700 MHz Auction: As open access nears, bidders back off

While the FCC is not disclosing the identities of the bidders to the public or each other, analysts projected the contest to be between two bidders, Verizon Wireless and Google. Since each round that has attracted a bidder has received only a single bid, two participants are most likely playing off one another, playing leap frog over one another from round to round.
Verizon Wireless is interested in 700 MHz to launch its future 4G network, using long-term evolution (LTE) technology. Google, however, is more of wild card. While Google is clearly interested in getting into the wireless business, it doesn’t necessarily want to be a network operator. Its primary interest is in seeing that the C block meets the reserve price threshold set by the FCC, thus ensuring that the eventual winner’s network is open to its gadgets and applications. Google is participating in the auction, but it may just bid up the C block to the $4.6 billion threshold and then bow out ungracefully. Google CEO made this strategy fairly clear in a statement before the auction, claiming Google was putting its “money where our principles are.”

“No matter which bidder ultimately prevails, the real winners of this auction are American consumers who likely will see more choices than ever before in how they access the Internet,” Schmidt said.

Verizon Wireless has battled Google over the open access provisions from day one, but late last year it changed its approach. It dropped its court challenge of Google (though it was immediately picked up again by CTIA), and a few weeks later announced its own plans to open its networks, not just any future 700 MHz 4G network but its current 3G cellular network. Google and Verizon Wireless’ definitions of “open” may differ, though, which could lead to more courtroom battles after the auction concludes if VZW is the eventual winner.

Another possible bidder on the C block license is AT&T, the only other tier-one wireless operator in the auction. Like Verizon, AT&T will probably launch its future 4G network over 700 MHz, but its 4G future may already be set with its upcoming acquisition of Aloha Partners’ 700 MHz licenses. AT&T will be one of the largest holders of 700 MHz in the country, but it will have limited spectrum, with only 12 MHz in any given market. By comparison, Sprint holds 70 MHz in many of the markets in which it is launching WiMAX. To launch comparable networks, both AT&T and Verizon would have to load up on spectrum, which means AT&T is likely fishing in the regional and market licenses in the 700 MHz auction if not participating in the contests for the nationwide blocks.

Telephony’s Unfiltered Blog will have daily updates of the auction’s progress.