Google's solo wireless bid

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.

 

Google also has made strides in the area of mobile software. On Nov. 5, Google and 33 other companies including Motorola (MOT) and LG Electronics announced the Open Handset Alliance (BusinessWeek.com, 11/6/07) and a new cell-phone-software platform named Android that's designed to make it cheaper and easier to create mobile applications and services.

Partner possibilities

But even if it bids alone, Google isn't ruling out partnering to build a network"”a job that under auction rules has to be carried out quickly. The spectrum being auctioned carries a requirement that at least 40% of the new network has to be completed by 2013. To meet that deadline, 'they need help,' says Mark Gibson, senior director at spectrum consultancy Comsearch.

Potential partners on that score include Sprint Nextel (S), which has shown willingness to lease its network to other partners in the past. Another might be T-Mobile USA, the U.S. wireless unit of Deutsche Telekom (DT) and a member of the Google-led Open Handset Alliance. Even Verizon Wireless could step up to the plate, deciding it would be better off partnering than waging war with a formidable new rival. 'There's probably more to be gained together,' Gibson says.

Should Google opt at the last minute to bid with a partner, it would probably find no shortage of willing collaborators. Intel (INTC) is looking to expand the use of networks"”and its chips"”based on WiMAX, a wireless broadband technology. 'We don't talk about intent,' says Sriram Viswanathan, who heads the WiMAX business at Intel. But he points out that, in Japan, Intel has banded together with carrier KDDI to apply for a wireless spectrum license. 'We are evaluating all options,' he says.

Kharif is a writer for BusinessWeek.com in Portland, Ore. Giles is technology editor for BusinessWeek.com in Silicon Valley. With Robert D. Hof in Silicon Valley.

Copyright 2000-2007 by The McGraw-Hill Companies Inc. All rights reserved.

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