Schmidt: Google Will Definitely Participate In The Wireless Spectrum Auction

This article from Forbes sort of quotes Google CEO Eric Schmidt saying, for the first time, that the company would “definitely” participate in the forthcoming 700 MHZ wireless spectrum auction to be held in January. It also says that Google would open that spectrum up to anyone willing to pay for it, in defiance of the US FCC’s compromise position on Google’s request for open networks. Google had previously said it would potentially bid nearly $5 billion for the spectrum licenses, which the FCC has repeatedly described as “beach front property.”

On the Google Q3 earnings call, Schmidt and Google co-founder Larry Page had backed away from any definite commitment to bid on the licenses:

Page: (re the 700MHZ spectrum auction): We’re very happy with the openness provisions that have been put into the auctions [by the FCC]. We have many different options available to us as a company. The money isn’t burning a hole in our pocket, so we have no need to bid to win [spectrum licenses].

The article speculates about a number of potential partners that Google might join with to bid on the licenses, effectively making Google into a wireless carrier/ISP. Two of the potential partners mentioned are Sprint and T-Mobile, both of which are part of the Open Handset Alliance (OHA) associated with the Android open mobile platform. I had previously thought that Verizon was nearly ready to join the OHA, but any move by Google on spectrum licenses would probably be seen as threatening and might mean Verizon would hold out in protest or retribution. It’s extremely unlikely that AT&T would join the OHA.

Going in with an existing wireless carrier might give Google political cover in some quarters. But now that it appears definite, it remains to be seen whether Google and its partner or partners win of course — it’s a tremendously gutsy move to open up the US mobile market. Go back to the Internet circa 1999, when AOL is the dominant site and is a closed system. That’s what we essentially have now in the US mobile market, except that there are a number of AOLs. Google is intent to appear on opening up the current market in several ways: Android is one, and bidding on wireless spectrum licenses is another.

In addition, Google and a group of other companies, including Dell, EarthLink, Hewlett-Packard, Intel, and Microsoft, had been trying to gain access to television spectrum licenses, so-called “white space” licenses, as another way to provide (fixed and mobile) Internet access.

One way to regard these various moves by Google is as a way to control its fate in a sense — to guarantee and broaden access to users (amid concerns about “net neutrality”) and as a kind of laboratory, perhaps to offer experiments (e.g., ad-subsidized phones, etc.). Even as Google’s moves are bold or gutsy, they are also risky. That’s true both from a partner and a financial standpoint. Despite Google’s massive cash on hand ($13 billion), spending more than a third of that for wireless licenses with an uncertain ROI is a big risk.

Many people might argue that to achieve its mobile objectives, Google doesn’t need the wireless licenses. Indeed, one could argue that the Android initiative and the bid for wireless spectrum are at cross purposes. For Android to succeed fully it has to be as widely adopted as possible, and the spectrum bidding potentially alienates Verizon, the largest US carrier.

But Google has apparently made its decision and “crossed the Rubicon.”