Google's solo wireless bid

Olga Kharif and Tom Giles
26 Nov 2007
00:00

Google is readying plans to make a big showing in a coming auction of wireless airwaves. And contrary to recent speculation, the Web-search leader is likely to bid by itself, rather than partner with a company that has more experience building and operating wireless networks, BusinessWeek.com has learned.

The company will make its plans public by Dec. 3, meeting a government deadline set for prospective bidders, according to a person familiar with the matter. The auction, scheduled for January, gives participants a rare opportunity to assemble spectrum for a national network in a single swoop, potentially creating a competitor to existing mobile service providers AT&T (T) and Verizon Wireless, a joint venture of Verizon Communications (VZ) and Vodafone (VOD).

Google first indicated in July that it might participate in the auction. The Internet search and advertising company had said it was ready to commit 'at least $4.6 billion to bidding for spectrum,' but only if certain conditions were met: The government would need to alter the auction rules (BusinessWeek.com, 5/3/07) to ensure broad participation in the bidding and to require the creation of 'open' networks that let consumers use the phones and services of their choosing. In short, Google wanted to weaken traditional wireless players' control of the devices consumers can get and how they use them.

The government acceded to only some of the requests, raising doubts about whether Google would in fact participate in the auction. But recently, Google executives revived the notion it might bid"”possibly by partnering with others. 'One scenario says we could bid with someone else,' Google CEO Eric Schmidt said at an Oct. 24 press conference. He added that Google had 'a wealth of options and partners that we are navigating through.'

Multibillion-dollar prospect

Now that the company is leaning toward going solo, big questions remain over how much Google might need to spend to win what's expected to be a hotly contested auction, whether it can actually afford the investment, and what it would do with the spoils should it prevail.

Analysts speculate that, all told, the airwaves will fetch more than $14 billion. It's unclear how big a slice of spectrum Google might pursue, but prices are likely to outstrip the company's $5.1 billion cash pile. Google's intention to participate alone in the auction was reported earlier by The Wall Street Journal. A Google spokesman said in an e-mail: 'We're still evaluating whether and how to participate.' He declined to make an executive available to discuss the plans.

Wireless bases covered

Financing aside, a wireless newcomer like Google would face a big challenge designing, building, and then operating a mobile network"”from towers to huge computer-filled operating centers. It would also have to develop the product lineup and business systems needed to provide mobile services across the country. Many experts contend these constitute too heavy a load for Google alone. The company maintains its own local wireless network at the site of its Mountain View (Calif.) headquarters, but that's hardly a proxy for a nationwide network.

Google has some other wireless bases covered. It owns large quantities of the fiber-optic cables necessary for carrying wireless calls over long distances"”though presumably not so much that it wouldn't need to rely on national carriers such as AT&T and Verizon. And it has added key wireless talent: Andy Rubin, Google's director of mobile platforms, has years of experience in phone design.

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