Government

Sanity check: The 700 MHz auction will tip the wireless balance, but in which direction?

The 700 MHz auction is expected to have a major impact on the future of mobile phones and the wireless Internet in the United States. Google, Verizon, AT&T, and others have big stakes in this game. Find out which ways it could tip and what it would mean.

It is one of the most talked about pieces of air in the history of civilization, and for good reason. The 700 MHz spectrum of radio waves currently being auctioned by the U.S. Federal Communications Commission (FCC) will have a major impact on the future of mobile phones and the wireless Internet in the United States.

The auction kicked off last Thursday, January 24, and during the first two days of the auction, $3.7 billion in bids were made. We know that there are 214 pre-screened bidders, but we won't know the identities of any of the winning bidders until the auction closes. However, we do know that the three biggest players in this game are Google, Verizon, and AT&T, and there are a variety of other interesting bidders, including Chevron, Qualcomm, Vulcan Ventures (led by Microsoft co-founder Paul Allen), EchoStar, U.S. Cellular, Alltel, Cox Communications, and Towerstream.

Why is 700 MHz worth billions?

All of these bidders want 700 MHz because the radio waves in that spectrum have long range (up to 20 miles) and can easily pass through walls and other physical obstacles. This makes it perfect for delivering broadband Internet over the airwaves at comparable speeds to cable and DSL. The spectrum has long been used for UHF television broadcasts in the United States, but on February 19, 2009, the TV broadcasts will go entirely digital, and the FCC decided to open up this valuable spectrum for commercial use. The graph below (based on data from Aloha Partners and GigaOm) shows how 700 MHz will allow a wireless carrier to cover the same area as higher slices of the spectrum but with much less infrastructure and at a much cheaper cost.

One company won't win the entire 700 MHz spectrum at the auction. Some smaller players, such as Qualcomm, are looking to land specific pieces of the spectrum to further niche services, such as video for mobile phones. And regional telecom companies are naturally looking to grab regional slices of the spectrum they could use to offer local broadband Internet using a technology such as WiMAX.

Nevertheless, I would expect that when the results are released for all 1,099 licenses sometime in February, it is very likely that we will be able to declare a winner. The part of the spectrum to keep a close eye on is the highly coveted C block, which if one company were able to control it, would provide full nationwide coverage for a next generation wireless Internet network. However, in an effort to promote open standards and competition, the FCC has stipulated that licensees of the C block must "allow consumers to use the handset of their choice and download and use the applications of their choice in this spectrum block."

It will take deep pockets to win the C block. The bidding was already up to almost $1.8 billion after two days and the FCC has set a reserve price of $4.6 billion. The conventional wisdom is that it will go in one of three directions: 1.) Verizon or AT&T, 2.) Google, or 3.) Someone else with deep pockets and a desire to enter the mobile Internet market. Let's a take a look at the potential consequences for each of these three scenarios.

If Verizon or AT&T wins ...

Both would likely hold onto the 700 MHz Class C block until their next generation 4G platforms are ready to deploy and they would probably do everything that they could to meet the absolute minimum requirements of openness. At different times, both of them have talked a big game about open platforms -- especially Verizon recently -- but both of them are primarily walled gardens that have a lot of opening up to do, and time and momentum are not on their side.

Market forces are pushing Verizon and AT&T toward open platforms, but both have long established legacies, policies, and infrastructures to overcome. They both covet 700 MHz Class C  to be able to more quickly compete against Sprint's mobile WiMAX, which will launch in 2008 and begin the conversion of cellular providers to mobile Internet providers. Because of their stake in the current cellular business and their own infrastructure legacies, I have to believe that AT&T and Verizon would ultimately slow the growth and adoption of the mobile Internet if either of them won 700 MHz Class C. For the same reasons, these two are also likely to delay the move to open platforms.

If Google wins ...

There would immediately be a debate about whether Google wants to become a wireless carrier or if it just wants to control the airwaves and rent them to wireless providers with the provision that they provide open access and are friendly to Google's emerging mobile platform. Google's ambitions are clear. It sees the Internet going mobile and it wants to build an ad network to monetize the Internet on mobile devices.

The question is whether Google would actually want to get into the messy and complicated business of becoming a service provider. That seems doubtful. So far in its short corporate history, Google has been content with letting others do all the hard work of building things and then Google has swept in and served as an information middle man with an ad network that scrapes money off the top of transactions.

If Google does actually win -- which is a long shot -- I think it would indicate that Google wants to jump into the service provider role. After all, Google has said again and again that it is a technology company and not a content company. If Google does win and start a new wireless broadband network, it would put tremendous pressure on the leading wireless carriers to open their networks and play fair. We'd also likely see 700 MHz implemented much more quickly because Google would have a clean slate to work with at the platform level and would be highly motivated to get something off the ground as soon as possible to start recouping its investment.

If someone else wins ...

