FCC 700 Mhz Auction: 20 Billion Dollar Baby

The news: Verizon wins almost everything, Google does not win anything.
But, let's deal with the nonsense first: "Google is the winner...", "Google was bluffing..." etc. You may find plenty of such claims in the web, but if these were functions they would return false. The reason? At least in poker, you bluff to win, or for others to lose big. None of that happened. If Google wanted to be a provider, she lost. If Google wanted just to ensure openness, she won, but in that case she had won several months ago in a controversial FCC decision.

I had written a post about the FCC auction 73 here, with the main points being that Google's decision to participate was big news for the mobile industry and that it was somewhat unclear as to whether the company wanted to slowly create and maintain the new wireless network or just ensure open access. But let's take things from the beginning.

First, there is the decision that analog TV moves to digital in the US, in one year from now. This releases some frequency bands, namely around the 700MHz that now is occupied by a number of analog TV channels. Shifting to digital, these bands will be vacant. Hence, they were auctioned off. Due to its physical properties, this band is ideal for communication networks and attracts the interest of the wireless industry, but also quite to a bit of a surprise, the interest of Google. It was soon realized that there were actually three players in the auction: Verizon, AT&T and Google.

Almost half a year before the auction begins, Google announces that it would bid the minimum 4.6 billion $ if the FCC would require from the winners to support 4 types of open platforms. Quoting a part of the company's press release:

• Open applications: Consumers should be able to download and utilize any software applications, content, or services they desire;
• Open devices: Consumers should be able to utilize a handheld communications device with whatever wireless network they prefer;
• Open services: Third parties (resellers) should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms; and
• Open networks: Third parties (like internet service providers) should be able to interconnect at any technically feasible point in a 700 MHz licensee's wireless network.

Now, I don't have the industry knowledge to fully decode Google's strategy, so let's trust logic on that. If Google wanted to support and realize the idea of open networks and devices, why doesn't she participate in an auction with no strings attached? If you believe in your idea, go and get it. On the other hand, if Google does not want the burden of having to maintain such an infrastructure, what is afraid of and requires open platforms? After all, Google is still doing pretty well in traditional GSM, 3G or GPRS networks. Afraid of Verizon teaming up with Google's competitors (e.g. Microsoft) in building new generation mobile services or afraid of her Android-based open mobile platform initiatives, ending prematurely? Both might be correct.

Almost a month later, the FCC makes a balanced decision: A portion of the band that is auctioned off will be open to any mobile device (Verizon-certified of course) interpreting only as a partial result for Google but basically leaving all players unsatisfied. Both parties have good arguments: Google talks about different business models, open networks, platforms and other e-socialist ideas. Carriers talk about paying "a fair market value in an honest auction". After all Google has much more budget than Verizon, so if she wishes to bring new models to the business she should pay the price, rather than pressing for open requirements. AT&T's response is breath-taking: "We would repeat that Google should put up or shut up— they can bid and enter the wireless market with any business model they prefer, then let consumers decide which model they like best." While many considered Google's battle as a crusade against evil wireless carriers, it would not be unreasonable to claim that the company acted more or less as a cheapskate, trying to buy openness at zero price (given that Google was never interested in really buying the bands).

Finally Verizon together with Vodafone, was the big winner of the auction, totally owning the C-block of the 700 Mhz band and Google did not get anything. "We are very pleased with our auction results. Specifically, we were successful in achieving the spectrum depth we need to continue to grow our business and... help us satisfy the next wave of services and consumer electronics devices.", was the announcement from Verizon. It might be said that Google was the actual winner, having assured that the new network will be open. While there might be reasons for that, there is one obvious flaw: This would mean that Google was a winner from the beginning. Why Verizon would enter in a battle already lost or is it a win-win situation? My feeling is different after reading the first reaction from the Google part. While the company declares the auction as a win for American consumers, there is an over-stressing that the network is open for anybody. I cannot be easily convinced that someone paid some billions of dollars to buy an open network and I therefore can understand why Google seems a little anxious over that part of the deal: Could Verizon find holes in the FCC rules?

Anyway, there is still these anti-collusion rules, so there is no in-depth information from the auction players yet. Thoughts of Google building a new and open mobile network, thus bringing a new era of mobile communications, were proven wrong. Verizon owns a new band to play with.

Meanwhile, here in Europe, we are still stuck paying 5-10 euros for every 'mobile' Mb we download, while the European Commission is still messing with the way business is done (with the most recent and infamous example of choosing Nokia's protocol for mobile TV. While not final, this decision demonstrates how much politics in Europe, interfere with the industry)