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Mobile Payments - Controversy over Google Wallet

Mark W. Brennan

Mark W. Brennan,

Washington, D.C.

17 January 2012

According to media reports, Verizon Wireless ("Verizon") asked Google not to include functionality for its new "Google Wallet" product in the Samsung Galaxy Nexus handset, arguing that this feature is not a typical application and needs to access new and proprietary hardware elements of the handset.

According to media reports, Verizon Wireless (“Verizon”) asked Google not to include functionality for its new “Google Wallet” product in the Samsung Galaxy Nexus handset, arguing that this feature is not a typical application and needs to access new and proprietary hardware elements of the handset.  The Galaxy Nexus uses the Google-backed Android platform and debuted on Verizon’s network in December.  Google Wallet is Google’s new virtual wallet service that stores payment cards and special offers and enables users to pay and redeem offers by tapping their mobile phone at the point of sale.  It utilizes near-field communications (“NFC”) technology and stores encrypted payment information on a computer chip on the mobile phone (called the “Secure Element”). 

Some parties, including Free Press, have suggested that Verizon may in fact be doing more than “asking” Google to omit Google Wallet – specifically, that it may be blocking the service because it competes with a forthcoming mobile wallet service backed by Verizon (ISIS, a joint venture involving Verizon, AT&T, and T-Mobile).

Verizon’s critics also note that the company’s actions may violate the “open platform” requirements applicable to the Upper 700 MHz C Block spectrum (Verizon owns almost all of that spectrum).  These requirements prohibit Verizon and other C Block licensees from limiting the ability of their customers to use the devices and applications of their choice on the licensee's C Block network,  from disabling features on handsets they provide to customers, or from configuring handsets to prohibit their use on other providers' networks.  See 47 C.F.R. § 27.16. 

In response, Verizon has stated that it is not “blocking” Google Wallet, noting that it appears to be more than just an application:

Recent reports that Verizon is blocking Google Wallet on our devices are false.  Verizon does not block applications.

Google Wallet is different from other widely-available m-commerce services. Google Wallet does not simply access the operating system and basic hardware of our phones like thousands of other applications.  Instead, in order to work as architected by Google, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones.

We are continuing our commercial discussions with Google on this issue.

The FCC has thus far declined to get involved, and it remains to be seen if or how Verizon and Google will resolve this dispute.  In the meantime, ISIS services are expected to debut this year.

HL Spectrum International Review  note:  In the meantime, on January 11, the European Commission in Brussels initiated a consultation on ways to foster and grow mobile payments.  Towards this end, the Commission adopted a "green paper" entitled "Towards an integrated European market for card, internet and mobile payments." The Commission press release says that it "seeks the views of stakeholders as to which obstacles hinder further market integration and how these could be resolved. The deadline for submitting contributions to the consultation is 11 April 2012."

 

Mark W. Brennan

Mark W. Brennan,

Washington, D.C.

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