On Wednesday, the New York Times reported that Google and Verizon“are nearing an agreement that could … speed some online content to Internet users more quickly if the content’s creators are willing to pay for the privilege.” While both Google and Verizon quickly denied the NYT report, the newspaper says it’s standing by its story. If the Times is right, this content-for-cash scheme would be the greatest scandal in Google’s history. We could term it “Internet Payola,” after the practice of record labels paying radio stations to play their songs.

The plan would probably work like this: In exchange for payment or some other mutually beneficial considerations, Verizon would give special priority to sites like Google.com and YouTube, making them run faster than competitors like Yahoo.com and Hulu. Such a payola scheme would violate the precept of net neutrality, the belief that all packets that travel over the Internet should be treated equally. It would be a betrayal of the public’s trust from a firm that has long sold itself as a fair broker and has tirelessly tempered its growing power with its advocacy of “open networking.” It would also reveal the need for immediate federal action on net neutrality and continued oversight over all corporate monopolies that control speech and commerce.

How could Google be moving away from its “open networking” values? The people I’ve spoken to at Google claim that no such movement is afoot—that the New York Times story is “wrong.” In contrast, another source with knowledge of the discussions says the Times story is “generally accurate.” A Verizon spokesman admitted to the Times that the company has “been working with Google for 10 months to reach an agreement on broadband policy.” Whether the two have actually agreed to a payola scheme is not yet known. What is clear is that Google is in bed with Verizon; the only question is how far things have gone.

As the owner of the world’s most popular Internet site, Google has always had an incentive to offer cash in exchange for favors for its content. Yet until now it has resisted the temptation and instead declared itself the world’s greatest enemy of net discrimination. As a kind of living proof, Google has on its payroll several leading prophets of Internet openness, like Vint Cerf and Fred Von Lohmann. Its founders consider themselves members, in good standing, of the 21st-century openness movement. If you’re a cynic, you might think the openness talk was always just talk. Yet there are definitely people on Google’s campus who believe in it.

In fairness to Google, the company has certainly done more than just talk about openness. The company has spent real money in Washington, D.C., defending net neutrality before the FCC and Congress. In 2005, Google could have destroyed YouTube through a deal with Verizon, AT&T, and Comcast; instead, it bought the video-streaming firm. Google retreated in China for many reasons but at least in part because of net censorship. The tension between Google’s ideology and incentives has always been there, however. Even so, hearing about a possible cash-for-favors agreement with Verizon is not unlike finding out that the Pope isn’t Catholic.

If Google hasn’t switched sides, it has certainly softened, particularly in the wireless realm. If an Internet payola scheme does come to pass, it’s most likely that this prioritization would happen on wireless devices, like your mobile phone, rather than wired devices like your desktop computer.

We can find an explanation for Google’s changing stance on wireless in several places. First, Google has clearly felt threatened by the rise of the wireless Internet, in particular the popularity of the Apple/AT&T iPhone. The firm was born, after all, on the late-1990s Internet, which arrived over wires plugged into a computer. The computer isn’t obsolete, of course, but if you use an iPhone, you’ll notice you don’t really need Google as much as you used to.

Since 2007, then, Google has stared down a potential future of increasing irrelevancy. It was in a position not unlike Microsoft in the 1990s, when that monopolist owned yesterday’s platform (the operating system) while another was rising (the Internet). Google, like Microsoft before it, decided to try and conquer the new market while it still had time. In 2007, Google launched its own wireless operating system, Android, designed to compete with Apple’s iPhone. While in some sense, Android represented an effort to extend its search monopoly to wireless, Google continued to define its mission in ideological terms. With Android, it was bringing “openness” to the wireless world the way one might bring democracy to the Middle East.

Another reason for Google’s shifting position on net neutrality might be the company’s sense of isolation in Washington policy circles. When it first came to town, Google was in conflict with the entire communications industry (Verizon, AT&T, the cable companies) and the copyright lobby (Hollywood and friends), not to mention authors, publishers, and the Department of Justice. Gaining Verizon as a policy ally provided something of a break from an otherwise unrelenting struggle—as a sign of friendship, the two firms sometimes file jointly to the FCC.

Who has gained the most from the Verizon-Google marriage? Google and its CEO Eric Schmidt know much more about the Web than Verizon, and the latter has been able to learn at the feet of a venerable Web company. Verizon, in turn, has been able to teach Google about how to maintain a monopoly. Verizon, a descendent of the Bell Co., is steeped in monopolist culture. The firm long ago mastered the delicate art of suppressing competition and preserving a monopoly long past its due date. Indeed, Verizon, aka Bell Atlantic, has held on to certain parts of its telephone monopoly since the 1880s. As a relatively young monopolist, Google may have more to learn from the Bell monopolists than vice-versa.

What is most obvious from these flirtations with Internet payola is the need for federal oversight. The FCC should (finally) enact binding net neutrality rules using the authority vested in the agency by Title II of the 1934 Telecommunications Act. This means the FCC will actually have to write rules, rather than its preferred method of delegating rule-writing to the firms it regulates. When we are talking about deals between the nation’s most powerful communications firms, the potential for abuse is obvious, and lack of oversight is not an option.

For Google, the scandal raises a different danger: that it will lose the trust of its customers. People use Google mainly because it is good and it is “free” but also because they generally trust the firm. No one trusts Google or any company entirely, but Google has always portrayed itself as an honest broker of what’s on the Internet. If it’s lying or playing favorites, that makes it harder to trust. That’s why those people at Google who still believe in the company’s founding principles need to take back the firm, so to speak, and understand that its wireless ambitions and Washington deal-making could damage the integrity of the whole venture.

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