Blog Post

Google will bid for Wireless Spectrum

If you have been following the drama around the 700 MHz wireless spectrums, then you know a lot of mud has been flung around by all parties involved: FCC’s Kevin Martin, The Google Camp, Frontline Wireless, and of course the incumbents, AT&T and Verizon. They are all trying to basically control the piece of spectrum that is going to be vacated when analog television shuts down. The spectrum is going to be auctioned off in February.

This morning, Eric Schmidt sent a letter to the FCC and said Google will also bid for the spectrum in the wireless auctions, and have indicated that they are going to bid a minimum of $4.6 billion, as per requirements. This is a gutsy move by the search giant: it is saying we got the money and we will spend it to get our way.

Google is using money to force the issue – something Microsoft used to do. They know Bells have some, if not many financial constraints.
Given how much money they have tied up in new efforts like 3G and broadband upgrades, the Bells should be looking at an auction which can get as crazy as the auction for a rare Rembrandt.

Google’s proposal liberally throws around the word, OPEN: open apps, open platform, open devices, open services and open network. Those are nice words. But in reality no one commits spending $4.6 billion (or more) unless they have vested interests. I suspect Google has a lot more wireless applications coming, and needs to basically insure a way to get them to the people. Read their spin on the news on the Google blog.

At the end of the day, whoever wins in these auctions, we are looking at the prospect of either the Bells or Google owning the spectrum. And none of them are that appetizing.

15 Responses to “Google will bid for Wireless Spectrum”

  1. I thought I could already buy a phone and pick any carrier already without Google’s help.
    I bought a Nokia phone and a T-mobile SIM.
    I don’t see a problem?
    Am I missing something…
    What planet are they on?

  2. Om:

    You’re the expert on broadbanditry but I think you may be too cynical on this one. Forgetting good and evil and just looking at the business interests of the companies involved, the telcos have every incentive to PREVENT the 700MHz spectrum from being used to create effective competiton to the duopoly they enjoy. Google has great incentive to see effective competition AND will get no return on whatever it pays UNLESS it can put the frequencies in use. The telcos, on the other hand, might well derive greater value by letting the frequencies lie fallow (or effectively so) than letting soemeone else put them to use.

    I posted more on this at:

  3. The pathetic, consumer-unfriendly, rapacious service offerings by current “tele”com providers/former monopolists are a disgrace . .
    Time to shine some light and get some real
    competition going in this laggard area of
    US technology.
    The whole world will benefit.
    And what’s wrong with “open” ?

  4. mutenewt

    You guys don’t get it. Google doesn’t even need to win the auction, they just need to get the terms of the auction changed. If the spectrum will be “open”, then Google/others and most importantly consumers win.

  5. Tom Coseven

    Om, you are right… It is inevitable that Google should increasingly resemble Microsoft in it business practices. I don’t buy your “lease it versus sell it” is the magic solution. You mean to tell me that Vodafone, DoCoMo, KDDI, KT, SKT (…) are providing customers freedom to run any service they want?

    The Martin open device, open applications mandate is pretty unambiguous. Why not focus on making sure both of these are really open.

    If you read Googles proposal, the fourth open requirement gives me real heartburn: “third parties (like Internet service providers) should be able to interconnect at any technically feasible point in a 700 MHz licensee’s wireless network.” They didn’t say “resellers should be able to interconnect,” but rather “third parties should be able to interconnect.” This leads me to believe Google wants to create direct connections that bypass the public Internet even if they are not the wholeseller or reseller. Google has the backbone infrastructure and local data centers to exploit direct interconnection in ways that Google’s competitors could not. It would be very difficult to see this as consistent with net neutrality. In fact, it is inconsistent with Google’s second requirement open applications.

  6. Google’s ‘spin’ is that they are not just bidding to win the auction. They are showing the money as a confidence-building measure for the FCC to make complete ‘open-ness’ a prerequisite. They are saying that the FCC need not be afraid that implementing complete open-ness will make the spectrum less attractive for prospective bidders.

    If Google ends up winning the auction AND the rules around open-ness are enforced by FCC, how can it be an unpalatable situation?

    Regarding ambiguity – unfortunately, ambiguity is the middle name of Google. Don’t expect them to give you any more information than more of the above spin about ‘open-ness’.

  7. Shad and Buster,

    The explanation to this google deal is pretty simple: they win the deal, they sit in the middle as a clearing house for everything. they have not clearly outlined what their intentions are, what they need to do with this spectrum and how they are going to support third parties.

    Those are important questions. Which in my mind if don’t go unanswered, they are no different than telco plans.

    On what is the solution: lease it, not sell it. this keeps everyone honest and fosters the most competition. they are doing it in rest of the world. why not here.

    Ref: previous post.

  8. i agree with shad. i have been siding with google in the recent past, but that last line was pretty cheap. what would you propose as an ideal solution or heir to the spectrum?

  9. shad qudsi

    Why are neither Google or the Bells appetizing winners for this auction? Just curious because it seems that you just threw that out there last minute and didnt really explain why. Thanks.

  10. Jesse Kopelman

    Actually, there are plenty of ways Google could make money off of won spectrum without violating Net Neutrality. Whether Wall Street will allow them break from tradition with so much money on the line is a different question. Historically, the markets are very schizophrenic about innovation: if you are small/upcoming it is heavily rewarded, but if you are large/established it is heavily punished. To a large degree, investing is based on digesting accounting information and accounting can only deal with historical information. When a company is small or growing very fast, historical information is unavailable or too obviously irrelevant and investing is all about whether you believe the sales pitch. When a company is well established, there is plenty of historical data and investors would rather focus on that and sales pitches completely unrelated to this data become unpalatable. In the end, saying you are going to be like Verizon, only better, is a very strong temptation for a large public company in telecom. Saying you are going to spend like Verizon but have a different largely unproven business model, takes Stephen Colbert sized BALLS.

  11. Kevin Walsh

    It will be fascinating to see how quickly Google alters its disingenuous net neutrality stance once it owns a piece of the access infrastructure.

    Probably as quickly as college kids alter their belief in income redistribution once they graduate and start making money.