Google 700MHz spectrum bid: genuine or a game?

By Stephen Withers
Monday, 19 November 2007 04:55

Regulation

Rolling out mobile phone network takes a lot of capital and expertise. Google's not short of the first, and its pockets are deep enough to acquire the second.

One risk is that investors might see this as an example of a company shifting its attention too far from its core competency, so it might make more sense for Google to buy the spectrum and then find a partner to take care of the operational aspects.

While that might makes sense from Google's point of view, what about that of a would-be partner? If you had the wherewithal to build and run a network, you could probably afford the spectrum too. Being the licensee would make you commercially independent, beholden only to the FCC rather than to Google as the licenceholder.

Google's main concern seems to be that there should be at least one mobile network where the operator does not restrict - or attempt to restrict - customers' choices of hardware or Internet services - so called 'open access'. The FCC has imposed this condition on the C Block licences (12 licences for the frequencies 746-757 and 776-787MHz).

A widely reported suggestion by Stifel Nicolaus' managing director and principal analyst Blair Levin is that Google's apparent intention to participate in the FCC auction is a strategy to ensure that the Commission's minimum price is reached. If bids fall short of $US4.6 billion, a fresh auction may be called without the open access requirement.

If Levin is right, Google wins even if it loses out at the auction. There will be a network that can't lock out any of Google's services or prohibit the use of Android phones from Google and its partners in the Open Handset Alliance.

But if Google wins the spectrum, it'll need to decide whether to roll out its own network or find a partner.

The 700MHz band is being freed as a result of the move from analogue to digital TV broadcasting.