Analysts Say Google 700 MHz Auction Entry Is About Politics

Google announced its participation Friday. “We believe it’s important to put our money where our principles are. Consumers deserve more competition and innovation than they have in today’s wireless world,” said Google CEO Eric Schmidt. “No matter which bidder ultimately prevails, the real winners of this auction are American consumers who likely will see more choices than ever before.”

Google didn’t say whether its bid would meet the reserve price needed to maintain the C-block open access rules. “We have not made that commitment,” a spokesman told us. “We are just making the first step of applying to participate in the auction.”

Google will probably meet the reserve price but not outbid rivals, analysts said. “Google will bid the minimum, not bid to win,” UBS said in a recent note. The C-block is a piece of spectrum others “want a lot more,” Nelson said. Google’s auction participation involves “saving face,” maintaining “political clout,” and ensuring open access to benefit its business goals, he said. Google participation is about politics, Current Analysis’ William Ho agreed. “If they still want to stay relevant in this topic, they need to continue to influence policy makers, especially when the telecom companies have lobbying juggernauts,” he said. “They've… achieved a lot in getting open access from a concept to now near reality. Do they really need to control the spectrum? It’s certainly prime assets, but in the status quo, it’s outside their core business.” Google didn’t return a request for comment.

Google may engage in a “bid and run” strategy to force up the price, but the company may “just be crazy enough” to go all the way, said Amol Sarva, Txtbl CEO and member of Frontline Wireless’s Open Access Advisory Council.

Starting a mobile network would probably be a bad move for the Internet search firm, UBS said. “While Google may have the ability to change the game with a new business model based on advertising and paid search… we believe it would be relatively painful to do so” given high costs of starting up and maintaining a network. Verizon’s “any apps, any device” announcement last week supporting open access principles reinforces the point because Verizon is “probably the carrier most likely to win C-Block licenses,” UBS analyst John Hodulik added.

Google plans to file its short-form application with the FCC Monday, it said. Applications for the 700 MHz auction are due at 6 p.m. ET. Google’s application “does not include any partners,” despite talks that the Wall Street Journal said Google had with Verizon. A Google spokesman declined to comment on backroom discussions. But going it alone in the auction “doesn’t preclude” Google from entering spectrum partnerships following the auction, he said. It’s too early to say what those post-auction dealings will look like, but Google could end up “leasing or wholesaling” spectrum if it does not operate the network itself, he added.

The Internet firm could still add a partner. “I am sure there have been many discussions among potential partners,” Ho said, predicting a partnership would be formulated by Monday’s application deadline, he said. If Google wins spectrum, it will “need a partner with wireless networking experience,” he added. Google could start a network with its own employees, but wireless is “not their core business,” he said. Better options might be to either “buy a company” or “get an incumbent network partner,” he said. Even if Google does apply by itself, there are “sneaky ways” to work together that may not violate rules, Sarva said. For example, Google could guarantee a business relationship or even revenue to a bidder that wins spectrum in exchange for running Google services on its network, he said.

Google’s auction plans aren’t tied to Android, the open application platform revealed in November (CD Nov 6 p4) OR (WID Nov 6 p2), a spokesman said. Android is a “completely separate initiative” that will work on all existing networks and any new network deployed after the auction, he said.

Google can’t discuss the auction until it ends early next year under FCC anti-collusion rules, Google’s Chris Sacca said in a blog post. That’s fine with Google, a spokesman said. The Internet firm “recognizes” that the anti-collusion rules “keep the auction competitive,” he said. Meanwhile, Google will be talking about Android, he added.

AT&T and the CTIA applauded Google’s auction entry. “We welcome Google and any others who wish to enter the vigorously competitive mobile market,” said an AT&T spokesman. “Its announcement validates what we've said all along: the evolution of the wireless industry should be driven by market forces and consumer demand, not government intervention and regulation.” The CTIA concurred: “The more the merrier,” a spokesman said. Sprint Nextel declined comment. Verizon and T-Mobile didn’t return requests.

Open access proponents celebrated. “Google’s intent to bid in the 700 Mhz auction and Verizon’s sudden support for open networks suggest that we may finally see the competitive wireless marketplace that consumers demand,” said Ben Scott, Free Press policy director. “Google will be a welcome bidder, as the company brings a refreshing view of what an open wireless market should be,” said Public Knowledge’s Art Brodsky.