What Google plans to do with the spectrum is anyone’s guess. Google could experiment with different revenue models such as a one-time licensing fee with no monthly access charges, subsidized with advertising. The Yankee Group estimates U.S. cellular revenues were $95 billion last year.
That’s real money, even for Google.
Google’s worldwide gross revenue will total $11.8 billion in 2007, up from an estimated $9.3 billion in 2006, according to eMarketer, most of it generated from Adwords and AdSense.
UPDATE: Here’s the official word; Google Will Apply to Participate in FCC Spectrum Auction:
“We believe it’s important to put our money where our principles are,” said Eric Schmidt, Chairman and CEO, Google. “Consumers deserve more competition and innovation than they have in today’s wireless world. No matter which bidder ultimately prevails, the real winners of this auction are American consumers who likely will see more choices than ever before in how they access the Internet.”
Schmidt also praised the leadership of FCC Chairman Kevin Martin and his fellow commissioners for adopting the new rights for consumers earlier this year.
Google’s formal application to participate in the 700 MHz auction will be filed with the FCC on Monday, December 3, 2007 — the required first step in the auction process. Google’s application does not include any partners.
Google-owned spectrum would likely provide downward pressure on cell phone rates. Capacity on the 700 MHz band could be a problem, although 22 Mhz on the “C” block seems plenty for now.
With Clearwire as a partner, mobile and IP-TV could be an option. Clearwire has the spectrum. FCC rules require satellite connectivity is built into to at least one handset operating in the D Block. That would likely be MSV. TerreStar could team with Frontline for satphone connectivity.
Some believe Google will partner with its Android partners, T-Mobile and Sprint Nextel, to provide towers and service provision with Google providing spectrum management and an open access software platform.
If Google is seeking to become a cellphone operator in its own right, this wouldn’t be well received by T-Mobile or Sprint Nextel, notes TechCrunch.
AT&T will participate in the 700 MHz auction this January, according to AT&T CEO Randall Stephenson this week. AT&T is already committed to 700MHz. They bought, spectrum from Aloha Partners last month for $2.5 billion, getting two 6 Mhz channels (on Channel 54 and 59). MediaFlo is already on Channel 55.
Verizon is in. They’re a part of the massive IWN project. The $10B Integrated Wireless Network is an ambitious multibillion-dollar, 15-year program — set to build a nationwide interoperable 700MHz network intended primarily for federal law enforcement agencies. Verizon also announced open platform access to 3rd party applications this week, the preferred approach for the adjoining (shared) public service band.
Verizon may likely face off with Frontline Wireless on another 22 MHz chunk; combining the 10 Mhz of the “D block” with 12 MHz on the public service band. Front end costs are lower, but infrastructure costs would be higher since it requires anywhere connectivity, all the time. In an emergency, first responders can get priority access to the commercial segment. The “D Block” can be wholesaled to third parties (pdf), after building a network that meets public safety specifications.
Reed Hundt says if Frontline gets their “D-Block”, then it planned to “build the nation’s first fourth-generation broadband wireless network from coast-to-coast” and “sell services to police and firefighters to create the nation’s first interoperable network for all of public safety.”
Google could lease the “C” block to somebody like Sprint or Clearwire, speculates The Inquirer. Google bought Ubiquisys, the #1 femtocell developer, this July. It provides a local 3G base station in the home and plugs into DSL. The box also provides WiFi, Ethernet, USB and ordinary telephone access.
A 700 mhz connection could be handy for providing rural users with phone and data services while WiMAX connectivity has more capacity for high-density urban dwellers. Like Google’s YouTube.
Will the air interface be Mobile WiMAX or LTE? It could go either way. If everyone used the same technology for interoperable broadband 700 Mhz communications, however, it would be advantageous. Pick one. Verizon & AT&T seem likely to go with LTE. Let’s go with that.
Google’s Chris Sacca, Head of Special Initiatives has more on his Public Policy Blog:
Monday, December 3, is the deadline for prospective bidders to apply with the FCC to participate in the auction. Though the auction itself won’t start until January 24, 2008, Monday also marks the starting point for the FCC’s anti-collusion rules, which prevent participants in the auction from discussing their bidding strategy with each other.
These rules are designed to keep the auction process fair, by keeping bidders from cooperating in anticompetitive ways so as to drive the auction prices in artificial directions. While these rules primarily affect private communications among prospective bidders, the FCC historically has included all forms of public communications in its interpretation of these rules.
All of this means that, as much as we would like to offer a step-by-step account of what’s happening in the auction, the FCC’s rules prevent us from doing so until the auction ends early next year. So here’s a quick primer on how things will unfold:
- December 3: By Monday, would-be applicants must file their applications to participate in the auction (FCC Form 175), which remain confidential until the FCC makes them available.
- Mid-December: Once all the applications have been fully reviewed, the FCC will release a public list of eligible bidders in the auction. Each bidder must then make a monetary deposit no later than December 28, depending on which licenses they plan to bid on. The more spectrum blocks an applicant is deemed eligible to bid on, the greater the amount they must deposit.
- January 24, 2008: The auction begins, with each bidder using an electronic bidding process. Since this auction is anonymous (a rule that we think makes the auction more competitive and therefore better for consumers), the FCC will not publicly identify which parties have made which bid until after the auction is over.
- Bidding rounds: The auction bidding occurs in stages established by the FCC, with the likely number of rounds per day increasing as bidding activity decreases. The FCC announces results at the end of each round, including the highest bid at that point, the minimum acceptable bid for the following round, and the amounts of all bids placed during the round. The FCC does not disclose bidders’ names, and bidders are not allowed to disclose publicly whether they are still in the running or not.
- Auction end: The auction will end when there are no new bids and all the spectrum blocks have been sold (many experts believe this auction could last until March 2008). If the reserve price of any spectrum block is not met, the FCC will conduct a re-auction of that block. Following the end of the auction, the FCC announces which bidders have secured licenses to which pieces of spectrum and requires winning bidders to submit the balance of the payments for the licenses.
Spectrum Block B, with 12 MHz of paired spectrum, is divided into 734 Cellular Market Areas (“CMAs”) for auction and licensing. The CMAs are made up of: 1) 305 Metropolitan Statistical Areas (“MSAs”) as defined by the Department of Commerce, and 2) 429 Rural Service Areas (“RSAs”), which are clusters of rural counties specified in the FCC’s rules.