They’re the superheroes of the airwaves, invisible signals that can carry data faster than a speeding bullet, powerful enough to penetrate the thickest walls of homes and office buildings, able to leap long distances between transmission towers in a single bound.
The federal government’s decision to auction this prime public spectrum in January could change the wireless world. It has the potential to make talking on cell phones, surfing the Web on a mobile device and watching TV on your handset easier and less expensive.
Among the bidders expected in the auction, which is scheduled to start Jan. 24, are Google Inc., AT&T Inc., Verizon Communications Inc. and Leap Wireless International Inc., operator of the Cricket and Jump mobile-phone services.
Even though the coveted airwaves won’t be available until early 2009, when TV broadcasters give them up as they convert to all-digital signals, they’re transforming the mobile marketplace already.
Federal officials hope the spectrum will produce another national competitor to existing wireless companies and lead to the creation of the long-desired “third pipe” of high-speed Internet access to compete with phone and cable service.
“It’s going to allow for a truly next generation of advanced wireless services,” Kevin Martin, chairman of the Federal Communications Commission, said recently.
The auction run by the agency will take weeks to complete and is expected to raise upward of $20 billion for the federal treasury. For consumers, it could launch a new era of wireless communications where networks are open to whatever devices or applications people want to use, and scanning Web sites and watching streaming video are as common as making phone calls and sending text messages.
“This auction potentially opens up mobile computing from something that’s very expensive and very limited to something that comes into everyday use,” said Harold Feld, senior vice president of the Media Access Project, a public interest law firm that has pushed for more open use of the airwaves.
The spectrum promises to help the U.S. catch up to Asia and Europe in the availability and speeds of wireless Internet and other mobile services.
But it’s not all about shopping online while at the beach or watching TV in the back seat of the car. Some of the spectrum has been set aside for emergency personnel, so firefighters and police officers from different departments can communicate better during wildfires and other major disasters.
The lure of the prime spectrum enticed Google, which wants to extend its Internet empire to the wireless world. And the clout of the deep-pocketed search giant, pushing the FCC to loosen the rules for about one-third of the new spectrum, has helped crack open the traditionally closed mobile world.
“No matter which bidder ultimately prevails, the real winners of this auction are American consumers, who likely will see more choices than ever before in how they access the Internet,” Google Chief Executive Eric Schmidt said in a statement.
Mobile advertising, which is expected to grow dramatically, is one of Google’s biggest potential new markets. The company has had difficulty getting products such as its search engine and Google Maps onto mobile phones in ways that make them easy for consumers to use.
That’s why Google recently formed a consortium with handsetmakers, technology companies and phone carriers, including Sprint Nextel Corp. and T-Mobile USA, to offer free software for mobile phones. It has built transmission towers on its Mountain View, Calif., campus to experiment with a high-speed wireless network.
For Google to really go mobile, it needs changes in the marketplace, where phone companies operate systems largely closed to unapproved devices and applications.
“Their basic strategic objective is to make sure that the wireless Internet resembles the wired Internet,” said Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co. “Right now, they are very different.”
Google is trying to change that, and the soon-to-be auctioned spectrum is the key.
The airwaves are considered the beachfront of the wireless landscape. Used for years by TV broadcasters, the chunk of spectrum in the 700 megahertz band carries data much farther than other bands, requiring fewer transmission towers. And it can penetrate obstacles easily, making it ideal for streaming video, which requires a constant signal.
Add that it is the last large block of spectrum expected to be available for years, and the auction’s stakes become supersized. Public-interest groups were pushing to free the spectrum from the closed regulations of the large wireless companies when Google joined their cause this year.
In the summer, Google promised to bid in the auction if the FCC agreed to make the new airwaves more open. Martin and the FCC agreed to one part of Google’s push, requiring whoever wins the spectrum to allow people to use any device or software on it. But Martin balked at Google’s more controversial request: to require the new spectrum license-holders to allow any company to use the airwaves at wholesale prices.
While Google will bid in the spectrum auction, it might not bid to win. Analysts estimate it could cost the company $10 billion, on top of the billions needed to acquire the spectrum, for the transmission towers and other infrastructure needed for its own network.
With the requirement to allow any device or application to operate on the spectrum, Google could get into the mobile market without having to build and operate a network. But there’s a catch.
Under Martin’s plan, the openness requirement disappears if the minimum $4.6 billion bid is not met, something major phone companies such as Verizon and AT&T, who opposed the requirement, would prefer.
So while Google is jumping into the auction, it might quickly jump out.
“There are a lot of people, myself included, who think that is their fundamental strategy: to bid … and trust that Verizon bids $4.61 billion,” said Levin, the Stifel, Nicolaus analyst. “At that point, they accomplished their goal.”
The threat of Google starting its own wide-open network will force Verizon to bid aggressively to beat them out, said Jason Armstrong, a telecommunications analyst at Goldman Sachs.
Verizon and AT&T would not comment on their strategies. AT&T spent $2.5 billion in October to buy spectrum licenses in the same band in 281 markets from Aloha Partners, so it might not need to buy much of the newly available spectrum.
But it will participate in the auction, one that could end up rocking the wireless world.
