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General news, Media, Communications, Internet, Finance

Is Google Bluffing on Spectrum?


Google on Friday said it will file an application with the Federal Communications Commission to bid in an upcoming U.S. auction for wireless spectrum.

The Mountain View, California-based search giant said little about its application other than that it does not include partners. The move puts the search king in line to meet a December 3 deadline to submit applications for the auction of wireless spectrum in the 700 MHz band.

Google's formal announcement to bid was widely expected, but analysts continue to question Google's commitment to become a wholesaler of wireless spectrum.

"If Google truly participates, Verizon will force the price through the roof," said Joe Nordgaard, director of wireless consulting firm Spectral Advantage.

A number of observers believe that Google's main goal is to ensure that the ultimate winning bidder, most likely an established carrier, frees up a key portion of the spectrum, the so-called C Block, for open access to independent developers and device makers.

"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," Ovum analyst Jan Dawson said.

Google's blockbuster business from Internet advertising hauls in far higher margins than those of the mobile carrier business, Mr. Dawson said.

The Internet, aided by the rapid build-out of high-bandwidth fiber-optic lines, was able to grow quickly to meet demands for bandwidth. However, it will be difficult to replicate that kind of bandwidth explosion in the wireless world because of spectrum limits.

Google has lobbied heavily for changes in the rules for the upcoming auction, and it has been moderately successful in getting the rules changed to accommodate its ideas about what truly constitutes an open network.

Two recent announcements by Verizon may have been triggered in part by Google's success in getting those rule changes. This week Verizon announced that it would open its network in 2008 and that it will adopt a wireless broadband technology, LTE, that could make some of that openness more achievable.

"Verizon's announcements about opening its network and its choice of LTE as its broadband standard were concessions to Google to get a deep-pockets bidder off the table," Mr. Nordgaard said.

Whether that was successful or not will be difficult to assess until the auction begins on January 24, 2008.

Google and the other participants will go into a quiet period of sorts because the FCC's anti-collusion rules kick in after the December 3 filing deadline. There is a limit to what the participants can say because a lot of it can be seen as illegal signals about bidding strategy being sent among participants.