Could Google emerge as broadband powerhouse?

23 Jul 2007

Search giant Google has offered a US$4.6bn surety payment to guarantee it will pick up a 700MHZ spectrum in the US if over-burdensome rules put off other competitors, leading to the company emerging as a future broadband powerhouse.

On Friday, Google chief executive Eric Schmidt sent a letter to the Federal Communications Commission (FCC) reaffirming its position on net neutrality in the forthcoming US spectrum auction, which it hopes to bid for if the conditions are right.

It has been suggested by a senior Ovum analyst that while the surety may be Google’s way of dealing with concerns that US taxpayers may be financially at a loss if there are no bidders for the spectrum, it may also be Google’s way of ensuring its own rules of regulating the spectrum are adopted.

“Of course there’s another side to this debate too,” explained Jan Dawson of Ovum’s US enterprise practice. “The wireless carriers who currently make a business out of heavily subsidising exclusive handsets in return for two-year commitments to their service plans have every interest in perpetuating that model, and have so far resisted calls for wireless net neutrality.

“Verizon has been strongly opposed to any form of neutrality provisions in the rules, while AT&T’s position has been a little more nuanced, supporting some of Google’s proposals while ultimately suggesting that it should bid for and win the spectrum itself if it wants to see a neutral approach to the spectrum,” Dawson explained.

Dawson said that at this point the most important thing is for the FCC to determine the rules quickly, giving all parties enough time to build business models for the use of the spectrum by the time of the auction – and all parties appear to agree on this.

“However, on virtually everything else there is still a gulf between Google and its supporters and the wireless carriers, with the FCC stuck in the middle,” she said.

Dawson recommends that the FCC errs on the side of less regulation but provide incentives for open and flexible use of the spectrum.

“Many of Google’s other proposals around the structure of the auction are actually very sensible.”

Ultimately, she said, if Google’s proposed business model is really as attractive as it suggests, it ought to be able to win the auction and push forward with that business model with its own spectrum, rather than enforcing the same business model on all other participants in the auction.

“But whether the FCC will be brave enough to resist calls for favourable treatment for one business model under the guise of ‘what’s best for consumers’ remains to be seen,” Dawson pondered.

By John Kennedy