Google bidding for spectrum – not entirely a blessing

Google is really trying hard to get its applications and services into mobile phones. But in the bargain it could be encroaching into every part of our Internet lives from its core business in search, to the Android operating system and applications on phones, to now owning spectrum for mobile telephony and data.

Google announced today that it will apply to participate in the Federal Communications Commission (FCC) upcoming auction of wireless spectrum in the 700 megahertz (MHz) band.

As part of the nationally mandated transition to digital television, the 700 MHz spectrum auction -- which begins January 24, 2008 -- will free up spectrum airwaves for more efficient wireless Internet service for consumers. Advocacy by public interest groups and Google earlier this year helped ensure that regardless of which bidders win a key portion of the spectrum up for auction (the so-called "C Block"), they will be required to allow their users to download any software application they want on their mobile device, and to use any mobile devices they would like on that wireless network, Google said. The winner must ensure these rights for consumers if the reserve price of $4.6 billion for the C Block is met at auction, it added.

Google’s moves in the last few months have been aimed to get its services into mobile phones, thus opening up a new advertising revenue stream for the company. Mobile operators however want to control what applications users download, because they are also beginning to see special services as large potential revenue streams, including from advertising. If Google wants to get into the phones of these mobile operators, it can only do so through generous revenue sharing deals with the operators.

The search giant has hence been pushing for opening up the networks, to further its business interests. The 700 MHz spectrum auction was an opportunity for Google and other groups to advocate to the FCC that at least this part of the spectrum should be kept open by bid winners.

Google has been at the same time pushing the open source Android platform for mobile devices, which will again support third-party applications, including Google’s. However the big players like Nokia are not backing this initiative. Having seen the control and commoditization of the PC platform by Intel and Microsoft, they don’t want something similar in the mobile phone market.

It is not clear at this point whether Google really plans to win the auction, or just meet the reserve price for the auction. Also not clear is whether Google, if it bids seriously and wins, will get into actual network operation. If it decides to do so, not only other service providers and mobile phone makers, but also users should be worried. Google will be playing in too many inter-related markets from mobile networks to mobile devices to applications such as search, giving it a lot of opportunity to control.

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Google Inc., T-Mobile, HTC, Qualcomm, Motorola and others have collaborated on the development of Android, which is open source software for mobile devices, including an operating system, middleware and key mobile applications.

As reported in various newspapers and in this blog, the Google Phone is not a device introduced by Google, but a software stack for mobile phones.

The companies have teamed under an alliance called the Open Handset Alliance (OHA), a multinational alliance of technology and mobile industry leaders.

The key objective of Android is summed in this paragraph on the web site of the alliance: “Android does not differentiate between the phone's core applications and third-party applications. They can all be built to have equal access to a phone's capabilities providing users with a broad spectrum of applications and services.”

Google’s bid to proliferate a standard platform, even an open-source platform, will likely be resisted by many mobile phone vendors including Nokia. An open source platform would deprive Nokia of its differentiation. Open source tends to drive commoditization, because every new software feature is available to anyone else to include in their phones.

In its bid to expand its presence beyond the desktop, Google has been pushing for mobile phone vendors and service providers to open up their platforms and services to third-party applications. That would enable users to download Google applications and services on to their phones without having to worry about software compatibility issues, or whether their network operator supports the application.

Currently Google, as also other application and services vendors have to negotiate with mobile phone vendors and network operators to support their applications or services. In such a deal Google would probably have to share its key revenue stream – advertising – with service providers.

The adoption of an open platform would help Google as also users who would have the freedom to choose applications for their device. These days if you buy a phone from Nokia Corp. or Sony Ericsson, or any other vendor, before you download an application, you have to verify that the software is compatible with and supported by your specific mobile phone model. You may also have to check with mobile phone service providers to find out if they support the application.

Google’s move to promote a standard platform is however likely to be resisted by mobile phone makers and network operators, as it will be seen by many as a move by Google to extend its dominance to beyond the desktop, and beyond search. The question foremost on vendors’ minds will be: what is Google doing with operating system and middleware for the mobile phone ? Isn’t that the same thing that Microsoft has been trying with its own software ?

As an user, I too would be a little worried, if my favorite search provider, news aggregator, online productivity applications provider, and blog hosting provider were to also try to get into operating system software. Google is beyond doubt the key player in the Open Handset Alliance. To assuage the doubts of handset vendors and those of users, the company has to make a clear statement of its own objectives.

Apart from winning over big handset vendors like Nokia, Google and Open Handset Alliance will also have to win over large service providers like AT&T and Verizon Wireless. These two companies together control over 50 percent of the US market, and have long been used to deciding what goes into phones on their network. Control has provided them rich content and services revenue streams. They may not take too kindly to having Google and the Open Handset Alliance telling them what to do on their networks.

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