penultimate issue of the weekly TV listings insert in the San Jose Mercury News, as well as for its sister papers in the Bay Area News Group. On August 16, the TV listings will only go to those who pay $26/year. While I certainly get the Merc’s need for new business models, this seems like a non-starter.

Once upon a time, TV listings were one of the main reasons people bought the Sunday paper; I know that’s what caused me to take the SD papers rather than the LA Times, even when I preferred the latter’s news and features. Apparently such sections have been a money loser for years, and several papers (including both Boston papers) have already dumped theirs, in part due to the cost of providing comprehensive information on all the various cable and DVS stations.

Perhaps the Merc is giving away so many papers — to keep the ad rate base up — that they need to charge for something. Certainly charging for the TV section must means that it plan to keep the section ad-free, since the section and its ads will be seen by only a small fraction of the 650,000 Bay Area News Group daily newspaper readers — I’d wager less than 10%.

A decade ago, I might have ponied up for the section or gone out and spent $40/year to subscribe to the dead tree TV Guide. Today, many people use the TV Guide Channel, that combination of listings and shows that makes TMZ seem like Masterpiece Theatre.

The TV Guide Channel doesn’t help our family, because Comcast no longer provides it free on basic cable. Still, we’ll get by just fine without the Mercury’s TV section: TVGuide.com provides more accurate information, for free. If TVGuide.com gets greedy and wants to charge, TV listings are a commodity and so I have plenty of other alternatives: TitanTV, TV.com, AOL or a number of other sites.

So why charge if it’s doomed to fail? Perhaps it’s one last attempt by the TV section staff to prove they’re valuable rather than get laid off immediately. Who knows? Perhaps there are enough non-Internet savvy seniors to keep the section around for another year or two.

For those of you not tenured...

Here’s a caustic dig this morning at tenured faculty from an ex-lawyer and Cal alumnus who normally attacks fellow cartoonists.

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.

Clunker of a law

The House voted Friday to throw another $2 billion at Cash for Clunkers after the first $1 billion (apparently) ran out.

The program destroys working vehicles, prevents recycling of the most valuable components, and creates unimaginable bureaucratic hassles and invasive spyware for car dealers. Of course, the evidence is that it will have no long-term benefit — after all, it’s a perfect example of the Frédéric Bastiat broken window fallacy.

So in other words, this is a smash success by the standards of the politicians spending like drunken sailors. (Oops, retract that — it might be defamatory to naval personnel.)

Finally, if Congress is unable to accurately predict the cost of encouraging auto trade-ins — a simple transaction with a known pool of eligible vehicles — will they do any better predicting the cost of their stealth Single Payer health plan?