Up and to the Right

Dissenting opinion. There’s been a lot of garbage and hogwash written about why Google Voice was taken down and barred from the iTunes App Store for the iPhone. There’s also been debate as to whether it was Apple or AT&T who demanded the take down. The one thing everyone seems to agree on is that this was an evil and wrong-headed move by Apple and AT&T.

First off, it really shouldn’t be hard to figure out who ordered the take down. If Google Voice (and other IP-based phone apps like Skype) are allowed to operate over cellular/3G this represents a major business challenge to AT&T. Forget about “right” and “wrong” and your hippy ideals of “open” this and “free love” that for a minute. Do the goddamn math.I pay $122.04 per month with taxes to AT&T to operate my iPhone every month. I don’t even have that fancy of a plan. It’s upper-middle class. I have 900 anytime minutes, the iPhone data plan, and 1500 SMS per month–that’s it. AT&T gets about $100 of that per month after taxes. Now if Google Voice were available, I would instantaneously drop my voice plan from my $60 for a 900 minute plan to the barebones $40 450 minute plan. I would go from the $15 1500 SMS to the $5 200 SMS plan. Net net I would be paying AT&T $35 per month or $420 per year less to the Big Blue Death Star. Oh yeah, and that $420 has near zero marginal cost. It’s the sweet, sweet gravy on AT&T’s poutine. Consider hundreds of dollars of lost revenue per customer for all 78 million American 3G subs that AT&T has and all of a sudden this little Google Voice app approval thing looks like potentially billions of dollars of lost gross margin for AT&T every year. Ouch.

So should we get all up in arms and boycott the iPhone over this apparent customer-screwing move like a bunch of irate schoolchildren who just threatened to stop playing kickball until the rules are to our liking? Hell no. AT&T is a business you communist fool. They ain’t no charity. Randall Stephenson isn’t the CEO for his health. They have executives and a Board of Directors responsible to their shareholders in both the short and long-term. They are not about to voluntarily give up billions of dollars of margin and screw their shareholders over just because you think Apple and AT&T are capricious in their App Store approval process. News flash: It’s their multi-billion dollar 3G network, so we’re playing by their rules. It’s their kickball and their field.

Can AT&T hold out on Google Voice forever? No. They can’t ostrich this one for too long or the FCC or some 18 year old’s technology will find a way around whatever barriers are erected. (Life always finds a way. Doesn’t it Mr. Goldblum?) AT&T needs to come up with a solution. Very short-term they need to deny Google Voice exists except perhaps over Wi-Fi, but after that they need a plan. That’s the responsible thing to do for their company and shareholders.

For instance, AT&T could allow Google Voice but change their rate plans to go one of two ways: 1) the simple way…create a single totally unlimited iPhone plan that costs $89 pre-tax for everyone (i.e. a price point that’s higher than the current median iPhone plan price point but not too high) that doesn’t make silly breakouts for voice, data and SMS. They could call it The “Its All Frickin’ Packets Anyhow Plan.” Alternatively, AT&T could bundle voice, data and SMS together and base their plans on either access speed or MBs per month (or something else?). This would be similar to home internet access through AT&T U-Verse and others. (i.e. In the ISP world this is “Do you want access rates of 3mbps, 6mbps 12mbps or 18mbps?”) I don’t know if cell towers currently have the technological capability to throttle 3G service rates by individual handset (guessing not yet) but this is probably something they should start working on pronto if they haven’t already. Personally I think MBs per month would be a terrible idea that only complete nitwits would go with and would stifle all innovation. I also think Apple would quit AT&T the minute they did that. I am sure there are other sound ways too of AT&T making up for much (but probably not all) of the lost revenue that Google Voice and its kind represent, but the key thing is moving away from “minutes, SMS, MBs” to a less artificial approach that recognizes its all packets anyhow and AT&T should get paid for packets not minutes. (For instance, if at the end of the day under the new billing scheme my bill only goes down by $15 per month–the amount I pay for SMS, I would not be upset. Current SMS fees should be felony offenses in all 50 states.) The real problem is that AT&T still thinks of itself as a phone company.

So who rejected Google Voice? Yeah, I am going to have to go ahead and go with “AT&T” here as my final answer. And why? Because smart companies don’t voluntarily shoot themselves in the foot. Once you accept the fact that even though technology will continue to innovate, AT&T will continue to find clever ways to charge you an inflation-adjusted $80-$100/month you’ll be a happier person for it. So, Messrs. Arrington and Calacanis please give it a rest and realize that AT&T is a business and not a not-for-profit. Use some common sense. AT&T did what anyone should expect of them: they did not commit Seppuku.