Google set to bid billions in airwave auction

WASHINGTON — Google on Friday said it will bid at least $4.6 billion for wireless airwaves being auctioned off by the federal government — if certain conditions are met.

The Internet search company wants the Federal Communications Commission (FCC) to mandate that any winners lease a certain portion of the airwaves to other companies seeking to offer high-speed Internet and other services.

Such a provision, Google argues, will give consumers — who traditionally get high-speed Internet, or broadband, access via cable or telephone lines — a third option for service. The so-called wholesale provision presents a huge business opportunity for Google, analysts said.

"Today, we have 200-plus million cellphones. If those are now all 200-plus million enabled broadband devices, what's the value of Google? It's significantly greater," said Blair Levin, an analyst at Stifel Nicolaus.

FCC Chairman Kevin Martin last week previewed draft rules for the auction that did not include the wholesale provision.

That's a sticking point for Google, which sees the wholesale provision critical to promoting competition in the wireless broadband marketplace. It wants one-third of the airwaves being auctioned off to be offered on a wholesale basis.

The wireless airwaves that will be auctioned lie on a particularly valuable band of spectrum. They can travel long distances and easily penetrate walls, ideal for high-speed Internet service.

The auction, which must take place before Jan. 28, 2008, could raise as much as $20 billion for the U.S. Treasury.

In a letter to Martin, Google Chief Executive Eric Schmidt said the current auction terms fall short of what it, consumer groups and other companies want.

"In short, when Americans can use the software and handsets of their choice, over open and competitive networks, they win," he wrote in the letter dated Friday.

Google's position puts it at odds with major telecom carriers such as Verizon Wireless and AT&T, both viewed as potential bidders.

AT&T has said it favors the current auction draft rules, but Verizon would not comment on its stance.

Martin's draft proposal did contain a rule on open access that seems to be favored by all potential bidders. It also means Google's conditions would be at least partially met. Open-network access would allow consumers to buy the wireless device and software of their choice and use it on the new network.

In a statement Thursday, Jim Cicconi, AT&T's senior executive vice president for external and legislative affairs, said Martin's proposal was an "interesting and creative balance" that would not change the business models of AT&T and others. He said Google would now have to "put up or shut up."

Even without the wholesale provision in the final rules, Google can still lease the airwaves to other providers if it wins the auction.

But, Chris Sacca, Google's head of special initiatives, said the company is a longshot to win.

"Auctions traditionally go to the incumbent. They go to the company who has the most money and, in this case, Verizon and AT&T have a lot of money," he said.

Sacca said Google won't comment on whether it will drop out of the auction until it sees the final FCC rules.

The FCC draft proposal, which has not been made public, must still be voted on by the full commission, perhaps as soon as July 31. One commissioner, Michael Copps, a Democrat, said last week he may not vote on the proposal because it does not contain the wholesale provision.