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March 20, 2008

Breaking: FCC Confirms that Big Winner in Spectrum Auction is Verizon. So Why Is Google Smiling?

Erick Schonfeld

42 comments »

spectrum.jpgThe big winner of the FCC’s $19.6 billion auction of wireless spectrum that ended yesterday is Verizon. That was pretty much everyone’s guess.

At a press conference today, the chairman of the FCC announced that Verizon won six large regional licenses for the most sought-after C-Block of spectrum that will give it a national footprint. It also won 77 smaller licenses in the B-Block. Google did not win any licenses. And AT&T won 227 small licenses, which might be good to fill in areas of coverage where it is currently weak. Satellite TV provider Echostar also won enough licenses to put together a national service,which could expand its ability to offer two-way broadband services. Also, the D-Block reserved for emergency services will be re-auctioned (it didn’t attract the minimum bid).

So it looks like my Mississippi Valley Sneak Attack theory might have been right and it was Verizon that won individual regional licenses instead of taking Google head-on in a bid for the national license (I am still speculating what Google did, but that is what it looks like).

The real winner here is Google precisely because it lost. Google committed to bidding the minimum $4.6 billion that would trigger open device and open application rules that it had lobbied for, but nobody seriously thought it actually wanted to win the auction. Building out and operating a wireless network is a much lower-margin business than search advertising, and even leasing out the spectrum would have been a distraction. But by putting its $4.6 billion on the table early, it was able to dictate the new rules of the game. Rules that Verizon is now stuck with. All Google really wants are broadband wireless networks that cannot discriminate against Google mobile apps or Android phones no matter who operates them.

And what if Google had won? It was never really that risky a move. There are worse places to park your cash than in wireless spectrum, something for which demand is always going up and supply is always going down.

(Photo by Steve Jurvetson)

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Comments

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  1. Levi McCallum

    March 20th, 2008 at 12:47 pm

    I don’t get it. Everyone was rooting for Google to win, but the pulled out? Or are they sitting on something better?

    I’m lost.

  2. Jared Brown

    March 20th, 2008 at 12:47 pm

    Guess all the Google wireless rumors were wrong.

  3. Kevin

    March 20th, 2008 at 1:01 pm

    Google’s hopes for entering into the Cellular telephone market are no more ;(

  4. rg

    March 20th, 2008 at 1:29 pm

    @1,2 it was pretty much a given google was in the auction just to make sure the minimum bid was made in order to enforce the FCC’s open platform requirement, they never wanted the spectrum, they only wanted to make sure verizon would play by their rules and open up the walled garden. this way google doesn’t waste resources operating a wireless carrier, but they do still get the open platform - which really is their goal here

  5. Todd

    March 20th, 2008 at 1:30 pm

    There is a god. Green light for Android on a tens of millions of handsets. Haven’t looked at, but was there just now a stock price jump for chip companies that make 700Mhz radio chips?

  6. Tom

    March 20th, 2008 at 1:45 pm

    so google stock will go up now?

  7. Chris

    March 20th, 2008 at 1:50 pm

    So basically we’ll have the iPhone which only runs on GSM networks (AT&T only for now) and we’ll have Andriod device(s) which run on Verizon’s CDMA network and never the twain shall meet? That doesn’t seem like a good outcome to me.

  8. Joe

    March 20th, 2008 at 1:59 pm

    all the news that was circulating on Google’s bid just helped to push higher bids. now the question is how verizon will exploit this new licence to get back that money + its profits .

    http://www.spinsted.com

  9. jro

    March 20th, 2008 at 2:02 pm

    Verizon has historically been very good at maintaining a walled garden, not an open one. Do the open access rules also provide for requirements such as quality of service? What about timeframes, i.e. when is this available for use?

    Call me skeptical, but I’m just not overly optimistic that it won’t be a really long time before anything tangible around this surfaces.

