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Tuesday, Jul. 31, 2007 at 1:22 pm

Google’s WiMax Bid Makes Sense — Dollars Too?

By Robert Gorell
July 31st, 2007

WAY faster than dial-upTalk to any European who’s ever paid for mobile or data coverage in the US and — once they’ve stopped laughing — it becomes painfully obvious how badly we’re getting ripped-off. “I can’t believe how slow it is over here,” they say. “We had these phones, like, three years ago,” they add. “Why do Americans allow themselves to pay $100 per month for third-world phone service?”

[Cue laughter and eye-rolling.]

Enter Google’s deal with Sprint, and its promise to bid at least $4.6 billion at the FCC’s upcoming spectrum auction for the coveted 700-megahertz range. This frequency is the ultimate sweet-spot for broadcasting, and it’s been collecting dust ever since you stopped adjusting rabbit ears on your TV.

Why such a bold move? SiliconValleyWatcher‘s Tom Foremski believes Google will become a wireless telco with its own fat backbone:

Google is not interested in search. It is interested in connecting the dots in user behavior. My cell phone can tell Google a huge amount of information about my user behaviors. And as Om Malik at Business 2.0 GigaOm, rightly points out, location is a powerful thing when you are in the contextual ad business…

Still, Foremski doesn’t see WiMax as the answer. He proposes that Google change its model entirely, and morph into a telco. But the thing is, as ComputerWorld reports, Sprint’s doing it anyway

Mobile WiMAX should provide far superior performance than the cellular operators’ 3G networks and Sprint has said it would charge less. In simple terms, mobile WiMAX would give Sprint at least a two-year lead over its competitors in terms of providing fast wireless broadband access.

Even more important, Sprint has said it would be an open network. By contrast, Sprint’s cellular competitors think the world is clamoring for walled-garden closed networks with overpriced service plans.

Meanwhile, the likes of PBS’s Robert X. Cringely have, well, cringed at the idea. “Is Google on crack?” Cringely seems to think so…

[...] what Google has done is a bold and foolish act in which it is hard to find an upside for the company. If they intended to actually win the auction, which I wish they would, then they wouldn’t have tried setting these conditions. They would just bid a truckload of money and walk away with the spectrum. But this thing they did do, what is it? It makes no sense at all, and one could argue, in fact, that is fiduciary suicide.

[...] This could be a fake, a head feint on Google’s part. By attempting to set these conditions on any eventual auction winner, Google is tacitly telling the mobile carriers that it really doesn’t intend to bid or doesn’t intend to bid above the $4.6 billion threshold. Emboldened by this the telcos, who are also arrogant and have a kind of reptilian craftiness, may decide to save their resources and only bid, say, $10 billion. But what if Google bids $20 billion? Well then it’s a whole new ballgame.

I hope that is Google’s plan, but I fear that it isn’t.

Like Cringely, Marketing Pilgrim‘s Andy Beal thinks Google might be bluffing

[...] Threatening to become a wireless carrier is one sure way to get the attention of those already in the mobile space. Surely the likes of Verizon and AT&T would be willing to accommodate Google’s partnership ambitions, just so long as the company stays out of their business.

Perhaps. Time will tell if it really is a bluff, but a Sprint/Google network would work. Google provides the ads while Sprint manages the network. Why is this such a stretch? Beal’s skepticism seems healthy, but Cringely’s is way overblown.

Google isn’t on drugs. Google is the drug.

Google’s Objective: Organize All the World’s Information

But to what end?

By organizing, cataloging, delivering, and analyzing the intentions and behavior of people, they’ve learned how to make lots of money. Google has always been more focused on distribution and delivery than they have been on advertising. Sure, the ads are where Google’s revenue comes from, but it’s a symptom — not the cause — of their current distribution model: search.

Now, close your eyes for a moment (or at least squint so you can still read this) and picture network that doesn’t require you going to Google.com or using a freaking browser toolbar to get table-scrap ads shoved in your face — highly relevant ones at that. Who’s searching now?

So, now for my own spectrum speculation:

  • Google will bid as much as it takes to win the auction.
  • A revenue share with Sprint will allow advertising to pay for the whole enchilada.
  • Pure-play broadband providers will continue to distinguish themselves with premium “last-mile” delivery, but they’ll have to get real about pricing. (Gen Y doesn’t fear an open network.)
  • Other wireless carriers won’t take long to flirt with Google.
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Comments (2)

  1. [...] we discussed how Google's WiMax deal with Sprint makes sense. Today, the mobile revolution seems imminent. Google's feeling [...]

  2. [...] Google tried to bid on the 700mhz spectrum recently with added conditions to their bid. Google wanted the regulator to specify the winning bidder must give users freedom to connect any devices to the network, download any software, and the carrier must be prepared to sell of chunks of the spectrum to third parties wholesale.(The Register) [...]

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