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Finally, Google and Schmidt go 'All In'

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[qi:018] Friday’s letter from Eric Schmidt to the FCC was something telecom wonks have been waiting for: Google has not just stepped up to the lobbying table, it has pushed in its entire stack of chips, challenging the incumbent telco status quo in a way no other entity out there can.

And by making it personal at the highest executive level, Schmidt has taken another important step: he has made telecom and communications a hot-button priority issue, guaranteeing its entry into mainstream business and political discourse.

Given Google’s economic (and now political) stature, the big issues in telecom won’t be constrained to geek-only audiences anymore. Whether Google wins this battle or not, the trend of more open discussion at the topmost levels is heartening, since it can only mean greater focus on the troubling stagnant state of the U.S. communications infrastructure, and what can be done to fix it.

Since we still have a long ways to go before the 700 MHz spectrum auction is complete — heck, the FCC hasn’t even set the initial rules for bidding — it’s premature to guess whether or not Google will win this current fight, since like any good telecom issue the goalposts aren’t just moving, they’re in constant 3D time-warp flux. (Our cynical betting line says Kevin Martin uses Google’s “open” adjectives in flowery introductions for bidding rules but sticks with AT&T and Verizon’s wishes in the fine print; this is known as flirting but sticking with who brung ya to the dance, telco-regulation style.)

But one great side effect of Schmidt putting himself into the middle of this issue is that the debate will now take place at the highest levels, like it should — here we agree with former FCC chairman Reed Hundt, whose startup Frontline Wireless operation openly challenged Verizon’s Ivan Seidenberg to a debate on 700 MHz plans. Such direct exchange between the principals can only help eliminate the rhetorical clutter generated by the various proxies the telcos have traditionally used to fight their battles. Schmidt vs. Jim Cicconi in an email dustup is not just good theater, it’s moving the debate forward by getting the principals on the record, in direct give and take. No hiding behind questionable white papers or economic “studies.” As Cicconi says, Put up or Shut up. Hear, hear.

With his company’s political and economic impact growing at about the rate of its advertising business, Schmidt had basically no choice but to give up his “silent man” act of the past few years, and start speaking directly to D.C. and to the mainstream media that still has a large influence on Beltway decisions. It’s a good move, perhaps overdue, a charge that could be brought historically against most parts of Silicon Valley and not just Google.

Telecom issues may seem to revolve around technologies, like available spectrum and blocking of packets, but in the end the most important part of telecom is the politics — because telecom and communications are in the same infrastructure league as water, roads and airspace, and as such will always face some kind of regulation anywhere it matters. So when it comes to telecom Washington is guaranteed to take its cut, either straightforward in taxes, or as an exchange for influence, as in campaign contributions. To play, you must lobby.

While the sheer historical inertia of the telcos’ lobbying influence may win them the first round of the 700 MHz fight, Google is quickly catching on to the lobbying game, even holding mashup-type camp sessions to show legislators how to join the Internet age. With his letter to the FCC, Schmidt has moved the 700 MHz argument past the “regulation will limit the incentive to invest in new networks” bromide and is instead asking out loud whether the U.S. wants networks that are old and busted, or the new hotness.

Mr. Stephenson? Mr. Seidenberg? I believe the “put up or shut up” ball is now in your court.

18 Responses to “Finally, Google and Schmidt go 'All In'”

  1. This whole thing is heating up the shoe soles of the old school telecom players and they don’t like the hot foot at all! I linked to your story via the blog at in hopes of increasing your audience and growing our community. The Innovators Network is a non-profit effort to spread technology to small businesses, venture capitalists, entrepreneurs and ensure intellectual property is well protected. Please visit us for more information.

  2. Jesse Kopelman

    If Google puts in the reserve and nobody else does, they win the auction. it’s as simple as that. Therefore, $4.6B is Google’s opening bid. What Google is saying is that if the rules are changed they will bid. If the rules got changed and they did not bid, I’m sure the FCC would have legal recourse and I’m also sure they would use it. Now, will the rules get changed enough for Google to bid? That’s a whole different and much more important question.

  3. 4.6 billion is the reserve price (lowest acceptable price) on the auction.

    Google is saying we will bid at least the minimum if you run the auction in a way that will give us access to the spectrum win or lose.

    If they get the terms of the auction changed, their incentive to bid is lower.

    If they intended on bidding competitively, there would be no need for the statement, they probably would keep things secret.

  4. Tom Coseven

    Recent estimates start at $20B for the entire 60Mhz public portion. The 22MHz “C” is expected to be more valuable (per MHz) than the other blocks, because it will be easier to assemble a national offering. So Garth’s point that Google’s $4.6B is a low offer is still correct.

  5. The google statement is nothing but talk, if they were serious they would offer to actually bid on the spectrum. The auction is supposed to fetch between 10 and 30 billion, a 4.6 billion offer is a joke

  6. John Thacker

    Comparing the “old and busted” to the “new hotness” is interesting because the other articles you link to talk about the FCC focusing too much on building the “new hotness” instead of increasing competition on the old (and busted?) networks.

    Without at all discounting the importance of opening up phone networks, a large portion of the “stagnant” situation you talk about is also a result of a previous pro-consumer and pro-Internet feature of US telephony– unmetered local phone calls. Unmetered phone calls meant that US adoption of the Internet in the modem age was much faster than other countries. But it’s also meant a much larger legacy install base of narrowband users, some of which have proved amazingly reluctant to go to even $20/month DSL deals when available in their area. There are many people I’ve tried to convince to get broadband with fairly little success. Many people just don’t see the need for speed.

    The relative expensive of local phone calls in most other countries (sans Canada) drove the spread of DSL for Internet access.

    Opening up the phone networks for competitive DSL will certainly prevent investment in the old copper network. In my opinion, we DO want companies to build new networks, and one way of doing that is to make the old legacy networks less profitable while not interfering with investment in new networks. At the same time, I’m disturbed at the people who seem to spend all their effort attacking new networks and wanting to regulate them. The old incumbent networks should be regulated, but brand new investment less so. (And when one company, like Verizon, owns both sorts of networks, regulate the one more than the other.)

  7. I’m the first guy to cheerlead someone other than the incumbents getting this spectrum and doing something with it that vaguely resembles open competition in this country.

    That said, I’m not so sure it’s all that heroic on Google’s part to say they’ll pony up big dough for broadband, but only with the caveat that the FCC implement policies everyone knows they’re never going to implement under current AT&T/Verizon friendly leadership…..

    Is Google learning to lobby and play political PR tricks? Yeah. Does that mean much when they’re up against probably the third most effective lobbying machine (aside from oil and pharma/insurance) ever built?

  8. Thanks for saying what i have been saying for years. Nothing is free with Google – sure, they will give you free phone service but mid sentence, they will send you a Cell phone provider voice ad because you just mentioned “i may switch cell phone companies” during your call. With Goog, free is never free.

  9. Sweet summary. If telcos can screw you, they will. If Google can treat you more fairly than you would ever have expected, every time they come up with a new offering or model, they will. Please win, Google.

  10. Tom Coseven

    “…the most important part of telecom is the politics.” Paul, you are so right! I wish Cisco and other technology companies would take a far more active role.

  11. Thanks for the manifesto update Jerry, it’s a little tough to read for most people, but solid points to be sure. iThink that Google will end up charging us somehow, how could they pump the airwares full of free bandwidth without a catch? Oh yes, total invasion of privacy.