It’s now clear that Google underestimated the public’s desire for true net neutrality over both wireless and wired services — something the company quickly discovered after issuing  a joint policy recommendation with Verizon last week.

Google tried to explain its thinking with a couple of posts, but so far the reaction has remained harsh. (See, for instance, the typically Google-loving Wired’s “Why Google Became A Carrier-Humping, Net Neutrality Surrender Monkey.”) Google (GOOG) has lost some public trust and could possibly have irreparably harmed its reputation.

While the agreement would mostly uphold net neutrality for wired networks, it was hands off on wireless networks. Google seems to be saying that it has been negotiating on the side of consumers for net neutrality and has found a good compromise.  The public’s reaction seems to be, “I didn’t know that I elected Google to negotiate on my behalf and frankly I don’t have to compromise with some huge wannabe monopoly whose only desire is to milk more profits out of me by offering less for more money.”

The U.S. telcos haven’t earned themselves a stellar reputation over the years with consumers.  Google, on the other hand, has done a much better job. That’s why this agreement has people up in arms at Google and has earned a tame reaction from Verizon (VZ).

Paul Kouroupas, Vice President Regulatory Affairs at Global Crossing (Internet backbone provider), likes the Verizon/Google solution but doesn’t think it is going to make it unscathed through congress.

“Unfortunately, with the absence of congressional action, the FCC is likely to react in some way.  That will mean years of litigation and uncertainty in the market.  The industry would be better off to devote time into looking at peering agreements and devising a way to increase competition.”

Google’s PR department, from people I’ve spoken to, seem to have been taken aback by the reactions.  Google’s Vint Cerf, sometimes called the Father of the Internet, came out in support of the new limitations, disappointing many.

What’s strange is that Google has always been a consumer advocate of net neutrality.  There is no shortage of statements from Google’s over the years backing that up.

What happened? What is Google’s motivation to cede wireless net neutrality?

I’ve seen some speculation that Verizon (VZ) offered Google the chance to side with it on this issue in exchange for turning down the iPhone. That’s highly unlikely for a lot of reasons, but it is hard to dismiss anything at this point.

I think it has to do more with Google’s future ambitions.  Sure, Google is a strong partner with Verizon now, but Google has products in development that are going to need even more support, from all carriers.

Video products like GoogleTV come to mind. Current streaming platforms like AppleTV and RokuHD max out at 720P video. GoogleTV is advertised to work at 1080P;  YouTube now not only supports 1080P but they go to resolutions much much higher. These GoogleTV Android boxes are going to suck up more data than has ever been used before. Without the packet prioritization that Google is now advocating for on wired networks or special dedicated networks to handle this traffic, other services like VoIP (which Google is also getting into) will suffer.

If Google plans a mobile, wireless version of GoogleTV (why wouldn’t it?), tiered networks become much more important. Take this rumored Verizon/Motorola (MOT) Android tablet for instance.  If you are watching a movie on the device, it will create such a burden on bandwidth that calls are going to get stuck in a jam on their way to phones.

And don’t forget that AT&T (T), T-Mobile and Verizon’s next generation networks are LTE, which doesn’t carry voice separately like traditional 3G networks. The carriers are going to have to use data in the same way that Vonage or Skype currently do, over IP. Packet prioritization is a must in this case.

The ISPs may be forcing Google to play along so that GoogleTV can perform how it is intended, but Google will soon be its own ISP as well.

Haven’t you heard? Google plans to roll out 1Gbps fiber to competing municipalities. That means Google is an ISP just like Verizon or Comcast (CMCSA). Google has also been rumored to be building a surplus of dark fiber for this and much larger rollouts.

[youtube=http://www.youtube.com/watch?v=wusklcNKDZc&w=600&h=375]

As with Time Warner (TWC) and Cablevision (CVC), Google knows it can make the fiber routers that it supplies to homeowners into wireless access points to reach even more consumers.  But its ambitions don’t end there. Google is also an investor in Sprint/Clear’s WiMax service in the U.S. Yep, Google owns part of the Clear/Sprint network that those EVO and EPIC 4G Android devices connect to the Internet on.

(Google has also sponsored wireless airport access points through third parties in the past.)

So when Google’s interests were only in data centers, it was completely beneficial to be net neutral. Now that Google is moving out of the data center into your house with devices and OSes and even wires, the priorities are realigned.  It would be realistic to expect their stance on net neutrality to realign as well.