November 30, 2007 2:41 PM PST

Google versus the telecoms

There may just be a Google phone after all.

Google said on Friday it would apply to bid in the U.S. Federal Communications Commission's auction of 700 megahertz band wireless spectrum.

If it wins, it could build a wireless network for that spectrum on its own, or partner with others to build and operate such a network. Either way, Google could put its brand on millions of mobile devices that use the network. It would also be able to control the Internet experience on the devices and how much people would pay--or not pay--for the services.

In essence, Google could control the direction of the next-generation wireless network.

"Imagine an iPhone where the whole thing is a screen and the bottom eighth is banner ads running across," said Iain Gillott, a wireless analyst at IGR. "Spectrum is king; you own everything."

The 700MHz spectrum, which has been used to provide analog TV service, travels far and penetrates walls. As a result, it's considered the last remaining chunk of attractive wireless airwaves and is viewed as an opportunity to expand the Internet to a new frontier. The spectrum auction is scheduled to begin on January 24, and the deadline to apply to participate is Monday.

Google and other Internet companies have been hampered in their ability to expand their markets into the wireless space because carriers have had such a tight hold on the cellular industry. Right now, U.S. consumers are locked into the handset they use, the network it operates on, and the software it runs.

"Imagine an iPhone where the whole thing is a screen and the bottom eighth is banner ads running across. Spectrum is king; you own everything."
--Iain Gillott, IGR wireless analyst

This situation has crippled consumers' ability to use the Internet on their mobile devices, compared to how they use it on their PCs. Google executives say their aim is to bring the PC-style of Internet openness to the mobile world so that users have more choice in mobile services and applications, as well as price.

Google was instrumental in getting the FCC to adopt so-called "open access rules" that would ensure consumers could use any mobile device they choose on a large chunk of the 700MHz spectrum.

Profit motivates


While Google's entrance is likely to turn the wireless world upside-down, market disruption is not its motivation. Google's priority as a public company is to make a profit; having a Google-branded wireless service would attract a good deal more eyeballs to its ad-based services.

And mobile, in some ways, will be particularly fruitful for advertising. Owning the spectrum would give Google an advantage in local advertising, which is tailor-made for mobile use as people look for nearby restaurants, gas stations, or copy shops.

Conquering the mobile world would also give Google a boost in international markets, where people tend to be even more dependent on their mobile phones than they are in the U.S.

Google has managed to turn Web search into an $11 billion business on PCs by selling simple text ads that appear with search results. Imagine how lucrative that market will be when the ads, including local advertising, can get to the far reaches of the world where there aren't any PCs.

Right now the global PC search market generates about $20 billion in revenue, assuming each PC owner conducts an estimated 35 searches a month, according to Citigroup research. If they do just one search per month on the four billion mobile phones expected to be in use in 2010, they could generate $2.3 billion in revenue, assuming PC search advertising economics migrate as-is to the wireless world, Citigroup said in a report this week.

For Google, that could translate into $700 million in incremental revenue in 2010, according to Citigroup. A new network on the spectrum isn't expected until 2010 at the earliest, analysts say.

"If you can get the most attractive demographic, the 18- to 30-year-olds (who have grown up on Google), then advertisers will be lining up at the door," Gillott said.

The wireless spectrum bid dovetails nicely with Google's moves to unify handset makers, software developers, and carriers on Android, an open mobile platform.

Mobile isn't the only place Google is eyeing the wireless access business. The company is dabbling in Wi-Fi-based services for PCs, building its own free wireless network in its hometown of Mountain View, Calif. It had also partnered with network provider EarthLink on a proposal for San Francisco. Despite initial support from city officials, the approval process stalled and EarthLink backed out in August amid a company restructuring and significant layoffs.

"Google is spending time and money paving this new superhighway," said Jeff Kagan, a wireless and telecommunications analyst. "Google is creating the world they want to compete in because it doesn't exist for them right now."

A Google representative said no executives were available to comment on their spectrum plans or motivation.

Even if Google doesn't win, its actions have already shaken up the stagnant mobile industry, said Derek Brown, an analyst at Cantor Fitzgerald.

For Google, "there is a risk that they get in way over their heads in a field in which they are late to the party and in which they have no expertise," he said. "But history suggests Google has made some very good strategic, operational, and financial decisions and seems to have done as good or better a job at investing toward the future than many other similar companies."

