http://www.forbes.com/2007/12/02/google-att-wireless-tech-cx_ew_1203auction.html?partner=alerts Technology/Wireless Airwaves For Sale! Elizabeth Woyke 12.03.07, 6:00 AM ET It's deadline time at the Federal Communications Commission.Monday marks the day designated by the FCC for companies to declare their intention to bid for a portion of the wireless spectrum--in particular, a segment widely described as "beachfront property." At stake is nothing less than the future of wireless communications in the U.S. And that means it's worth taking a moment to assess who might be contenders--and what they might do if they win.
The auction has set off a scramble among traditional telecom firms, cable companies, even retailers, entrepreneurs and wireless device makers to assemble bids, some solo and some in teams.
Both Verizon (nyse: VZ - news - people ) and AT&T (nyse: T - news - people ) plan to bid independently. They would likely use the spectrum to improve Internet access to mobile devices as people increasingly use their phones for messaging, e-mail, broadband video, over-the-air purchases and mobile TV.
On Friday, Google (nasdaq: GOOG - news - people ), too, announced it would bid, on its own (see "Google Heads for the Airwaves"). Regional wireless carriers and cable companies are likely to get in the game. And there may be some wild card entries from retailers, entrepreneurs and wireless device makers. "This auction is big and robust enough to create all kinds of opportunities," says Amol Sarva, chief executive of New York City-based mobile start-up, txtbl.
The auction kicks off on Jan. 24. The FCC's blind bidding process means the public won't know the auction's winner or winners until February or March. Anti-collusion rules forbid bidders from talking with one another. Insiders describe the process as a game of chess or musical chairs.
The hottest competition is for the "C block" of spectrum, located in the low end of the spectrum. Radio signals in the 700 megahertz portion of the spectrum can penetrate much further than those in higher bands, which translates into better reception for consumers and lower infrastructure costs for operators. (Televisions, which currently receive signals in the 700 Mhz band, for instance, get reception in basements, while cellphones rarely can.) The C block is also attractive because it could provide national coverage and is open to virtually any kind of use. Its owner could become a new mobile operator.
The C block has international potential as well, as this same band is opening up around the world for wireless broadband services. That kind of potential has analysts predicting that the C block could sell for as much as $10 billion to $15 billion.
Google's role in the auctions has attracted considerable attention--and puzzlement. Google has asked the FCC to affirm that the spectrum could be used for "non-traditional" uses--although exactly what that means is a mystery, AT&T Chief Executive Randall Stephenson said in an interview with Forbes' Quentin Hardy. Analysts are also trying to predict whether Google would become a mobile operator itself. All Google has said is that it favors an open system that would offer consumers the freedom to use whatever wireless networks, devices and services they choose, at competitive prices. Simply publicizing its involvement should help achieve Google's goal of liberalizing the wireless industry, points out Sarva.
Verizon also has had some surprises for the industry recently. Last week, Verizon declared it would open its network to outside devices and programs and eventually adopt a new mobile technology standard likely to be shared by other carriers.
"Verizon's timing was clearly intended to take wind out of Google's plans," says Scott Ellison, vice president of mobile and wireless communications at market research firm IDC. "It says to the FCC, 'There's no need for intervention--the market is working!' " When Google promotes itself as different, Verizon can counter by saying it is "partially different," Ellison adds.
Verizon goes into the spectrum auction currently owning the least amount of spectrum of the three big carriers. AT&T acquired 12 Mhz of spectrum from telecommunications firm Aloha Partners in October, for which it paid $2.5 billion. Sprint Nextel (nyse: S - news - people ), which owns 90 Mhz as part of its investment in WiMax, an advanced wireless data technology, is struggling to build out its network and doesn't plan to bid.
T-Mobile, the country's fourth-largest wireless carrier, isn't expected to be an aggressive bidder, if it participates. It committed $4.3 billion in an earlier spectrum auction and "got what it needed," says Charles Golvin, a principal analyst with Forrester Research.
Wireless broadband company Clearwire (nasdaq: CLWR - news - people ) already has quite a bit of spectrum in a higher band, but might bid to make itself a more national player. Qualcomm (nasdaq: QCOM - news - people ), which develops chips and other wireless technology, owns a slice of 700 Mhz spectrum, which it uses for its mobile TV application, mediaFLO. Handset companies, such as Motorola (nyse: MOT - news - people ), Nokia (nyse: NOK - news - people ) and Sony (nyse: SNE - news - people )Ericsson (nasdaq: ERIC - news - people ), are likely interested in any move that will break the carriers' grip on their business.
Yahoo! (nasdaq: YHOO - news - people ), Microsoft (nasdaq: MSFT - news - people ) and Apple (nasdaq: AAPL - news - people ), by contrast, may just sit back and watch the results. The industry's movement toward openness benefits them by making it easier to place their applications and services on more phones. "There's no longer the same sense of urgency to invest that kind of money to ensure they get their applications out to consumers," says Golvin. Microsoft Chief Executive Steve Ballmer said in October that the company would avoid bidding as to not "alienate customers." Microsoft could still partner with a carrier. "All of these companies have a huge interest in growing their wireless business," says Sarva. "They don't need to buy spectrum; they may want to just be somewhere in the mix."
And then there are the folks that tend to participate in any spectrum auction. The cable companies, such as Comcast (nasdaq: CMCSA - news - people ), Cox and Time Warner (nyse: TWX - news - people ), may bid as a consortium, as they have in the past. Like the carriers, they have so-called locked systems that they are trying to broaden and diversity with new services. A number are currently reselling wireless service from other operators. Owning their own wireless network would make better business sense. They also may be interested in warding off Google and the carriers as competitors. If Google won the auction and launched video services, for instance, it would wind up competing directly with cable outfits. But cable companies still have a huge chunk of spectrum from a 2006 auction that they haven't built out, which could make a bid hard to justify.
Satellite TV companies, namely DirecTV (nyse: DTV - news - people ) and EchoStar (nasdaq: DISH - news - people ), remain for now unpredictable actors in the spectrum auction. Both want to expand their business beyond video providing but are limited by the fact that the 700 Mhz spectrum must be used for terrestrial-based mobile services. "Building that is vastly different from the satellite business and a completely different cost structure," says Ellison.
Even big block retailers such as Best Buy (nyse: BBY - news - people ), Circuit City (nyse: CC - news - people ), Wal-Mart (nyse: WMT - news - people ) and Target (nyse: TGT - news - people ) may join in. Best Buy has a growing interest in the mobile industry, as evidenced by its Best Buy Mobile stores. Wal-Mart, which recently entered the computing business with a low-cost computer, could be interested in providing mobile services, too, say analysts.
The other spectrum blocks going up for auction will attract a different set of players. Regional wireless carriers like MetroPCS (nyse: PCS - news - people ), Leap Wireless (nasdaq: LEAP - news - people ) and Alltel (nyse: AT - news - people ) are expected to bid for the smaller A, B and E blocks to fill out their networks. Start-up Frontline Wireless has publicly expressed the most interest in winning the D block of spectrum, which will be split between commercial and public safety uses.
However the pieces sort out will have a big impact in the coming years. Says Sarva, "This could be the transformation of the mobile industry from the telco model to an open model like the Internet."
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