Posted by George Colony on September 3, 2010
Have you wondered why the odd couple of Verizon and Google have teamed up to propose tiered pricing for wireless Internet access? It's a way for Google to fight off App Internet.
The next wave in technology will consist of applications that seamlessly leverage the power of the local device (a smartphone, a PC, a tablet), and the power of the Cloud. iPad apps are the best early example. This model will challenge two old approaches: 1) the Microsoft model of applications running locally, and 2) the Web/Cloud model with applications running remotely. App Internet incorporates elements of both and combines them to create an improved experience.
Despite its efforts with Android, Google makes approximately 98% of its revenue and 100% of its profit from old model two: Web/Cloud. And that approach heavily relies on the segment of basic technology that is improving in price/performance at the slowest rate: the network. In contrast, processors and storage (the technologies powering local devices) are improving at much faster rates.
Google wants you to run your applications (search, mail, calendar) at a remote server, and in the process continually move all your bits back and forth across the network (with ad impressions delivered with each to and fro). This bandwidth-hungry approach makes Google a powerful ally of Verizon. And it explains why Google wants to raise network prices in the future and potentially give itself a network cost advantage -- because its model won't ultimately keep up in price/performance or popularity with App Internet.