Google Has Even Bigger Plans for Mobile Phones
Google Inc. made a big splash last week with its new software for cellphones. But that's far from the limit of the Internet giant's wireless ambitions -- which could include running its own mobile network.
The company is gearing up to make a serious run at buying wireless spectrum, a chunk of the airwaves that can be used to provide mobile phone and Internet services, in a Federal Communications Commission auction in January. Google is prepared to bid on its own without any partners, say people familiar with the matter. It is working out a plan to finance its bid, which could run $4.6 billion or higher, that would rely on its own cash and possibly some borrowed money.
A STRONG SIGNAL
Google's wireless initiatives could eventually lead to a national network.
• Developed Android software for mobile phones.
• Made Google applications -- including email, chat and mapping -- available on cellphones.
• Sells advertisements for certain Web sites accessed by cellphone.
• Enables users to do Web and business searches with cellphone browsers, by text message or with a call.
• Is testing an advanced wireless network at Google headquarters.
• Operates a free Wi-Fi network in Mountain View, Calif.
• Expected to bid for wireless spectrum in a January FCC auction.Google, meanwhile, already is running a test version of an advanced wireless network at its Mountain View, Calif., headquarters, gaining operating experience that could come in handy if it wins the spectrum and decides to run a full-scale national mobile carrier, according to people familiar with the matter.
The behind-the-scenes moves illustrate just how serious the Internet giant is about trying to reshape the wireless world. Its push could potentially expand the availability and decrease the cost of high-speed mobile Internet access to consumers and broaden the wireless applications they can use.
At the same time, Google's wireless projects could take it far from its core expertise, at a big potential cost in money and management attention. They could also antagonize telecom carriers, some of whom have relationships with the company, and other Google partners, who might view the wireless push as a competitive threat. It remains possible that last-minute developments could alter Google's strategy between now and a Dec. 3 FCC deadline for declaring an intent to bid.
A Google spokesman said in a statement that the company would reveal any plans to participate in the auction by then. "In the meantime, we are making all the necessary preparations to become an applicant to bid," he said. "Our goal is to make sure that American consumers have more choices in an open and competitive wireless world," the spokesman added.
The company has said it wants to make mobile networks more open, so that consumers can use any Internet service and application and move their handsets between carriers without onerous restrictions. That's one impetus behind the Android software for mobile phones that Google announced Nov. 5, alongside a group of industry partners including Taiwan's HTC Corp., a handset maker, and Deutsche Telekom AG's T-Mobile, a wireless carrier.
Google also views open wireless networks as key to sidestep any telephone and cable company efforts to make it difficult for consumers to access Google services, or to charge Google to deliver the services to consumers over their Internet connections. Carriers such as Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, say they guard their networks closely to provide high-quality phone and Internet service and protect consumers from security breaches and invasions of privacy.
Google Maps running on Android cellphone software
Behind the scenes, Google also is eyeing financial opportunities, as revenue for U.S. wireless carriers hit $95 billion last year, the research firm Yankee Group estimates. Google could reap subscriber fees if it controlled an operator, and experiment with models such as a one-time licensing fee for consumers to use its network and no monthly access charges. Company executives have said that cellular handsets or services could eventually be subsidized by revenue from advertising consumers view on their cellphones.
Google may square off at the auction against large U.S. wireless carriers such as AT&T Inc. and Verizon Wireless that are looking for more spectrum, which is necessary to expand their own broadband Internet offerings and power services such as mobile TV.
Some carriers have privately expressed skepticism about Google's ambitions, saying it is vastly underestimating the challenges of operating a network, providing customer service and gaining traction as a new entrant in a crowded wireless market. Still, there is a fear among carriers that "because it's Google, because of the power of their brand and because they understand networks really well, it might work," said Blair Levin, a telecom analyst with Stifel Nicolaus & Co. and former chief of staff at the FCC.
The FCC issues licenses to use portions of the airwaves for wireless networks and radio and television broadcasters. The frequencies on the block early next year are among the most valuable that have ever been auctioned. One reason is that they carry well over long distances, potentially requiring fewer transmission towers to cover large areas.
Google is focused mainly on bidding on what has been designated as the "C" block, a slice of the 700 megahertz spectrum. It is also considering other blocks of spectrum available as well, though they would provide only regional coverage or come with other limitations. Google has hired game-theory specialists to help plot its auction strategy, say people familiar with the matter.
Sean Maloney, an executive vice president at chip maker Intel Corp., argues that the frequencies on auction could hasten the spread of high-speed Internet access to rural areas and others who can't easily get it. "Seven-hundred megahertz is a national treasure," he says. The government is expected to turn over use of the spectrum to the winning bidders by early 2009.
