Wireless Auction: Google Playing Chess Ten Moves Ahead

This has to be one business schools will study -- assuming Google's maneuvers in the FCC's 700 Mhz auction were all thought-out and well-considered.

Google wanted open cellular networks so it could offer services to anyone, much as it does on the Internet. Google made noises as if it was going to bid on wireless spectrum and go into competition with the established wireless carriers and told the FCC that if it won, Google would keep the networks open. That put pressure on Verizon and AT&T to say they'd open up their EXISTING cell networks, and Google influenced the FCC to make the new 700 Mhz spectrum stay open.

So Verizon won the biggest block of licenses, and AT&T won a bunch -- but Google didn't pay a dime and wound up with basically what it wanted. Not many companies can pull off something like that.

Comments

[Network Effect:]

the story is over. the google that everybody knew no longer exists. look at the history of the Internet - AOL, Yahoo, eBay, Amazon - all kings of the hill one day like Google is now. but watch their stock price history as the bloom came off the rose as it just did for Google as it went from $750 - $400 and people started to realize that they can't keep that growth pace up. as a result, disappointments start to be the story for a while rather than huge outperformance and P/E starts to come in b/c growth is slowing. The great Google story is over - they're still a great company and will do great things - but it's no longer the Google that we once knew.

2008 Mar 21 10:25 AM

[vboring:]

what?

i thought they were going to invent renewable energy that is cheaper than coal?

surely this is worth $1000/share.

2008 Mar 21 10:51 AM

[User 166581:]

People who underestimate AT&T or Verizon's competitiveness or savvy need only talk to anyone who worked for MCI-WorldCom, or any of the other telecom roadkill the big guys left in their wake after the ten year foot-dragging and lobbying and, from a positive standpoint, reorganization and refocus, following the Telecom Act of 1996. People were predicting the demise of the legacy Bell companiesl as MCI grew like a weed. Then, as now, one should not underestimate - as Google certainly does not - the magnitude of what is involved in managing a worldwide telecommunications network. Enginneering. Regulation. Employees. I don't think AT&T or Verizon likely suspected - as this post implies - that a bunch of foosball playing experts in running a data center (Google) were interested in taking on that effort. This is a long war. That's how I would approach this business case simulation.

2008 Mar 21 10:52 AM

[wrlsmarc:]

Do you really believe Google has that much clout. If you look at GSM networks which both T-Mobile and AT&T use, they are as open as can be. I can use my SIM card in any GSM phone that has the correct radio/frequencies embedded in them. I will credit you, Verizon and Sprint were less open as they required the handset to be acknowledged in their database. However, the true story here is that even if OPEN is required, in the next five years, there will not be many 700MHz devices out there to make a difference in the way we buy mobile services. There are 100s of choices of GSM handsets. We will be lucky if we have 10 that incorporate 700MHz in 2011.

2008 Mar 21 11:49 AM

[Joe S:]

Interesting angles in the commentary and news... I'm scratching my head at where some of these perspectives originate from?

"Openness" means a lot more than being able to stick a SIM in a phone, or activate a handset (for CDMA). What good does a SIM do if the APN blocks IP traffic? What good is IE on a handset if the network forces it through a WAP gateway?

"Openness" has to do with certification, billing, partnering, what sorts of features are enabled (like GPS/LBS), what sorts of services can be provided, IP address management, etc.

Verizon Wireless have recently taken great (real) steps in this direction. Google's powerful capabilities from a server, to a device, will make everyone's experience a lot more useful, and fun! The financial community has matured such that voice-based ARPU is not the only financial metric. The FCC is getting better with every auction.

The 700MHz auction has been planned for some time, so if you think the manufacturers aren't already queued up to support devices (immediately), win RFPs, think again. Everyone is happy to see all this new real-estate, and develop it.

Cheers!

2008 Mar 21 03:33 PM

[exnt:]

Maybe Google can get what it needs by buying Sprint or at least buying access to Sprint's high speed network?

2008 Mar 21 04:07 PM

[gofer:]

"Google playing chess ten moves ahead"...
This much confidence and faith in Google seems reminiscent of someone who over-valued Google at $750 per share rather than the current $435.
.... besides this is coming from an author who predicted that Blu-Ray would eventually tank. Hehe...he was a tad off on that prediction.

2008 Mar 21 05:02 PM

[Nick Rao:]

I believe that the author gives Google too much credit. Google has been an IT company and has always supported open standards. Verizon Wireless and AT&T have set sights on expanding data revenue, voice being a commodity, as it has been for the land line business for years. By creating open networks, they expand the opportunity as data service and transport providers.

2008 Mar 22 10:36 AM

[pochovilla:]

What Google means by OPEN and Verizon means by OPEN are vastly different things. Verizon will open to the eye of a needle only after sufficient foot dragging and demanding standards that it must approve.
So we all agree with the 10 moves. Let's assume they made five moves so far from $750 to $435. What will the next five moves bring?

2008 Mar 22 02:53 PM

[Socialism c...:]

Hey "user"...the bloom didn't come off...it was overhyped to begin with!! I never bought any GOOG because I knew the hype would end. Show me the products. Ad money is not gonna keep rising at the rate GOOG did...it was a bubble from the get-go!

2008 Apr 02 12:41 PM