  10. Fabian Schonholz

    March 20th, 2008 at 2:21 pm

    Wow!! Slick move by Google. Google knows how to play the game and it did. It Played a calculated risk of $4.6B, which it has. By doing that it forced a configuration under which they are the clear beneficiaries. Now not only somebody else gets to pay for the right to build it but also pay for the infrastructure and management. Google gets to ride on it for free!!

  11. Reid

    March 20th, 2008 at 2:28 pm

    @ Chris:

    Neither GSM nor CDMA operate on the spectrum in question here. We’re talking about a whole new wireless ballgame.

  12. Mac Gaming Exile

    March 20th, 2008 at 2:31 pm

    If you guys believe those rules enforce completely open access you either need to stop smoking whatever you are smoking, or, more likely, you need better legal and wireless consultants.

    I won’t even bother trying to explain why here, because it is clear that few of you have actually read these ‘rules’.

    As an aside, it is clearer to me how politicians and their ilk manage to manipulate the masses in this country.
    - C’mon boys! Let’s write a law and tell them what it says!
    They’ll never read it!

  13. dan

    March 20th, 2008 at 2:44 pm

    @9 — Verizon has recently “seen the light” of open networks, inspired by Google. There was a quote back when Verizon announced Android plans from Verizon’s CEO that Google was inspiring their open movement. For proof at the change, look at the recent announcement of Verizon’s embrace and support for P2P bandwidth.

  14. Koby

    March 20th, 2008 at 2:55 pm

    @Mac Gaming Exile - You’re right “completely open access” is not in the rules. But there in fact provisions for any device and any software in those 700Mhz C-Block spectrum rules.

    That doesn’t mean anyone can get on the network, but it stops Verizon from saying “you HAVE to purchase a device that we can lock down to accept only software we want to run on it” I’m sure you’ll still need to buy service from Verizon to get on the network.

    I’m excited that AT&T won a bunch of licenses hopefully we’ll see them do something cool with it. (I’m on AT&T for cell service at the moment)

  15. jro

    March 20th, 2008 at 3:04 pm

    @dan: Wish I could share in the optimism, but I don’t want to get my hopes up. Hope they keep moving in that direction, but history keeps me from getting overly excited at this point.

  16. ron diggity

    March 20th, 2008 at 3:05 pm

    I can’t say this was good for Google. Obviously they wanted it by bidding 4.6 billion. I don’t they’re smiling about it. If anything Verizon is going to MAKE the rules of the game, and Google had nothing to do with it by starting the bid early.

  17. Google sucks

    March 20th, 2008 at 3:16 pm

    This sucks. Google will once again make 80% of all mobile users use THEIR platform and control every byte that flows on it.

    I will NEVER use Android.

    Eff Google. I want healthy competition, not a monopoly that can (and will) so easily be wiretapped by the government.

  18. Mobile Boffin

    March 20th, 2008 at 3:21 pm

    @Chris / @Reid: Verizon has already indicated that they will deploy LTE as their 4th generation network. It is a move away from the CDMA Development Group and unites them with 3GPP and GSMA (home of GSM). This makes good sense for part owner Vodafone as it allows them to unite around 4G technology. Finally!

    @Mac Gaming Exile: I agree with your sentiment. While the open access provisions will help in the migration to truly open networks, it won’t get us there in one fell swoop. The provisions are vague and can be implemented in a multitude of different ways.

    While the outcome makes perfect sense, personally I wish Google had gone for it. We have been fighting this openness battle both in Europe and the US for far too long. It is my personal belief that mobile applications and services are being held back by the lack of openness. A couple of provisions are very different from Google operating its own network.

    Let’s hope Android and the OHA continue to gain more traction!

  19. Mobile Boffin

    March 20th, 2008 at 3:26 pm

    @”Google sucks”: If you don’t like monopolies, Google is your best friend in mobile right now!

  20. velioncho

    March 20th, 2008 at 3:31 pm

    Google has all the evil cunningness.

