Just as Apple shook up the phone industry with its advanced iPhone, Google hopes to do the same with the networks that manage mobile devices…
“Google may make a solo bid for frequencies to run a wireless network, but analysts say it needs a carrier partner…”
San Francisco — Google Inc. is making the necessary preparations to press ahead with a multi-billion-dollar bid for a slice of the US airwaves in order to launch a nationwide wireless broadband network, as a deadline nears to declare bidding plans, sources familiar with the situation said.
The spectrum, between 698MHz and 806MHz, and collectively called the 700MHz band, is currently used for analog TV broadcasts. It is due to be freed up for other uses, such as operating mobile telecommunications networks, by 2009. The U.S. Federal Communications Commission plans to auction off the right to use that spectrum on Jan. 24, and bidders must declare their intention to participate by Dec. 3.
“Bidding could pit Google against top wireless carriers AT&T Inc. and Verizon Wireless, owned jointly by Verizon Communications Inc. and Vodafone Group Plc.”
“The search giant is reportedly willing to pay $4.6 billion or more for the access.” Meanwhile, those plans are becoming more definite, with Google already running a test version of an advanced wireless network at its Mountain View, Calif. headquarters, possibly as a dry run for operating its own mobile network should it win spectrum, according to reports published in the Wall Street Journal.
One source underscored that Google had made no decision as of Friday on whether it would bid with partners or on its own in the auction of 700-megahertz spectrum due to begin January 24.
Going it alone at the government auction of airwaves would not rule out later signing up partners if Google were to win the necessary spectrum to create a network, the source said.
In July, Google said it would commit a minimum of US$4.6 billion to bid for a license to use the spectrum, if the FCC set certain conditions on the licenses. “Those conditions included giving people the freedom to choose what applications and networks they use with the phones they bought and giving service providers the freedom to connect with those networks and buy wholesale minutes from network owners on reasonable terms.”
Google executives discussed the auction last week with Federal Communications Commission officials, including FCC Chairman Kevin Martin, sources familiar with the meeting said.
At the talks, executives for the Web search leader gave the impression of “inching more towards” a bid, one source said.
Last month, CEO Eric Schmidt told analysts his company is open to working with partners on the FCC bid, but according to the Journal, Google is now working out a plan to finance the bid using its own cash and possibly some borrowed funds.
Laying out that kind of money for spectrum — and even paying for the construction of a wireless network to use it — would present no great problem to Google, which, as of Sept. 30, had $13.1 billion in cash and cash equivalents on hand.
“But analysts are skeptical of the benefit to Google of going it alone.”
An analyst said it is “within the realm of possibility” that partners could be brought on later if Google wins. Google has talked to a number of prospective partners, not just carriers.
“Wireless spectrum and network management are nowhere near Google’s core competency. Its competence is in one market, online advertising,” said Emma Mohr McClune, principal analyst with Current Analysis.
That sentiment was echoed by Jan Dawson, a vice president at market analyst Ovum Ltd.
“Anything other than search at the minute seems like a move in the wrong direction,” said Dawson. With its focus on search-based advertising, Google’s financial metrics are “phenomenally better” than those that even the best mobile network operators can achieve, he said. “You have to wonder why a company would diversify into a market like that.”
“Our goal is to make sure that American consumers have more choices in an open and competitive wireless world. We have already made great progress in achieving this outcome and expect more progress in the future. FCC rules require us to reveal our plans by December 3, and we fully intend to do so. In the meantime, we are making all the necessary preparations to become an applicant to bid in the auction.”
Google has been vocal in its arguments for making that spectrum open, and lobbied hard for auction rules requiring four types of open platforms as part of license conditions: open applications, open devices, open services and open networks.
The FCC ultimately adopted only two of those openness stipulations, but Google’s Schmidt indicated in August that the company would likely still bid anyway. Meanwhile, it also rolled out Linux-based Android with industry partners in the Open Handset Alliance.
At the analysts’ briefing, co-founder and president Sergey Brin said if Google wins the bid it will offer developers and users a network that will be “very open.” In the current system, wireless developers generally have to get a carrier’s permission to let their applications run on the network.
The latest developments come on the heels of Google’s big announcement earlier this month detailing its mobile phone plans, specifically, a set of open source software tools for bringing new applications to mobile devices.
Android and the company’s auction plans are not intertwined, Schmidt told reporters at a press conference on the day of Android’s announcement. Rather, “they are two completely separate initiatives,” he said.
Android will run well on all existing data networks as well as on any more open versions that might result from the FCC auction, he added.
“The auction is a tactic to get the outcome of end-user choice,” Schmidt said. Google is already operating an advanced high-speed wireless network under a test license from the FCC, according to the Journal’s story, which cited unnamed sources familiar with the project. The article said Google has erected transmission towers on its campus for the network and prototype mobile handsets powered by Google’s Android software that are currently running on it.
While a separate initiative, both the spectrum bid and the Google-led Open Handset Alliance (OHA) driving its mobile software plans are part of the company’s desire to open up mobile communications to more development and wider access.
Google’s goal may not be to make money from operating the network, though: it could simply be a lever to get its applications into the hands of more mobile phone owners.
It has already taken steps in this direction, offering versions of its Web applications for Apple’s iPhone, and launching the Open Handset Alliance to promote its Android open software stack for mobile devices.
“The commonality between all those moves is to get their services running on mobile devices,” said Adam Leach of Ovum.
Google has quickly become a major player in the mobile and wireless industry, even though its first products are not expected to be available until later next year, said Gerry Purdy, Frost & Sullivan’s chief analyst for mobile and wireless.
“This raises the bar for the industry again, just as Apple did with the iPhone earlier this year,” Purdy said in a statement. “This is very similar to the Microsoft model, except with one big difference: Microsoft gets its revenue from licensing its platforms to handset makers, whereas Google will get its revenue from advertising done by advertisers presented to users of Android-based devices. Thus, Google will give away Android but make recurring revenue from an open ecosystem in which advertising drives revenues.”
Partnering with Google could also be an opportunity for an experienced operator not yet present in the U.S. to enter that market, suggested Dawson. Possible candidates include Orange, a subsidiary of France Tilicom with networks in France, Poland, Spain, and the U.K., or Japan’s NTT DoCoMo.
However, the U.S. is not the only country with plans to auction off analog television spectrum for new uses: The U.K. began withdrawing analog TV service this month, and other European Union countries are set to follow suit.
In the UK, several groups are hoping to secure the 700 MHz asset. Different lobbying groups hope to secure it exclusively for mobile television, high-definition broadcasting.