Will Verizon Cause Trouble for Google and Netflix?

Verizon Communications Inc. (NYSE:VZ) shares bounced higher as the company announced several developments.

Verizon and Google (NASDAQ:GOOG) appear to be in a spat over Google Wallet, which allows people to use phones to make payments and redeem coupons with merchants.  It is a way for Google to gain access, and challenge companies such as Groupon (NASDAQ:GRPN) in the local-business advertising market.  According to the WSJ, Google says Verizon is keeping it from building its new application in the upcoming Galaxy Nexus smartphone.

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However, Verizon spokesman Jeffrey Nelson said, “Recent reports that Verizon is blocking Google Wallet on our devices are false.”  Verizon also explained that Google Wallet must be integrated into “a new, secure and proprietary hardware in our phones.  We are continuing our commercial discussions with Google on this issue.”  The app is already installed on some smartphones carried by Sprint (NYSE:S).

While Verizon and Google still work out the details, Verizon has already worked out a deal with AT&T (NYSE:T) and T-Mobile that also allows people to make payments and redeem rewards on smartphones.  The rival project is called Isis, and is expected to begin trials next year.

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According to a Reuters report, Verizon is also planning to launch a standalone streaming video service like Netflix (NASDAQ:NFLX).  The reports states, “The package of programming would be limited in its scope, said two people with knowledge of the plans. Another person said the focus would be packages of movies similar to Liberty Media’s Starz Play and Viacom’s Epix or could involve children’s programming from a partner such as Walt Disney Co. (NYSE:DIS) or Viacom (NYSE:VIA).”  The move will also challenge Amazon’s (NASDAQ:AMZN) online streaming service, Amazon Prime.

Verizon’s decision to challenge Netflix and Amazon could also cause more controversy for the company.  Verizon’s sister company Verizon Wireless, plans to resell cable TV service for Comcast Corp (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC) and Bright House Networks.  Reuters explains, “While a limited package of TV shows and movies is unlikely to have an immediate impact on cable sales, the launch of an online video service by a major company like Verizon will only add to the uneasiness in the pay TV business.”  Verizon’s new online video service could be available in 2012.

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