Google Adds Its Voice to 700 MHz Gamesmanship
Following in the wake of Verizon and AT&T, whose chief executives have both made comments in the past seven days that were interpreted by analysts as either saying they would bid in the FCC's upcoming auction of the 700 MHz broadcast spectrum or would not bid - depending, one supposes, on which side of the room they were listening on at the time - Google CEO Eric Schmidt added fuel to the fire by making the same kind of bipolar comments.
Indeed, some sources who attended Google's analyst conference in Mountain View yesterday quoted Schmidt as clearly saying his company would "probably bid" in the auction, now set for next January 24. But others who followed Schmidt out the side door to ask more questions, according to MarketWatch, heard Schmidt say his company would most likely want to partner with someone else to place that bid.
Excluding all the telecommunications carriers that would most certainly resist a partnership offer, or which Google wouldn't care to do business with anyway, the only "someone" out there with which a team-up might make sense is Frontline Wireless, the next-generation service provider currently headed by former Netscape CEO Jim Barksdale. It was Frontline that originally petitioned the FCC for the four open-access restrictions that Google later signed onto, two of which the Commission granted. Frontline has recently voiced its concerns about the FCC having rejected its other proposed rules, one of which would have mandated the winning bidder must make its spectrum available to others wholesale. Despite that fact, the companies do share deep historical roots, sharing at least two founding board members.
One reason Google may be intentionally muddying its stance on the matter may be to compel possible competitors AT&T and Verizon to submit lower bids. Back in August, Google indicated it was willing to spend as much as $4.6 billion, if the FCC would grant all of its and Frontline's requests. If Google still appears to be in it for the long haul, that $4.6 billion number could be perceived as a starting price, and the telcos may consider matching it.
Back in May, an Aloha Partners analyst speculated that Google might partner with service provider Earthlink, with which the company already does business. But since then, Earthlink has faced rough financial times, having reported a second quarter loss of $16.3 million, and just this morning reporting a third quarter loss of $35.9 million on slightly lower revenue. Earthlink's tough position forced it to cancel a planned rollout of municipal WiFi service to San Francisco, which it had planned in cooperation with Google.
Some of the real obstacles facing Google were brought up in a recent Unstrung Insider analysts' report cited by DailyWireless.org. The eventual owner of the 700 MHz blocks for sale will probably use it for WiMAX services, the report speculated. Verizon already has considerable infrastructure investments already in place to make that happen, whereas Google's own estimates cited by the report say a newcomer to this field would actually have to spend upwards of $12 billion over three years to make a service actually happen in the so-called "C-block," including placing the winning bid.
That's not impossible for Google, but it's a huge gamble, and while a partner would help the company meet its initial commitments, it would also expect a share of the rewards. Google's plans to consider reselling part of its stake in the C-block wholesale may conflict with the needs of any prospective partner to be able to fully monetize its share of the investment, and that includes Frontline.
So the identity of the prospective partner to which Eric Schmidt reportedly alluded remains a mystery. It might have been nice if reporters at the scene had stopped scribbling long enough to have asked.