Saturday, March 22, 2008

Results of the Airwave Auction Reported

Back on October 30th, I quoted the Wall Street Journal here, in talking about a Google phone:

In recent months Google has approached several U.S. and foreign handset manufacturers about the idea of building phones tailored to Google software . . . The Google-powered phones are expected to wrap together several Google applications--among them, its search engine, Google Maps, YouTube and Gmail email...The most radical element of the plan, though, is Google's push to make the phones' software "open" right down to the operating system...That means independent software developers would get access to the tools they need to build additional phone features.

A few days later, the The Los Angeles Times (LAT) also ran a story, saying there had been reports and rumors about an upcoming Google phone for a long time. The company had admitted it planned to bid in upcoming FCC auctions for a piece of the wireless spectrum. The LAT story pointed out that Google could cut years out of the process and jump into the business immediately by simply making deals with the major wireless carriers.

Almost two months later, I offered this prediction from media pundit Thomas Ordahl on December 27 here:

Prediction #1: Google stirs up telecom. Google has been rattling its saber about the January spectrum auction, to the tune of at least $4.6 billion. Google's intention to provide open access to the data network could mean a new kind of broadband access that would be significantly cheaper for customers than the telcos' current, closed offerings. Whatever the auction's outcome, Google's participation will shake up what has become a very staid game.

This past Wednesday, The Los Angeles Times reported:

The most lucrative airwaves sale in U.S. history ended with bids totaling $19.6 billion, underscoring demand from AT&T Inc. and Verizon Wireless for spectrum that will bolster Internet services on mobile phones.

Revenue from the auction came in near the top of analysts' projections for as much as $20 billion. The Federal Communications Commission didn't disclose the winners of the 1,099 licenses.

Yesterday The Los Angeles Times reported here that Verizon Wireless and AT&T, "The nation's two largest wireless companies emerged as the biggest winners in a record-setting auction of public airwaves, increasing the odds that they will continue to dominate that market for years to come."

Verizon Wireless, the #2 carrier, will pay 47% (more than $9 billion) of the revenue raised in the auction for the largest pieces of the spectrum. AT&T Inc., the #1 carrier, will pay another 32% (more than $6 billion) for their pieces of the spectrum.

Between them, the two carriers paid 79% of the record-setting auction's revenues of $19 billion.

Sprint Nextel, the #3 carrier, sat out the auction.

Consumer advocates said they were disappointed that no major new companies emerged. They hoped that the strong signals up for grabs -- currently used by television stations but due to be returned to the government in 2009 as the stations complete their switch to digital signals -- would provide a third high-speed data pipe to homes, rivaling DSL and cable. (LAT)

Google demanded that the FCC require the winners to rent transmission rights to other companies, but the idea didn't gain traction.

Instead the FCC agreed to certain sections of the spectrum being left free in order for anyone to have access in exchange for Google's agreement to put down a minimum $4.6 billion bid.

This compromise will permit Google to sell software to cell phone manufacturers as well as to sell ads on mobile phones. The deal saved Google from having to try and outbid the two phone carrier giants.

Stay tuned for more . . .

No comments: