Will Verizon's insistence on Bing upset talks with Apple for the iPhone?

Mike DanoVerizon Wireless (NYSE:VZ), it seems, plans to retain tight control over the user interface of its phones, even in this new world of smartphones.

The latest evidence of Verizon's continued presence in the UI lies in Samsung's new Fascinate smartphone. The Fascinate is one of Samsung's Galaxy S phones--other Galaxy S iterations are available from AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and T-Mobile USA--and the line represents the spear tip of the vendor's smartphone push. All U.S. versions of the Galaxy S run Google's Android operating system and carry Google's standard lineup of services, including Gmail, Google Search and Google Maps--except for Verizon's Fascinate.

Verizon confirmed that it required Samsung to replace Google Search with Microsoft's Bing search on the Fascinate. Further, there is no option to change it; Fascinate users are required to use Microsoft's Bing search. "Customers can still get to other search engines through the browser, but Bing is the one that comes on the phone out of the box," a Verizon spokeswoman confirmed.

Verizon's move drew the ire of a number of reviewers: "Being unwittingly forced into Verizon and Bing's conjugal relationship is infuriating on its own, but the implementation also feels like the sloppy hack that it is," wrote Gizmodo's Matt Buchanan. "Now, imagine buying an Android phone--a Google phone--only to discover that not only was Google not defaulted to as a search engine, it's not even an option!"

"For us, this is actually a deal breaker," wrote Engadget's Joshua Topolsky, noting that Verizon also installed its Navigator application as the default mapping service on the Fascinate.

That Verizon replaced Google Search with Microsoft's Bing--while confusing--is not a total surprise. Verizon late last year conducted a similar campaign with Research In Motion's (NASDAQ:RIMM) BlackBerry devices, though in that case Bing was the default but not the only option. The actions stem from Verizon's mobile search deal with a pre-Bing Microsoft, inked in early 2009. Verizon's spokeswoman declined to provide me with any further details about Verizon's deal with Microsoft--including whether it would stretch to additional Android devices.

Verizon's tinkering in the user interface of its phones is well documented. Indeed, the carrier in 2005 sparked widespread discontent among its feature phone suppliers when it announced it would require all phones sold through its retail efforts to run a user interface designed by Verizon. The move was intended to make troubleshooting easier for the carrier's customer service representatives and to smooth users' transitions from one phone to another--but it eliminated a major area in which handset vendors could differentiate their offerings.

And though it seemed the rise of smartphones--with complex and distinctive user interfaces--would stymie Verizon's inclination to fiddle with the user interface of the phones it sells, that doesn't seem to be the case. Already the carrier has installed its own app store, search and navigation services into various smartphones, and that's likely just the beginning.

But Verizon's actions on Samsung's Fascinate are particularly interesting for a number of reasons. First, the action reflects Samsung's do-whatever-it-takes approach to gaining smartphone market share. Indeed, the company recently boosted its global sales target to 25 million smartphones this year, up from a previous target of 18 million. To get into Verizon--the nation's largest wireless carrier and one of the world's 10 largest carriers --Samsung obviously was willing to make some concessions.

For Microsoft, the installation of Bing into the Samsung Fascinate is part of the software giant's wider battle with Google on search. And Microsoft is making progress: Experian Hitwise recently reported that Bing accounts for around 25 percent of searching, and is gaining share in some verticals. However, I personally tried Bing for more than a month after Microsoft released it and I still prefer Google.

But for Verizon the action is especially interesting considering the carrier's wide-ranging deal with Google. The two companies unveiled a major partnership last year, a teaming reflected in Verizon's support for Android and, more recently, the companies' partnership on net neutrality. But Verizon swapping out Google's search for Microsoft's Bing on the Samsung Fascinate directly cuts into Google's mobile strategy. The whole reason Google is offering Android for free to handset makers is to increase its advertising revenues, which are dominated by its search offering. The removal of Google Search from the Fascinate is a direct stab at the heart of Google's mobile business strategy. I would expect that Google knew of Verizon's five-year mobile search deal with Microsoft when it started working with the carrier, but I wonder exactly how this latest action is being viewed in Mountain View, Calif.

Now, this brings me to my final observation: What does this all mean for a possible Verizon iPhone? Verizon and Apple (NASDAQ:AAPL) are rumored to be in discussions over such a teaming, with a possible Verizon iPhone scheduled for a January release.

The rivalry between Apple and Google has reached epic proportions, with executives from each company going out of their way to take jabs at the other. Further, Apple recently installed Bing as an option for search on its iPhone. But will Apple be as flexible as Samsung when it comes to Verizon's user interface requests?

Both Apple and Verizon have plenty of momentum in the mobile market, and I suspect each is intent on staying the course, so I would say it's unclear which company will blink first. Or whether they will blink at all. --Mike

Update: It seems Microsoft is commenting on the whole issue. The company told Business Insider that "over the coming months, Verizon will announce the launch of new Android devices, which will be pre-loaded with Bing. The deal for Verizon Android devices is not exclusive."

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