In its clearest statement of intent so far, Google Inc. said that it will compete in an upcoming wireless spectrum auction, if the government agrees to certain rules.
On Friday, Google sent a letter to the U.S. FCC chairman informing him that the company will commit a minimum of $4.6 billion toward the auction, but only if certain conditions are met. Google spelled out those conditions in an earlier filing with the FCC.
The billion-dollar commitment could assure the FCC that if it does implement the conditions, it can expect to raise the amount of money it hopes to. "The odds are still against the FCC imposing the conditions Google seeks, but this significantly ups the ante," said Kevin Werbach, an assistant professor of legal studies at the Wharton School of the University of Pennsylvania and former counsel for new technology policy with the FCC.
Google's proposals are controversial for existing mobile operators, which could decide not to participate in the auction if the rules don't suit them, resulting in potentially less income to the government. On Thursday, Verizon Wireless said that complying with Google's ideas would amount to corporate welfare and bad public policy.
The $4.6 billion appears to be the figure that Google believes the FCC will require as a minimum price for the spectrum. In its letter to the FCC, Google wrote that it understood that a draft order from the commission had specified that figure. The FCC typically sets a minimum price to sell spectrum; if the minimum isn't met, the agency can cancel the auction.
"We're putting consumers' interests first and putting our money where our principles are -- to the tune of $4.6 billion," Chris Sacca, head of special initiatives at Google, wrote on the company's public policy blog.
AT&T interprets the move a bit differently. "Google is demanding the government stack the deck in its favor, limit competing bids, and effectively force wireless carriers to alter their business models to Google's liking," Jim Cicconi, AT&T senior executive vice president of external and legislative affairs, said in a statement on Friday. "We would repeat that Google should put up or shut up -- they can bid and enter the wireless market with any business model they prefer, then let consumers decide which model they like best."
The CTIA, an association representing mobile operators, had an equally harsh response to Google's move. "Google's letter to the FCC this morning highlights the Internet giant's scheme to have the 700 MHz auction rigged with special conditions in its favor," CTIA President and CEO Steve Largent said in a statement. "Google and its allies, with their collective market capitalization approaching half a trillion dollars, don't need a government handout at taxpayers' expense." The wireless industry welcomes new entrants into the business but companies shouldn't ask the government to custom-fit regulations to match their business plans, he said.
Google says that unless the FCC sets certain rules on the auction, existing large mobile operators will inevitably win the spectrum and competition in the market will stagnate. In order to prevent that, Google is urging the commission to ensure that users can download any applications, services or content they want. Consumers should also be able to buy a phone and use it on any network. In addition, Google says the winner of the spectrum should be required to allow third parties to resell services over the network on a wholesale basis.
Some other groups, such as Frontline Wireless, a company backed by luminaries including former FCC chief Reed Hundt and former Netscape CEO James Barksdale, have proposals similar to Google's.
AT&T argues that a draft proposal issued by FCC Chairman Kevin Martin allows Google to implement all the capabilities it wants, but the proposal just doesn't mandate them. "If our understandings are accurate, we believe Chairman Martin has struck an interesting and creative balance between the competing interests debating the Google Plan," Cicconi said in a statement released on Thursday. "The plan would enable the introduction of an alternative wireless business model without requiring changes in the business models of AT&T and others in what is a highly competitive wireless industry."
The proposal would allow Google to bid on the spectrum and test the model, AT&T said. If Google doesn't accept the proposals, it's a sign that the search giant's objective was "to use the government to stack the deck and force competitive wireless companies to abandon their chosen business models and instead adopt Google's model," he said.
Google has argued that unless spectrum winners are required to sell access to their networks on a wholesale basis, existing operators with deep pockets will win the licenses and be unlikely to offer wholesale access to their networks in an effort to thwart new competition.
While Google has been vocally urging the FCC to ensure that the spectrum can be used by any device and service, the company has until now hedged on questions about whether it plans to bid for the spectrum.
The FCC auction for 700-MHz spectrum is expected to happen next year. The frequencies are considered prime for mobile communications because signals sent through them can travel far and can penetrate walls better than higher frequencies. Much of the similar spectrum is already spoken for so this auction is considered a rare opportunity.
In a perhaps related announcement, on Friday U.K. femtocell maker Ubiquisys said that Google has invested in the company. Femtocells are small base stations that can be used in homes or offices to improve mobile phone coverage. Ubiquisys' current products operate over 3G networks.