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15 comments

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NOT ANOTHER WIRELESS CARRIER
Really Who Ever Wrote This Should Really look at the Cell Phone Industry as a whole. I find it hard to beleive that compnies such as at&t, sprint, Verizon, Alltel and t-mobile will sit by and let google erode the value that these companies provide. Companies such as at&t and verizon have been around for more the 15 years and have spent billions of dollars on building their networks out and maintaining it. Google has long way to go to build a network that would even come close to t-mobile which is the smallest of the national carriers. Google may have to spend countless of billions of dollars to even come close to providing phone service. Then they will have to incure countless of expenses in the process. I don't see this happening anytime soon. Google is company that will keep you guessing on what it may or may not do with this spectrum. But one thing is certain they are not going to be a WIRELESS CARRIER. This i dont see happening. In many ways they will follow the footsteps of many great companies who screw up and dive into somthing that they really have no business being in. GOOGLE IS AFTER ADVERTISING AND THATS IT.. ANDROID IS JUST THE STEPING STONE FOR ALL THIS.. GOOGLE WILL SOMEHOW GET PEOPLE TO ADVERTISE ON CELL PHONES AND WHAT NOT..


its like i said before in order for google to make any kind of impact on the wireless industry as a whole it really has to build its own network from the ground up and i just don't see that happening in the near term. Google would literaly have to spend untolds amount of billions of dollars to create a customer service call center and going to each and every metropolitin city and establishing towers in an already saturated market. City's wont be so eager to approve permits to build more towers on roof tops and highways and mountains like before. It's Just too much of eye sore for most people. This is why im saying Google is not Getting into the traditional wireless business. I see them building an advertising network that will allow companies to partner up with google and share the revenue stream. Again, i don't see what sort of value google will attempt to bring to the table. Mind You Att already has a tight relationship with Yahoo and verizon is not company known to be freindly towards it's competitors. All i can say is that Google has an uphill battle if indeed it intends to become a carrier with spotty coverage. Again i doubt they will go down that road..Google is after advertising dollars and that is the main goal. If there goal is to drive down cost of air time bills it might do so by sharing it's advertising revenue with carriers. But who knows the possiblities here. As usal google is hush hush on this and i assume they will be untill who knows when...
Posted by iphonesbiz (7 comments )
Reply Link Flag
Not another corporate sympathizer!?
Do you enjoy the stranglehold these companies have on the market? Just because these companies have been around a "whole 15 years", does not mean others should abandon any kind of corporate competition. In addition, just an FYI, the infrastructure already exists in the 700 MHz spectrum.
Posted by forcwis (1 comment )
Link Flag
You dont work for AT&T or Apple do you.
Personally mr iphonesbiz I would love for Google to break into the wireless carrier business and break up the nickel and diming schemes these big telco companies have ben pulling on people for years. In fact, I think it would be real cool if Vonage merged with Google so AT&T or Verizon couldnt so easily bully them around.
Posted by stockyjoe (640 comments )
Link Flag
No Google Wireless Network After All? Verizon May Win Spectrum Auction
We?ve been keeping an eye on the FCC?s 700MHz spectrum auction for the last couple of weeks. The bidding war commenced back on January 24, and, after seeing things get off to a slow start with several days of oddly small bites by various participates for the five ?blocks,? (A,B,C,D,E) big money has now taken the stage. The portion of spectrum known as ?C block? alone has already surpassed the $4.6B reserve mark. (That is the point at which the buyer agrees by default to abide by open networking rules.)

And as many of you know, Google has kept its sights strongly on C block, which many have considered essential to the company?s technological framework if it were to pursue the creation of its own US-based wireless network. (Some, including myself, believed that such an enterprise might have been planned.) Google negotiated forcibly with the FCC, against opposition brought by several established American telecommunications giants, to ensure that that particular aspect of the auction carry with it the requirement of remaining an open space by which any and all competitors could transmit data freely.

Well, for those of you who had hoped for the future arrival of ?Google Wireless,? we may have to disappoint. News arrived this morning that essentially signified Google?s all-but-certain defeat by telecom megalith Verizon for the prized C block spectrum.

Last week, speculation as to the status of the auction was quite intense. Some said that Google had put forth a $4.7B ($100m north of the reserve price), giving it a strong chance of coming away from the process with its hands full. Earlier today, however, Elizabeth Woyke of Forbes.com reported that Verizon?s interest in the C block was not shaken by Mountain View?s move, and is likely determined to claim the wireless space in order to, in the words of Stifel Nicolaus analyst Rebecca Arbogast, ?close the gap?(with) AT&T.?

Arbogast went on to say that she was ?reasonably confident that Google does not have the spectrum now.?

While this update comes as something of a personal surprise (I have been observing the 700MHz auction rather eagerly), I cannot say that I?ve been entirely thrown. It was certainly a bit of a stretch to think Google would go through to the very end to claim the prize. I figured the chance of a Google win to be just a bit greater to that of another party?s. Nonetheless, Google appears slated to leave the auction empty handed.