  21. Chris

    March 20th, 2008 at 3:36 pm

    @Reid That maybe for Verizon, but AT&T’s pickup was too small for a national foot print, they are just filling out what they didn’t have for their current technology. So if you are in a major metro area, your only choice for an “open” phone will be Verizon, they’ll make the billions back charging “special” rates for open handsets that aren’t theirs.

  22. Google sucks

    March 20th, 2008 at 3:41 pm

    @ Mobile Boffin:

    What I’m criticizing is: Google wants to make sure every Internet user will enter the Internet via their services. This gives them not only huge ad revenues but a massive control over (also sensitive) user data.

    (If you remember that it was possible to track down individuals by simply using Yahoo’s leaked search term database quite some time ago, it gets pretty freaky…)

    And I just don’t like big companies collecting all that knowledge about us, making us completely “transparent” in the end.

  23. G is evil

    March 20th, 2008 at 4:54 pm

    @ 22:

    It was AOL’s leaked database, not Yahoo’s

  24. G is good

    March 20th, 2008 at 5:53 pm

    I’ll bet that google looks like the cookie monster when he smiles, although more intelligent?

  25. NickeyD

    March 20th, 2008 at 6:26 pm

    Steve Jobs is smiling, too.

  26. whoopie

    March 20th, 2008 at 9:35 pm

    hilarious. google has once again shown itself to be the great vaporware company of 2008.

    hey, i can’t wait to use my google solar grid to charge up my android-phone and connect to free ad-supported google wireless so i can ask all my buds on opensocial to cruise on over to whatever the hell they were going to call their “wikipedia killer”

    HA! all of the above got IDIOTS to buy GOOG and send it to $740+ so the crew could dump their soon-to-be-in-the-300s shares. its all vapor kids. very soon analysts who take a moment to get over “free lunch” and “20% time” (another myth) are going to start asking how google can keep 16k people employed while doing nothing new.

    2009 will see layoffs in mountain view, and i ain’t just talking about doubleclick people

  27. Rich

    March 21st, 2008 at 7:03 am

    Google lost - If history tells us anything the Telcoms own the networks that all calls and data must be completed on. ALL cell calls and wireless data calls route through the wired networks owned by the old telcom. There is no way around it. Sure the Telcoms agree to “Open” their networks, however there is will fees applied to anyone who wants to use these networks. Remember MCI, they never had the wired network that the old AT&T had and basicly went out of business.

  28. Karl Bode

    March 21st, 2008 at 8:00 am

    A loss is not a win, sorry.

    Particularly when you’re talking about AT&T and Verizon, who collectively operate one of the most powerful lobbying machines in DC:

    http://www.dslreports.com/show.....ease-92842

    I suppose it’s a win if the goal was to net Google a lot of un-skeptical free press for the Google brand. In that case it’s a huge win.

  29. Wolke Snow

    March 21st, 2008 at 8:03 am

    Great spin by Google. They lost the auction. How Verizon finally “interprets” openness will have to be seen.

    Erick, why are you NOT TELLING us that your article is based on this article on the Google Public Policy blog
    http://googlepublicpolicy.blog.....ction.html written by Google counsels?

    Cnet is at least linking to the original spin doctors in their news blog
    http://www.news.com/8301-10784.....l?part=rss

    You’re on fast track to become the next Duncan Riley.

  30. Menashe

    March 21st, 2008 at 8:49 am

    Erick
    So let me get the gist of your masterpiece article. Google won because it lost?
    Jeez Erick something I wonder how come they let you continue writing for TC. Hope you didn’t put much more than 2 minutes of analysis into this great piece of nonesense.

  31. Dave Klinn

    March 21st, 2008 at 10:39 am

    Fact: Verizon won the auction.
    Prediction: How “open” Verizon will be in the future will have to be seen. US regulators don’t have a history of enforcing competition.

    Your whole article is a copy of the spin of two Google counsels on the (official) Google Public Policy blog.

  32. Software Development Outsourcing

    April 4th, 2008 at 12:34 pm

    Verizon won the bid now we will see how they will use it

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