Google Needs Telco Partner for 700MHz Bid, Analysts Say

Google has said it would offer a $4.6 billion bid for a license to use the spectrum, if the FCC set certain conditions on the licenses.

Google is making the necessary preparations to bid for wireless spectrum in an auction be held in the U.S. in January -- but it will likely need a carrier partner to help build a network to use it, analysts said Friday.

The spectrum, between 698MHz and 806MHz, and collectively called the 700MHz band, is currently used for analog TV broadcasts. It is due to be freed up for other uses, such as operating mobile telecommunications networks, by 2009. The U.S. Federal Communications Commission plans to auction off the right to use that spectrum on Jan. 24, and bidders must declare their intention to participate by Dec. 3.

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In July, Google said it would commit a minimum of US$4.6 billion to bid for a license to use the spectrum, if the FCC set certain conditions on the licenses. Those conditions included giving people the freedom to choose what applications and networks they use with the phones they bought, and giving service providers the freedom to connect with those networks and buy wholesale minutes from network owners on reasonable terms.

Google is still making "the necessary preparations" for a bid, a company representative said Friday.

The company is planning to finance that bid alone, without partners, according to a report in The Wall Street Journal.

Laying out that kind of money for spectrum -- and even paying for the construction of a wireless network to use it -- would present no great problem to Google, which, as of Sept. 30, had $13.1 billion in cash and cash equivalents on hand.

But analysts are skeptical of the benefit to Google of going it alone.

"Wireless spectrum and network management are nowhere near Google's core competency. Its competence is in one market, online advertising," said Emma Mohr McClune, principal analyst with Current Analysis.

That sentiment was echoed by Jan Dawson, a vice president at market analyst Ovum.

"Anything other than search at the minute seems like a move in the wrong direction," said Dawson. With its focus on search-based advertising, Google's financial metrics are "phenomenally better" than those that even the best mobile network operators can achieve, he said. "You have to wonder why a company would diversify into a market like that."

Google's goal may not be to make money from operating the network, though: it could simply be a lever to get its applications into the hands of more mobile phone owners.

It has already taken steps in this direction, offering versions of its Web applications for Apple's iPhone, and launching the Open Handset Alliance to promote its Android open software stack for mobile devices.

"The commonality between all those moves is to get their services running on mobile devices," said Adam Leach of Ovum.

Building a wireless network is too much for Google to attempt alone, say the analysts: the company should seek partners as it has in the handset market.

A carrier partner "is essential to building out and running a network. The core issue is the operations and maintenance of this new network. ... It is not trivial to build and run a telecommunications company," said Bill Ho, senior analyst at Current Analysis.

If Google is to partner with an operator it could choose Sprint, some analysts suggested. The two have already agreed to partner on WiMax services.

Partnering with Google could also be an opportunity for an experienced operator not yet present in the U.S. to enter that market, suggested Dawson. Possible candidates include Orange, a subsidiary of France Telecom with networks in France, Poland, Spain, and the U.K., or Japan's NTT DoCoMo.

The U.S. is not the only country with plans to auction off analog television spectrum for new uses: The U.K. began withdrawing analog TV service this month, and other European Union countries are set to follow suit.

But the likelihood of this opening the way for a new pan-European service to rival GSM (Global System for Mobile Communications) is remote: each country has different licensing rules for the television spectrum, and the frequencies used are not always the same from country to country.

"I can't see all these auctions collectively creating a new single market," said McClune.

This story, "Google Needs Telco Partner for 700MHz Bid, Analysts Say" was originally published by IDG News Service .

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