Except, well, not empty handed. Remember, Google has ensured the openness of the 700MHz. Though the vision of ?Google Wireless? is an idea now bound to reside only in the realm of fan fiction, we are guaranteed to encounter minimal technological barriers wherever the C block spectrum is ultimately employed. That?s something to look forward to, yes?
Posted by iphonesbiz (7 comments )
Link Flag
Uhh - they're not buying spectrum in rest of world!
The article is making this big point about how Google could make a big splash, especially internationally, where people are more dependent on their cell phones than here in the U.S. But duh!?! This auction is for US spectrum!!! So how will this help Google in the rest of the world??? If Google can't get spectrum in other parts of the world then a "Google phone" wouldn't be much good there, now would it?

Sometimes, I feel the hype is just getting out of hand.
Posted by twolf2919 (278 comments )
Reply Link Flag
Not quite informed
No, Google isn't (currently) buying the 700 MHz spectrum in the rest of the world, but they don't necessarily need to.

Other countries are gearing the 700 MHz spectrum for use by portable devices, so in coming years, it may go up for auction, or it will be handed over to the people.

Also, the rest of the world has a rather free take on phones and access compared to the US.

But, either way, nothing precludes the phones from supporting several different spectrums for communication.
Posted by hawkeyeaz1 (569 comments )
Link Flag
America's new phone company - MaGoogle?
There's more to offering a wireless service than "just" buying spectrum. Also, they might need to buy Skype to round out the service.
More thoughts on what Google's likely to do at:
<a class="jive-link-external" href="http://www.digitalmarketing.us/blog" target="_newWindow">http://www.digitalmarketing.us/blog</a>
Posted by Rusty Digital Marketing (13 comments )
Reply Link Flag
Google vs. Telecoms with the right mobile application
May be the readers comments will help Google make a right decision for their mobile browser when it is finally released.

IMO, Google needs to offer mobile phone users the ability to get instant information in one click. They need to simplify typing into the go window.

To make their mobile application a hit, the consumer should be able to get that information in one click when I click on the logo, trademark, keyword or words, slogan, billboards, RFID tags, 1D, and 2D barcodes, direct or indirect, etc. If they offer the most, why go anywhere else. I want to be able to say the words into my mobile device and go to the site. Why type?

Once these items are clicked or spoken into the mobile device, it becomes your mouse. Objects are turned on. Mobile Navigation is simplified. Information to bus scheudles, price comparison, nearest location of a resturaunt to your cell position, best route to avoid traffic, coupons from the brand, reviews, trailers for movies, etc. The possibilities are endless if the right giant offers it.

<a class="jive-link-external" href="http://www.neoreader.com" target="_newWindow">http://www.neoreader.com</a>

Now, if they open up the service to avoid the carriers, the marketing possibilites, clicks, and revenue streams for them are endless. It is all about REVENUE right?

But, what do I know. I am a consumer. That is what I would want. The mobile web where ever I go.
Posted by Swampthing18 (5 comments )
Reply Link Flag
google success on telecome is far story
700 mhz band would require new handset. That shouldn't be problem as handset maker would make such handsets but it international subscribers would have to look out because I don't know of another country in world where operators would get 700 MHz frequency.

And also google should not majorly rely on Ad business on mobile because Ads in PC web page are frustrating enough, just imagine how frustrating it would like on a small mobile phone screen.
Posted by austere_sly (3 comments )
Reply Link Flag
Worldwide timeline of 700MHz spectrum
In USA, the 700MHZ spectrum will be released by TV stations in 2008, and in Asia, around 2009 and EU by 2010.
Posted by Quemannn (76 comments )
Link Flag
Google will surely pick partners
Chances are that SK Telecom may join the auction, along with Earthlink,which is phasing out its WiFi Muni business. SK Telecom's $5 billion investment offer was turned down by Sprint lately.
Sprint wants to jump to 4G, whereas AT&#38;T and Verizon want a slow transition to 3G from the current 2.5G. Don't be foolish to mention iPhone here. Iphone is a 2G phone, based on EDGE, and iPhone-like multitouch features were introduced in Korea 3 years ago. But the current speed of US network can't support hi-tech multimedia phones used in Korea. If ATT&#38;T or Verizon won the auctin, it would be the slow shift to 3G. If Google or other newcomers won the auction, it would be a faster transition to 4G.
Contrary to Wall Street analysts' views, Google's bidding will be something more realistic than just a grandstand play aimed at entreching big carriers.
Posted by Quemannn (76 comments )
Reply Link Flag
Google buys
the 700 MHz then leases it to AT&#38;T, or whoever for the new phones for the iNet and then their ads are all over the phones but not to the point that it gets users upset.
Posted by royc (78 comments )
Reply Link Flag
 

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