AT&T attempts to scuttle "New Clearwire"

SAN FRANCISCO — The ultramodern wireless network expected to showcase Google's operating system and applications for mobile phones is becoming entangled in an old-fashioned political squabble.

The first devices powered by Google's highly anticipated mobile operating-system software, known as Android, are expected to become available later this year. Phones with Android are designed to let users more easily access Internet services such as searching, and could steal some thunder from popular devices such as Apple's iPhone.

Cutting-edge network

But the launch of a cutting-edge network primed for the advent of "Google phones" could be marred by regulatory obstacles, as a telecommunications player well-schooled in the ways of Washington, D.C., works to press its own interests.

AT&T has begun lobbying the Federal Communications Commission (FCC) to reject a proposed merger of assets between Sprint Nextel and Clearwire, which will form the "New Clearwire" network.

New Clearwire is expected to be more receptive to Android-based devices than other, more established mobile networks — at least initially. In addition, Google will be the new network's "preferred" provider of search and other applications.

While Google will rely on bigger networks for the success of Android, New Clearwire should be a crucial proving ground, according to Yankee Group analyst Phil Marshall.

"It will be a sort of test bed" demonstrating what Google can do, he said, "prior to a more mainstream environment."

AT&T, the country's largest wireless carrier in terms of subscribers, says that Sprint and Clearwire haven't honestly accounted for the amount of spectrum New Clearwire will be able to use to transmit Internet and voice signals. The FCC closely monitors companies' spectrum holdings to foster competition in different regional markets.

Analysts say AT&T's bid stands little chance of scuttling the asset merger, but they warn that it could delay New Clearwire's launch or result in a paring of its spectrum assets.

Suggested goal

Ultimately, they add, AT&T's goal isn't just to hinder a rival as much as it is to create a regulatory climate where the FCC is less likely to place limits on its own spectrum holdings in the future.

"Everyone in Washington does everything they can to use regulation to their advantage," said Blair Levin, a Stifel Nicolaus & Co. analyst and a former FCC chief of staff.

"In this particular case, AT&T has some long-term concern about the way the FCC looks at spectrum caps, and this is a sure way to force the FCC to make some rulings that would be beneficial to AT&T down the road," Levin said.

Google has invested $500 million in New Clearwire, with Intel, Comcast and others backing the venture.

A Google spokeswoman declined to comment on the petition against New Clearwire, filed late last month. In a recent filing with the FCC, Google deemed the effort "substantively improper and anticompetition."

To be sure, Google has a number of partnerships with other mobile networks and device makers to place Android and the company's applications prominently in front of mobile users.

While other operators also have committed publicly about embracing a wider number of devices, they have a history of limiting access to their networks, analysts said.

T-Mobile, with U.S. headquarters in Redmond, is expected to release an Android-based phone in the fall, for example. Sprint uses Google as the default search provider on its network, while recent reports suggest that Verizon Wireless is nearing a similar agreement with the Internet giant.

Major player

In addition, Google is a major player in the new 3G iPhone from Apple; Google's maps and YouTube video services are prominently featured on the device.

New Clearwire promises to distinguish itself in important ways, while granting Google remarkable input on the network's development, analysts say.

Unlike even the most advanced, existing cellular networks, New Clearwire will use WiMax — a beefed-up wireless technology primed to carry data equally well or better than voice signals.

With an eye to gaining a competitive advantage, New Clearwire says it will become home to a broad range of devices, including those running Android.

While other operators also have committed publicly about embracing a wider number of devices, they have a history of limiting access to their networks, which may make New Clearwire's assertions more credible, analysts commented.

Google product manager Larry Alder wrote on a company Web site in May that "Clearwire intends to build and maintain a network that will embrace important openness features," adding that "the new network will provide wireless consumers with real choices for the software applications, content and handsets that they desire."

Clearwire expects to launch the new network in Portland, before the end of the year, Clearwire's Johnston said.

In the meantime, Clearwire must wait to hear what the FCC has to say about AT&T's petition to deny the asset merger underlying New Clearwire.

"It definitely seems like it's a transparent attempt to distort the public's interest to benefit its own commercial interests," Johnston said of AT&T's petition.