Google to Fly Solo in Spectrum Auction

Google (Nasdaq: GOOG) is readying its application to participate in the Federal Communications Commission's January auction of 700 MHz wireless spectrum, the company announced Friday, but it is acting alone, without any partners.

The company will file its application on Monday, after which FCC rules prevent it from discussing the matter further until the auction ends -- potentially as late as March, said Google's Chris Sacca, head of special initiatives.

"We believe it's important to put our money where our principles are," explained Eric Schmidt, the company's chairman and CEO. "Consumers deserve more competition and innovation than they have in today's wireless world. No matter which bidder ultimately prevails, the real winners of this auction are American consumers, who likely will see more choices than ever before in how they access the Internet."

Consumer Rights

Previously used by TV stations, the 700 MHz band of wireless spectrum is widely desired because of its ability to travel long distances and go through walls. Now that TV broadcasters are moving to digital distribution, the FCC plans to auction off those bands starting Jan. 24.

Google and others lobbied hard earlier this year to ensure that whoever wins a key portion of the spectrum up for auction -- the so-called "C Block" -- will be required to allow users to download any software application they want onto their mobile devices, and to use any mobile devices they would like on that wireless network. The C Block's reserve price at auction is US$4.6 billion.

Meanwhile, Google and the Open Handset Alliance recently released the Linux-based Android open development platform for cell phones, which will run well on all existing data networks as well as on any more open versions that might result from the FCC auction, Schmidt has said.

Steps in the Process

Following Monday's deadline for application submissions, the FCC will keep those applications confidential until mid-December, when it will publish a list of eligible bidders, Sacca noted.

Participating bidders must then make a financial deposit by Dec. 28, depending on which licenses they plan to bid on, he added -- the more spectrum blocks they are eligible to bid on, the more they must deposit.

Finally, the auction will begin using an electronic, anonymous bidding process. Bidding will be conducted in stages, but winners won't be announced until the auction is concluded.

Paving the Way

"Google wants to change the typical experience, and so it is doing a lot of the pre-work to enter the cell phone business," Jeff Kagan, a wireless and telecom analyst, told the E-Commerce Times.

"First you pave the roads, then you can bring the cars onto the freeway," Kagan added. "Google is now starting to pave the roads."

The fact that Google will bid without partners "says to me that they have a vision for what to do with the spectrum, but that it doesn't line up with anybody who's got experience in the industry," Bill Hughes, principal analyst for In-Stat, told the E-Commerce Times.

"There are a lot of companies that have invested a lot of money in wireless and been boondoggled," Hughes added. "Market research through product development is the most expensive method, but Google wants to give it a try, and they've got the money to do it."

Slim Chances

Google's chances of success are slim, statistically speaking, Hughes said.

It won't be a lack of resources that would make the company's way difficult, but rather the attempt to apply rules learned in other markets to the wireless industry -- "business heuristics that just don't fly," Hughes explained.

Specifically, "Google's current experience doesn't necessarily involve them in the kind of regulatory negotiations that are often necessary in telecom," he added. "If I had to speculate, I'd say that's probably where they'll get tripped up -- you can have all the lawyers in the world on your side, but mere words and advice can still fall short of communicating some of the subtleties of how things work in wireless."

That said, however, "you can never say never," Hughes added. "I wish them luck."