Though it has made no firm public commitment about the coming auction, Chief Executive Eric Schmidt has said Google probably would bid. Last month, he told journalists the company was considering joining with partners on a bid, but that it "won't make that decision until the very last minute as more information comes along."
Several people familiar with the matter said that the company believes that it would lose goodwill in Washington, if it didn't bid, given that it won changes to the auction rules that will force the winner of one block of spectrum to open its network to any mobile device or software application. One of the people familiar with the matter said Google is "going for it" and expects to bid on its own despite interest by potential strategic partners in each investing $1 billion or more in a joint bid effort.
The complexity of the possible bidding scenarios and auction outcomes has led Google executives to believe they would benefit from the flexibility of bidding alone. They were also concerned about alienating allies by selecting some and not others as bid partners, say the people familiar with the matter.
In addition, Google discovered Wall Street was enthusiastic about the company's ability to raise any needed cash, lessening the pressure to bring in others. Google currently plans to consider whether to bring on partners after the outcome of the auction is known.
Meanwhile, back at its headquarters, Google is already operating an advanced high-speed wireless network under a test license from the FCC, according to people familiar with the matter. The company has erected transmission towers on its campus for the network. Prototype mobile handsets powered by the Android software are currently running on it.
Experience with the technology could aid the company in operating a full-fledged carrier, one of the options it's considering. Google is betting it could potentially build and operate a wireless network faster and cheaper than traditional operators.
In that event, the company could try new wireless technology approaches. Google this year invested in a closely held United Kingdom company called Ubiquisys Ltd. that makes a technology called femtocell, which allows mobile phones in poor-coverage areas to use home Internet connections to make calls and transfer data. Such technology could potentially be harnessed as part of any Google wireless infrastructure.
If Google is successful in the spectrum auction, other possibilities on the table include leasing spectrum to partners. The company has separately had discussions about potentially investing alongside other parties in Clearwire Corp., which is trying to build a nationwide high-speed wireless network, say people familiar with the matter. Such talks with Google aren't currently at an advanced stage, they say.
ABI Research senior analyst Nadine Manjaro believes it's more likely that Google would form a partnership with an existing wireless network operator than try to build one on its own. "They have no experience in running a network, and it's not something simple to do," she says. Ms. Manjaro estimates the cost of building a national network on the spectrum available at $3 billion or more.
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The company is gearing up to make a serious run at buying wireless spectrum, a chunk of the airwaves that can be used to provide mobile phone and Internet services, in a Federal Communications Commission auction in January. Google is prepared to bid on its own without any partners, say people familiar with the matter. It is working out a plan to finance its bid, which could run $4.6 billion or higher, that would rely on its own cash and possibly some borrowed money.
A STRONG SIGNAL
Google's wireless initiatives could eventually lead to a national network.
• Developed Android software for mobile phones.
• Made Google applications -- including email, chat and mapping -- available on cellphones.
• Sells advertisements for certain Web sites accessed by cellphone.
• Enables users to do Web and business searches with cellphone browsers, by text message or with a call.
• Is testing an advanced wireless network at Google headquarters.
• Operates a free Wi-Fi network in Mountain View, Calif.
• Expected to bid for wireless spectrum in a January FCC auction.Google, meanwhile, already is running a test version of an advanced wireless network at its Mountain View, Calif., headquarters, gaining operating experience that could come in handy if it wins the spectrum and decides to run a full-scale national mobile carrier, according to people familiar with the matter.
The behind-the-scenes moves illustrate just how serious the Internet giant is about trying to reshape the wireless world. Its push could potentially expand the availability and decrease the cost of high-speed mobile Internet access to consumers and broaden the wireless applications they can use.
At the same time, Google's wireless projects could take it far from its core expertise, at a big potential cost in money and management attention. They could also antagonize telecom carriers, some of whom have relationships with the company, and other Google partners, who might view the wireless push as a competitive threat. It remains possible that last-minute developments could alter Google's strategy between now and a Dec. 3 FCC deadline for declaring an intent to bid.
A Google spokesman said in a statement that the company would reveal any plans to participate in the auction by then. "In the meantime, we are making all the necessary preparations to become an applicant to bid," he said. "Our goal is to make sure that American consumers have more choices in an open and competitive wireless world," the spokesman added.
The company has said it wants to make mobile networks more open, so that consumers can use any Internet service and application and move their handsets between carriers without onerous restrictions. That's one impetus behind the Android software for mobile phones that Google announced Nov. 5, alongside a group of industry partners including Taiwan's HTC Corp., a handset maker, and Deutsche Telekom AG's T-Mobile, a wireless carrier.
