news analysis Google said last Friday it would apply to bid in the U.S. Federal Communications Commission's auction of 700 megahertz band wireless spectrum.
If it wins, it could build a wireless network for that spectrum on its own, or partner with others to build and operate such a network. Either way, Google could put its brand on millions of mobile devices that use the network. It would also be able to control the Internet experience on the devices and how much people would pay--or not pay--for the services.
In essence, Google could control the direction of the next-generation wireless network.
"Imagine an iPhone where the whole thing is a screen and the bottom eighth is banner ads running across," said Iain Gillott, a wireless analyst at IGR. "Spectrum is king; you own everything."
The 700MHz spectrum, which has been used to provide analog TV service, travels far and penetrates walls. As a result, it is considered the last remaining chunk of attractive wireless airwaves and is viewed as an opportunity to expand the Internet to a new frontier. The spectrum auction is scheduled to begin on January 24, and the deadline to apply to participate is Monday, 3 December.
Google and other Internet companies have been hampered in their ability to expand their markets into the wireless space because carriers have had such a tight hold on the cellular industry. Right now, U.S. consumers are locked into the handset they use, the network it operates on, and the software it runs.
This situation has crippled consumers' ability to use the Internet on their mobile devices, compared to how they use it on their PCs. Google executives say their aim is to bring the PC-style of Internet openness to the mobile world so that users have more choice in mobile services and applications, as well as price.
Google was instrumental in getting the FCC to adopt so-called "open access rules" that would ensure consumers could use any mobile device they choose on a large chunk of the 700MHz spectrum.
Profit motivates
While Google's entrance is likely to turn the wireless world upside-down, market disruption is not its motivation. Google's priority as a public company is to make a profit; having a Google-branded wireless service would attract a good deal more eyeballs to its ad-based services.
And mobile, in some ways, will be particularly fruitful for advertising. Owning the spectrum would give Google an advantage in local advertising, which is tailor-made for mobile use as people look for nearby restaurants, gas stations, or copy shops.
Conquering the mobile world would also give Google a boost in international markets, where people tend to be even more dependent on their mobile phones than they are in the United States.
Google has managed to turn Web search into an US$11 billion business on PCs by selling simple text ads that appear with search results. Imagine how lucrative that market will be when the ads, including local advertising, can get to the far reaches of the world where there are no PCs.
Right now the global PC search market generates about US$20 billion in revenue, assuming each PC owner conducts an estimated 35 searches a month, according to Citigroup research. If they do just one search per month on the four billion mobile phones expected to be in use in 2010, they could generate US$2.3 billion in revenue, assuming PC search advertising economics migrate as-is to the wireless world, Citigroup said in a report this week.
For Google, that could translate into US$700 million in incremental revenue in 2010, according to Citigroup. A new network on the spectrum isn't expected until 2010 at the earliest, analysts said.
Play video
There are currently no comments for this post.