Richi Jennings

Mixed blessing for Google in FCC's Auction 73 (and salmondance)

August 24, 2007 6:35 AM EDT
It's only bloomin' Friday's IT Blogwatch: in which the Federal Communications Commission publishes the draft rules for the 700MHz auction. Not to mention the Salmon Dance...

Matt Hamblen reports:
Public comments are due to the Federal Communications Commission by the end of the month on rules for a Jan. 16 auction of 700-MHz spectrum, which is expected to yield more than $10 billion. One provision in the proposed rules calls for keeping the identities of the bidders and the amounts of each bid secret until each round of bidding is closed in order to improve competition. The FCC approved the rules in July ... The auction is officially being dubbed Auction 73.
...
The spectrum was made available by the freeing up of TV channels in the conversion to digital TV by 2009. The auction's proceeds will go to the U.S. Treasury. Some analysts have said the auction total could reach $20 billion, with an active field of bidders.

Bidding will be done anonymously ... the bidders' names and net bid amounts [will] be withheld from public release until the close of each round of bidding ... a bidder will be told of other bidders with whom they are not permitted to discuss bidding strategies in order to enforce the FCC's anticollusion rules. [more]
Bryan Gardiner waxes metaphorically:
At this point, the message is clear: if you want a chunk of "beachfront" spectrum, be prepared to pay ... those wishing to buy a block of spectrum will need to meet some seriously strict financial preconditions. Specifically, the government agency is requiring a $4.6 billion reserve for the C block of licenses (the large, 22MHz portion that meets the "open access" conditions) for the auction to be valid, while those wishing to bid for the whole shebang will need a whopping $10 billion in reserves ... the FCC is telling the tech industry that if it truly wants open access it better "put up or shut up."

According to the FCC, nearly all of that C block aggregate reserve price will go toward a package of U.S. national licenses. This portion of the spectrum also happens to be the one with two open access conditions attached to its sale mandating that all devices be allowed to access the band and that all applications can be able to run across the network. If the reserve price isn't met, the auction will be rerun without these two conditions in place, according to the FCC.

Interestingly, Google had previously stated its intent "to commit a minimum of $4.6 billion to bidding in the upcoming auction" if the FCC promised four license conditions: (1) open applications, (2) open devices, (3) open wholesale services, and (4) open network access…" Presumably, at least two of these conditions are now being met (for the C block auction) and the reserve price happens to be the exact amount Google promised to bid. [more]
Carlo Longino decodes:
It’s highly unlikely that Google will ever build, run and maintain its own mobile network ... It wanted license winners to be forced to allow any compatible device to attach to their network, and for network operators to be prohibited from blocking access to any software, service or content. The top priority for Google, though, was getting a stipulation that 700 MHz license holders would be required to sell wholesale access to their networks. This makes it pretty clear that Google’s interest here was as a wholesale buyer of network access (like an MVNO, essentially) — not as a potential operator.
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Google made a relatively empty promise to bid $4.6 billion in the auction if the FCC adopted the principles; the FCC responded by adopting only the two most meaningless open-access stipulations in its rules, but crucially, passing on the wholesale stipulation. From Google’s perspective, this significantly decreased the likelihood that it would enjoy a competitive market from which to buy wholesale access to redistribute, in turn resulting in higher costs for whatever it’s got planned to do with all that mobile network access.

So the next logical move would be for Google to go after some licenses. Should it win some — and there’s no guarantee it will — it will have a valuable currency to spend with actual network operators. Google could lease the licenses to somebody to build and operate the physical network, and extract the best terms possible from an array of competing suppliers. Whoever leased the license would power the Google virtual network, and probably be free to sell excess capacity to other service providers. [more]
Nate Anderson goes all meta on us:
Last night, CEO Eric Schmidt appeared to indicate that the company was leaning toward a bid, a decision that is no doubt giving the incumbent telcos night sweats. Schmidt delivered a dinner keynote at the Progress & Freedom Foundation's annual Aspen Summit, and he talked about the topic that was on everyone's mind: would Google use its hoard of cash to bid for a juicy block of 700MHz spectrum?
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Here's where things get a bit dicey. Reuters' recounting of his answer goes this way: Schmidt replied that bidding "probably would be the way to answer that."
GigaOm reports it a bit differently: Saying the FCC’s rules were "conducive" to the kind of bid Google might make, Schmidt said "probably... is the way to answer."
According to CNet, the crucial line fell trippingly from Schmidt's lips like this: In response to a question from a T-Mobile representative, he added: "probably is the answer to that."

The fact that each response is worded slightly differently is no big deal, and the gist of Schmidt's words is obvious. But the Reuters report makes it sound as though a bid would be Google's answer to the question; in other words, Schmidt isn't going to say, and other companies will just have to wait until the auction to find out if Google bids or not. The other quotes (and the tone of the rest of the Reuters piece) suggest that Schmidt's answer to the question about whether Google would bid was "Probably." That is, Schmidt said, "Yes, it's likely we will make a play for the spectrum." These are two quite different responses. [more]
Darren Murph yawns:
We know, the 700MHz soap opera is wearing a bit on us too ... When asked by T-Mobile USA's government relations chief Thomas Sugrue "whether Google planned to take part in the auctions for wireless broadband networks," [Schmidt] simply stated that placing a bid or two would likely be "the way to answer that." So, there you have it -- until next episode... [more]
Buffer overflow:
Around the Net Around Computerworld Previously in IT Blogwatch
And finally... Do the Salmon Dance [hat tip: Weebl]
Richi Jennings is an independent analyst/adviser/consultant, specializing in blogging, email, and spam. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You too can pretend to be Richi's friend on Facebook, or just use boring old email: blogwatch@richi.co.uk.