Google's High-Stakes Wireless Network Gambit

Posted by: Rob Hof on November 16, 2007

Or should I just call it poker? With fresh speculation in the Journal today, as well as BusinessWeek, that Google may be preparing to go it alone in a bid for the 700 MHz spectrum up for auction in January, I’m not alone in wondering how it can make sense on its face.

Henry Blodget notes that the minimum $8 billion it would cost to buy the spectrum and run the network equals two years of Google’s free cash flow. And that has to be a bare minimum if we assume there’s going to be competition, which could easily drive up the minimum $4.6 billion bid for the spectrum alone. Om Malik is still doubtful, too. But at the least, the chances that Google will do nothing with regard to the auction have dropped considerably. Its credibility would take a serious hit if it ends up doing nothing after all this talk.

Maybe Google has arranged the financing it needs to avoid spending all its cash. Maybe it also has found a carrier or other partner to take care of the dirty work of running a network. So many maybes here.

But I also can’t help thinking that even if it has gotten all those ducks in a row, these leaks—along with its new Android mobile operating system—are all part of its plan to shift the thinking on how the mobile industry should work to its advantage (and perhaps to consumers’ advantage). I wouldn’t go so far as to say it’s just a bluff. But maybe that expert in game theory that it has apparently hired to help it in the spectrum bidding is playing all the angles, not just the auction itself. As Cynthia Brumfield at IP Democracy notes:

If Google succeeds with its plans, the U.S. mobile communications business will never be the same. … Other carriers can’t allow Google to innovate without somehow relaxing their own closed policies that make mobile service sluggish and costly.

Update: Om Malik, who knows a lot more about telecom than I do, also now agrees that Google is essentially “using a big stick to get U.S. carriers to get a move on.”

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Reader Comments

Mike Reardon

December 6, 2007 03:57 AM

Just speculation that Google could runs it cell phone operations as 80/20 development projects. They could bring that same culture to telecommunication. 80% of the everyday operations would bring the best of everyday Google apps to users and at the same time Google could allow 20% of its spectrum to be open to disruptive developing technologies that could not gain access on other standard full profit carriers.

Google could gain first lease rights off the best new stuff or hold direct patents for lease of disruptive systems to other companies.

From the base of Google’s open access to everyone that they don’t ever want to interrupt, what ever come out, Google is first always into riding with every carrier and is not going to break with that.

One last thing debt at this level will cost less next year, everyone can bid a little harder than this year.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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