Google enters wireless world
2007-12-03 08:54
San Francisco - Google said on Friday that the company would bid on coveted airwaves to launch a US wireless network, pitting it against established telecommunications players AT&T and Verizon.
The internet leader said in a statement that it was ready
to go it alone rather than rely on partners in bidding in the
Federal Communications Commission-run auction of 700-megahertz
wireless spectrum due to begin on January 24.
The Silicon Valley-based company said it would make its
filing ahead of the FCC deadline on Monday for companies to
declare their interest in joining the airwaves bidding.
"We believe it's important to put our money where our
principles are," Chief Executive Eric Schmidt said. "Consumers
deserve more competition and innovation than they have in
today's wireless world."
Wall Street investors have reacted cautiously to Google's
latest move to expand beyond its core web search and online
advertising franchises, worried the potential upfront costs and
eventual network build-out could exceed $10bn.
But some analysts have speculated that Google was more
interested in ensuring certain requirements for network
openness and that it was bidding just to preserve those rules.
"The real question here is whether Google's intent is to
bid up to the reserve price and assure that the openness
condition stays in place," Stifel Nicolaus analyst Blair Levin
wrote to investors. "Or is the real purpose to actually win?"
And despite the excitement surrounding a Google bid, Stifel
Nicolaus said in a research note that it suspects Verizon will
probably end up winning the auction for the C block spectrum.
Bidding separately instead of assembling a coalition does
not rule out Google later signing up partners if it wins the
bidding, said a source familiar with the company's strategy.
But the FCC has "anti-collusion" rules that prevent deal-making
between potential bidders during the auction period.
The source said Google was eyeing the biggest chunk of
spectrum up for auction - the "C block" - but also was
considering bidding on separate spectrum reserved for public
safety agencies but which will allow some commercial uses.
A Google spokesperson declined to comment on the company's
bidding strategy.
Last chance for new player
The auction is expected to take several weeks, or even
months, of daily, back-and-forth bidding, with the identities
of the bidders kept secret. Big spectrum bidders typically draw
up elaborate strategies, often with input from game-theory
experts.
Expected bidders include AT&T Inc and Verizon Wireless, the
No 1 and No 2 US wireless network operators. Verizon
Wireless is a joint venture of Verizon Communications Inc and
Vodafone Group Plc.
Less certain are the strategies of satellite broadcasters
DirectTV and EchoStar Communications and cable networks Comcast
Corp and Time Warner Inc as well as other wireless players
Sprint, T-Mobile and Clearwire, according to Levin.
AT&T is in merger talks with EchoStar that could lead them
to join forces in the bidding, but with the deadline looming
the time to strike such a deal is short, the Stifel Nicolaus
analyst said.
These radio waves are being returned by broadcasters as
they move from analogue to digital signals early in 2009. The
signals can go long distances and penetrate thick walls. The
auction is seen as a last chance for a new wireless player.
Google and other Silicon Valley leaders see the wireless
spectrum as a way to create more open competition for mobile
services and devices than existing networks - putting the
industry on a footing similar to the free-wheeling internet.
The company won some changes in rules governing use of the
spectrum several months ago, but was denied other requests,
including a rule that would have required winning bidders to
resell access to their spectrum on an open wholesale basis.
The winning bidder must provide open access to any device
consumers choose to use on the network if the reserve price of
$4.6bn for the "C Block" is met at auction, Google said.
If the reserve price is not met, the auction would be rerun
without the so-called "open-platform" conditions.
On Tuesday, Verizon Wireless announced it had acceded to
Google's open-platform demands and would open its network to
any phone or software application by the end of 2008.
But Levin said Google may still want to bid high enough to
lock in a government-enforced open-platform condition on the
700-megahertz spectrum.
If its bid proves successful, Google could operate a
wireless network itself or seek partners to help it build out
the network and to potentially resell wireless services.
Google's announcement was greeted as good news at the FCC,
said a source at the agency. "It means that they're willing to
go a little bit further into the water," the source said.
"They're not just dipping their toe anymore."