Google also views open wireless networks as key to sidestep any telephone and cable company efforts to make it difficult for consumers to access Google services, or to charge Google to deliver the services to consumers over their Internet connections. Carriers such as Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, say they guard their networks closely to provide high-quality phone and Internet service and protect consumers from security breaches and invasions of privacy.
Google Maps running on Android cellphone software
Behind the scenes, Google also is eyeing financial opportunities, as revenue for U.S. wireless carriers hit $95 billion last year, the research firm Yankee Group estimates. Google could reap subscriber fees if it controlled an operator, and experiment with models such as a one-time licensing fee for consumers to use its network and no monthly access charges. Company executives have said that cellular handsets or services could eventually be subsidized by revenue from advertising consumers view on their cellphones.
Google may square off at the auction against large U.S. wireless carriers such as AT&T Inc. and Verizon Wireless that are looking for more spectrum, which is necessary to expand their own broadband Internet offerings and power services such as mobile TV.
Some carriers have privately expressed skepticism about Google's ambitions, saying it is vastly underestimating the challenges of operating a network, providing customer service and gaining traction as a new entrant in a crowded wireless market. Still, there is a fear among carriers that "because it's Google, because of the power of their brand and because they understand networks really well, it might work," said Blair Levin, a telecom analyst with Stifel Nicolaus & Co. and former chief of staff at the FCC.
The FCC issues licenses to use portions of the airwaves for wireless networks and radio and television broadcasters. The frequencies on the block early next year are among the most valuable that have ever been auctioned. One reason is that they carry well over long distances, potentially requiring fewer transmission towers to cover large areas.
Google is focused mainly on bidding on what has been designated as the "C" block, a slice of the 700 megahertz spectrum. It is also considering other blocks of spectrum available as well, though they would provide only regional coverage or come with other limitations. Google has hired game-theory specialists to help plot its auction strategy, say people familiar with the matter.
Sean Maloney, an executive vice president at chip maker Intel Corp., argues that the frequencies on auction could hasten the spread of high-speed Internet access to rural areas and others who can't easily get it. "Seven-hundred megahertz is a national treasure," he says. The government is expected to turn over use of the spectrum to the winning bidders by early 2009.
Though it has made no firm public commitment about the coming auction, Chief Executive Eric Schmidt has said Google probably would bid. Last month, he told journalists the company was considering joining with partners on a bid, but that it "won't make that decision until the very last minute as more information comes along."
Several people familiar with the matter said that the company believes that it would lose goodwill in Washington, if it didn't bid, given that it won changes to the auction rules that will force the winner of one block of spectrum to open its network to any mobile device or software application. One of the people familiar with the matter said Google is "going for it" and expects to bid on its own despite interest by potential strategic partners in each investing $1 billion or more in a joint bid effort.
The complexity of the possible bidding scenarios and auction outcomes has led Google executives to believe they would benefit from the flexibility of bidding alone. They were also concerned about alienating allies by selecting some and not others as bid partners, say the people familiar with the matter.
In addition, Google discovered Wall Street was enthusiastic about the company's ability to raise any needed cash, lessening the pressure to bring in others. Google currently plans to consider whether to bring on partners after the outcome of the auction is known.
Meanwhile, back at its headquarters, Google is already operating an advanced high-speed wireless network under a test license from the FCC, according to people familiar with the matter. The company has erected transmission towers on its campus for the network. Prototype mobile handsets powered by the Android software are currently running on it.
Experience with the technology could aid the company in operating a full-fledged carrier, one of the options it's considering. Google is betting it could potentially build and operate a wireless network faster and cheaper than traditional operators.
In that event, the company could try new wireless technology approaches. Google this year invested in a closely held United Kingdom company called Ubiquisys Ltd. that makes a technology called femtocell, which allows mobile phones in poor-coverage areas to use home Internet connections to make calls and transfer data. Such technology could potentially be harnessed as part of any Google wireless infrastructure.
If Google is successful in the spectrum auction, other possibilities on the table include leasing spectrum to partners. The company has separately had discussions about potentially investing alongside other parties in Clearwire Corp., which is trying to build a nationwide high-speed wireless network, say people familiar with the matter. Such talks with Google aren't currently at an advanced stage, they say.
ABI Research senior analyst Nadine Manjaro believes it's more likely that Google would form a partnership with an existing wireless network operator than try to build one on its own. "They have no experience in running a network, and it's not something simple to do," she says. Ms. Manjaro estimates the cost of building a national network on the spectrum available at $3 billion or more.
source
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