Google Confirms 700 MHz Auction Participation, Gets Ready To Play Spoiler

As has been widely expected, Google has confirmed that it will participate in the upcoming 700 MHz spectrum license auction here in the US. There’s lots of speculation and analysis about what this means; for its part, Google says FCC rules will prevent it from speaking publicly about its strategy.

Google’s blog post about the decision is strangely worded, though perhaps it reflects careful PR messaging more than any true tactics, with lines like “We already know that regardless of which bidders ultimately win the auction, consumers will be the real winners either way.” Still, this makes it seem like Google’s actual interest in bidding on, winning, and owning spectrum licenses is quite low. It still sounds like Google’s real interest is simply in getting wholesale access to a mobile broadband network, not in building and running its own network.

Verizon’s recent announcement encourages this thinking. After all, if Google can get access from a number of operators (Verizon, Sprint’s WiMAX network, etc.), there’s going to be a competitive market in place, negating the need for Google to shell out its own capital for licenses and networks.

What seems most likely, at this point, is that Google will meet the $4.6 billion reserve price for the C block nationwide license. This bid would put into place the open-access requirements stipulated by the FCC. After ensuring those requirements are attached to the licenses, Google could be happy to step aside and let operators fight over the license — since $4.6 billion is, by many accounts, a pretty low price for such attractive spectrum. Operators won’t want to see this spectrum slip out of their grasp, particularly at such a low price. Furthermore, new strategies, like that of Verizon, make the open-access rules a much smaller issue.

It’s something of a high-dollar game of spectrum chicken, with Google banking on the fact that the operators will blink. But, even if they don’t, Google still has an out. If it picks up the C block license for $4.6 billion, it’s gotten a great deal, and in turn has very valuable currency it can use to lease out to an operator and get itself a good deal on wholesale network access. Verizon’s open announcement could be seen as an attempt to persuade Google not to bid, since it could get the access it wants from Verizon; in the same vein, Google’s strange public announcement that it’s applying to bid is a sign to operators and any other interested parties that it means business.

Google can be the ultimate spoiler here. If it wants to, it can get involved and bid the license prices up, since it’s got the money to do it (though, of course, its investors might not be too happy). But that doesn’t really do it any favors. If it’s going to get licenses, it will want to pay as little as possible for them; it also doesn’t have any interest in inflating prices for licenses it doesn’t win, since that will be built into the costs of the network access it will later be buying.

One big issue is that, at some point, Google will have to play ball with the operators — the same operators it will want to compete with. But it will find a way to make it work, either by dangling spectrum in front of them like a carrot, or by virtue of being a massive wholesale customer.

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