Bloomberg News

Verizon Wireless Blocks Rival Google Wallet, Citing Security

December 08, 2011

(Updates with consultant’s comment in 12th paragraph.)

Dec. 6 (Bloomberg) -- Verizon Wireless, the largest U.S. wireless carrier, blocked Google Inc.’s competing mobile-payment system from the new Galaxy Nexus smartphone, citing security concerns.

Verizon Wireless, co-owned by Verizon Communications Inc. and Vodafone Group Plc, is working to have “the best security and user experience,” Jeffrey Nelson, a company spokesman, said today in an e-mail statement. The Basking Ridge, New Jersey- based carrier will allow the Google service, called Google Wallet, “when those goals are achieved.”

The move is a setback for Google and comes amid intensifying competition between services that let consumers pay for goods with mobile phones. Verizon Wireless and partners AT&T Inc. and T-Mobile USA plan to invest more than $100 million in a joint venture called Isis, which competes with the Google service, people with knowledge of the project said in August.

“The refusal to allow this is probably being used as leverage in negotiations between Verizon and Google over the terms of the contract and the sharing of customer information,” David True, a consultant with Broadly Curious Advisors in New York, said today in a telephone interview.

The Galaxy Nexus, made by Samsung Electronics Co., runs the latest version of Google’s Android software and will go on sale this month. It is Verizon Wireless’s first Android phone that uses a near-field communications, or NFC, chip that -- through Google Wallet -- can transmit payment information to store registers.

NFC Integration

Verizon Wireless’s move isn’t because of its competing payment system, said Nelson. Rather, it’s because Google Wallet is integrated more deeply on the Nexus phone through the NFC chip than most other mobile-commerce systems, he said.

“As architected by Google, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones,” Nelson said in a separate e-mail. “We are continuing our commercial discussions with Google on this issue.”

Verizon Wireless asked Google not to include the payment technology on the Nexus, said Nate Tyler, a spokesman for the Mountain View, California-based company.

“Google Wallet is a secure payment platform that has been designed from the ground up with security as a priority,” Tyler said in a telephone interview.

Verizon’s competing Isis venture plans to start its service in a few markets next year.

Blocking a Competitor

With its own mobile payment service in development, Verizon may be hoping to put a few speed bumps in front of Google in this emerging field, said Greg Sterling, founder of the consulting firm Sterling Market Intelligence.

“It’s blocking a competitor’s product from getting to the market,” Sterling said in an e-mail. “I don’t think the security concerns are genuine.”

Sterling points to Sprint Nextel Corp., which doesn’t have a mobile payment product and sells Google’s Nexus S phones with NFC chips for Google Wallet.

“Sprint obviously didn’t express the same concern about security in allowing Google Wallet on the Nexus S, and so far there don’t seem to be any reports that indicate security has been a problem for users or the carrier,” said Sterling.

--Editors: Ville Heiskanen, James Callan, John Lear

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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