And as for hurt feelings among telcos, Schmidt said there were no problems to report. "For the most part," said Schmidt, "our partners understand the message and are OK with it."

Apple ( AAPL) would seem to disagree. After watching Google's Android phones launch at nearly every U.S. carrier, as a competitor to the iPhone, Apple has reportedly started discussions to replace Google with Microsoft's Bing as the search service.

-- Reported by Scott Moritz in New York.

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