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.”