SBC's CEO picks a fight with Google

In an interview with Business Week, Edward Whitacre, CEO of telecom carrier SBC, said he wants to make Internet services firms like Google, Vonage, and MSN pay fees to allow SBC's broadband customers to reach them. When asked how concerned he was about Internet upstarts like Google (GOOG ), MSN, Vonage, and others, he said:

How do you think they're going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!

Said another way, Mr. Whitacre believes that while firms pay for bandwidth and peering arrangements with SBC, and consumers pay for bandwidth in their subscription fees, it isn't nearly enough. He wants to impose new additional fees to reach SBC customers.

Professor Larry Lessig warned that such a walled garden approach had the potential to destroy the utility of today's Internet in his seminal book, Code. And from a marketing point of view, there's an interesting question to ask here. Marketing is about connecting prospective customers to services you provide. Just how is this approach going to encourage the likes of Google and Skype to use SBC services rather than bypass them? While Mr. Whitacre may feel like he has a monopoly, SBC is far from the only game in town for Internet connectivity, and I would expect such policies to drive a mass exodus of SBC customers -- particularly business customers who pay for very large pipes into their data centers -- to other service providers. And should Mr. Whitacre enforce this walled garden on consumers, they will flee to other broadband carriers like Comcast in no time.

At the end of the day, the outcome of this fight is determined by this question: which company's services -- Google's or SBC's -- do you use more day to day? The answser for most consumers and businesses isn't SBC. If Mr. Whitacre actually imposes these fees, he will discover very quickly that picking fights with your customers is never good marketing.

Technorati Tags: Marketing, Google, SBC, Broadband, Telcos