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Google officially entered the hunt Nov. 30 for what is likely the most valuable spectrum to come on the market for a generation. The lingering question is, why?
After a successful summer campaign to convince the Federal Communications Commission to change the rules for Januarys 700MHz auction to require the winning bidder to build an open network, Google seemingly had won its point.
With the winning bidder obligated to offer an open network that will support the myriad wireless plans of Google, why would the Mountain View, Calif., search and advertising giant want to become a wireless carrier?
After Verizon dropped its lawsuit seeking to force the FCC to sell the spectrum to the highest bidder with no strings attached and AT&T crowed it was already an open network (at least according to CEO Randall Stephenson), it appeared Google had captured the minds, if not the hearts, of traditional carriers on the future direction of the wireless industry.
Yet, heres Google ready and willing to mix it up with AT&T and Verizon in a multi-billion dollar gamble for the analog spectrum being vacated by television broadcasters as part of the digital television transition.
Click here to read more about Googles plan to join the FCC spectrum auction.
“This resolves the uncertainty for now in terms of whether Google will bid or not, but still leaves unanswered the question of what Google is really up to here,” Jan Dawson, the vice president of U.S. Enterprise Practice at Ovum Research, said in an analyst note. “The obvious thing to do with spectrum is clearly to become a mobile network operator, but that seems a bizarre move for Google to make at this time.”
Dawson noted that if Google wins the spectrum, it would have to build a national, wireless network from scratch, a proposition that Google itself speculates would cost at least $12 billion and take as long as three years. Combined with the minimum spectrum bid of $4.6 billion, Google appears to be willing to spend almost $17 billion for a venture that on paper is far removed from Googles principle businesses.
Page 2: Googles Goals in Spectrum Race Remain Obscure
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“This would be a leap into the unknown and a hugely risky proposition that would take Google a long way from its core business model, introduce a much longer payback period for investments and potentially drastically lower its profitability,” Dawson said.
Dawson added that a more likely explanation is that “Google doesnt want to become a mobile operator any more than it wants to build mobile phones. In fact, Googles chief interests lie in ensuring that there are as few barriers as possible to the adoption of Google products and services on mobile devices.”
So what in the world is Google doing?
“Its possible that it wants to facilitate the creation of at least one network with a completely open access model by putting its money behind the spectrum purchase,” Dawson said, adding that such an initiative would probably require some partners and that Google clearly stated in its Nov. 30 announcement it has no partners in the spectrum play, at least not now.
“Its possible that one or more partners are lurking behind the scenes, ready to pop out into the open if Google wins a decent chunk of spectrum—one of the smaller U.S. carriers such as T-Mobile or Alltel or even foreign carriers with ambitions in the U.S.,” Dawson said.
“If a more traditional wireless carrier took on management and running of the network, Google could focus on what it does best—providing products and services and serving up advertising to subsidize them.”
Read more here about Verizons decision to drop its opposition to a spectrum auction on Googles terms.
Whatever Googles plans, they are not and will not be talking about it for next several months.
Although the FCC spectrum auction wont begin until Jan. 24, once a bidder submits its information to the agency participants are prohibited from discussing the auction. The rules primarily bar bidders from private communications among themselves, but the FCC historically has included all forms of public communications in its interpretation of the rules.
“All of this means that, as much as we would like to offer a step-by-step account of whats happening in the auction, the FCCs rules prevent us from doing so until the auction ends early next year,” Chris Sacca, Googles head of Special Initiatives, wrote Nov. 30 on the Google Public Policy blog.
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