Google gets its way with new wireless network

January 31, 2008, 6:59 PM UTC

By Michal Lev-Ram

Somewhere in the Googleplex, Sergey Brin, Larry Page and Eric Schmidt are celebrating right about now.

That’s because the Internet search giant Thursday scored its first big win in the mobile business: The minimum $4.6 billion bid has been met in the Federal Communications Commission’s auction of the so-called C block of the 700 MHZ wireless spectrum, and that means that the eventual winner of those airwaves will have to make their new network open to all mobile devices, a provision Google (GOOG) lobbied hard for last year. The FCC should be happy too — so far more than $13 billion in bids for the five blocks of spectrum have come in, exceeding the agency’s goal of taking in $10 billion.

The FCC had previously said that if its reserve price wasn’t met it would begin a new auction without Google’s open access requirement. The bidding race had stalled earlier this week, and until Thursday it wasn’t clear whether Google would get its way.  But Thursday morning, in the auction’s 17th round, a $4.7 billion bid rolled in.

What we still don’t know — and might not know for a while — is who will end up winning the C block, as the FCC is not identifying the bidders until the auction of the separate blocks of spectrum is completed. Google has said it would make a play for the C block airwaves, which are currently used for analog TV, but the company may have participated in the auction just to make sure the reserve price would be met. According to analysts, it’s likely AT&T (T) and Verizon Wireless (VZ) have their eyes on the C block as well, and at least one of them has been bidding, either against each other or Google.

“We think from this point on, Google can either exit the auction (i.e. stop bidding assuming it’s not the highest bidder currently) to hand it over to another bidder, or Google can  vie to win (but would unlikely be ‘stuck’ with the spectrum),” Bear Stearns analyst Robert Peck wrote in a note Thursday.

Why does Google care so much about this slice of spectrum? Because its wireless success depends on widespread use of its services on cell phones, and having a more open network would give it greater freedom to spread its mobile goods. Google currently faces resistance from U.S. carriers, who have traditionally had a tight grip on the type of devices and services allowed on their networks. Google’s new Android platform — a new mobile operating system open to all developers — has yet to prove its viability,  and having a more open, nationwide network in the United States could make it easier for Google — and other companies — to get more of its offerings on more devices.