A Gaggle of Google OptionsSaturday, October 06, 2007
I don't believe Google wants to build out a nationwide wireless network and I don't think it fits with its business model. However, I do believe Google wants access to at least one wireless network and, ideally access to all of them―on its own terms. As we all know, Google's business model is to make money selling advertising. It has not done anything to monetize ancillary projects it has funded, such as Google Earth, because its play, at the moment, is a pure advertising play.
If my premise is correct, what will Google do in the auction? The first thing I expect is that it will bid the minimum bid for the C Block ($4.6 billion) because the Report and Order states that if the reserve price is not met, the band will be re-auctioned without the open access requirement. Google wants the open access provisions to remain intact and even expanded. If it bid the reserve price and then walked away from the auction, whoever wins this block will be obligated to honor the open access rules.
Next up in my thinking is that Google will actively bid on, and win, a nationwide license for the C Block (22 MHz). After the auction, it will use this spectrum as currency to bargain with others-including incumbents―to gain advantageous access to wireless for its own use and for the use of those who want wireless access to Google. It could make a deal with either an incumbent or new network operator that would give it access rights to the spectrum, perhaps as an MVNO with special pricing for bulk access.
Or, as has been suggested by others, Google could bid on and win a nationwide footprint and then have someone else build out the network, being the anchor tenant and ensuring the network operator of a fixed income stream on the new network.
Or since it already has a deal with Sprint and Clearwire to provide the Internet Portal on the 2.5-GHz WiMAX system being built out, Google could lease the spectrum to this joint venture and with 2.5 GHz and 700 MHz, Sprint and Clearwire would have an interesting network, noting, of course, that the WiMAX technology is not yet compatible with the cellular model of transmitting on one portion of the spectrum and receiving on the other. But I suspect it will be ready by the time the 700-MHz spectrum becomes available.
Another course of action is for Google to bid on, and win, some of the spectrum in each of the blocks. It wouldn't take too much effort to figure out which of the incumbents needs spectrum in given areas of the nation. If Google won a number of licenses, it might then be able to negotiate with more than one network operator. This would make sense from the perspective that Google really wants to turn wireless networks into dumb pipes that can be used by any device for any content, anywhere.
One more idea about Google and 700 MHz is that it could end up partnering with like-minded companies before the bidding starts. This could lead to some interesting partnerships even before the auction.
Finally, Google could not bid at all, but I don't think that is likely to happen. Google wants and needs as many routes to its site as possible and wants us all to have access no matter where we are or what we are doing―the more the better from an advertising perspective. Speaking of which, this would give Google an edge for a business model as well. It really doesn't need to make money on transport, though I am sure it would be nice if it did. It could subsidize wireless transport for all of us who elected, for example, to make Google our wireless home page.
Regardless of what Google does at the 700-MHz auction, I recently learned that it owns a lot, and I mean a lot, of dark fiber (dark meaning it is not in use at the moment) around the nation. Let's think about this for a moment. As the model for networks changes with the addition of micro, pico and femto cells, access back to the network from each cell will be important as well. When the network operators start moving to the next generation of technology, one of the biggest issues will be the amount of backhaul needed for each site. They certainly won't be able to simply keep adding T-1 lines at each site, so fiber as backhaul where practical will be very important. I'm not sure what Google plans to do with all of its dark fiber, but it is an interesting asset that could give it additional leverage in the wireless world.
Of course, Google could do none of the above and move in a direction I have not even thought about. It will certainly be a fun few months!