The unknown factor in the auction is the possibility of someone else swooping in and gobbling up the Class C licenses. Very few companies have the kind of money to play a hand at that table, but there are some, such as Vulcan and Chevron, who could make a run at it if they are serious about running a new national broadband network.

New competition for cable and DSL would be great. New competition for mobile phone providers in the United States would be even greater. A new vendor in this space with the valuable 700 MHz spectrum as its top asset would have major ripple effects across the cellular and Internet markets in the United States.

Of course, building a new nationwide network would be very, very challenging and risky. But the payoff could be enormous since the mobile Internet will revolutionize both the current Internet access industry and the mobile phone industry (by replacing the current cell networks with VoIP over the mobile Internet).

Additional resources

Conde Nast Portfolio has published an excellent visual illustration of the 700 MHz spectrum:

For more on the 700 MHz auction, see:

Who do you think will win the 700 MHz auction? What do you think it will mean for the future of mobile and wireless in the United States? Join the discussion.

About

Jason Hiner is the Global Editor in Chief of TechRepublic and Global Long Form Editor of ZDNet. He is an award-winning journalist who writes about the people, products, and ideas that are revolutionizing the ways we live and work in the 21st century.

52 comments
Cazzywayne
Cazzywayne

How will this affect all the wireless Microphone users in the music industry? Wireless guitars and other devies like that. It would reaslly suck if you turned your amp on and plugged in your wireless just to her someones conversation, not to mention the fines that may go with it.

Cazzywayne
Cazzywayne

How will this affect all the wireless Microphone users in the music industry? Wireless guitars and other devies like that. It would reaslly suck if you turned your amp on and plugged in your wireless just to her someones conversation, not to mention the fines that may go with it.

Avendhia
Avendhia

1.5Mbps at 700Mhz is quite a stretch! At 900Mhz you barely get 3Mbps aggregate ??? that means 1.5 up and 1.5 down but with overhead it is more like 1.2Mbps. I wonder what kind of speeds they are going to get? For cell phones it???s no big deal but wireless internet for laptops? It???s going to be really slow???..FYI for people, this is the old UHF band so it has been used for decades but only for TV signals. It will be interesting to see what gets promised and what is reality.

naserm
naserm

I think available bandwidth and reuse factor at 700 MHz carrier should be taken into account as well.

damfman
damfman

What I wnat to know is...what is the FCC going to do with all that money?

ptg187
ptg187

last term for my competitive inteligence class we researched apple google and microsoft and found some interesting news. one, google took out patents on cdma technology, they have also given developers kits out for their new open source phones to have its network & security infrastructure made (for free). they have even been in talks with simon fuller, the man behind UKs idol hit show which spawned american idol, to revolutionize the way media content is created and delived. they even had the foresight to partner up with apple via youtube(which google ows) to create the demand they will supply to when they grab this auction and give comcast a run for their money.

jason
jason

My biggest concern is openness. I'm a Verizon Wireless customer, but only because I've had the contract forever, I plunked down the cash for a Treo 700p (CDMA) and most of my friends & family have Verizon (free mobile -> mobile). The idea of a whole spectrum with carrier-neutral handsets (best case) makes my mouth water, not to mention the concept of relatively inexpensive (hopefully) carrier-neutral mobile broadband modems.

pmosca
pmosca

Does anyone know if this 700MHz technology is ALREADY being used by wireless/internet companies in other countries?

DadsPad
DadsPad

Thanks, Jason for the heads up information. Interesting our future mobile phone service might be VoIP!! This could have world wide impact.

rkiran_josh
rkiran_josh

Interestingly there is a airwave (spectrum) auction in India too. 2.9 Ghz it seems. So any take/comments on that?

pr.arun
pr.arun

Very informational Jason. Also the caveat for the C Block means that if the $4.6 billion bid is not cleared, then AT&T or Verizon could bid for a closed C block...

Master G
Master G

In the pockets of big fat cats!. But in any case it will stimulate the economy with a new wave of services and devices as well as new media format or enhance the ones we currently have. A big change in auto technology and wireless networking. SO expect big changes in every company that involve roaming users to play a part on this.

bugsplat
bugsplat

isnt it more likely that everyone (by that i meant the big players with the money) will hold back and deliberately keep the bidding low so that the auction has to be redone, but without the C class restrictions...then they will bid high to ensure they get it.

NickNielsen
NickNielsen

Too bad your Competitive Intelligence class did not teach you the importance of proper spelling, punctuation, grammar and capitalization to good communication. You may have a valid point, but it's lost in the morass that is your post.

megamanv
megamanv

What right do they have to sell fractions of the electromatic spectrum? Your government is out of control. You call it a democracy? Who's voting? You don't even know who's running your life and so you have to grab at straws. Did anyone consider that this money gobbling act of privitization might actually be illegal? But hey, how can anything the government does be illegal? If it were me, I would wonder how a country comes to the point of selling itself out so miserably. pr.arun@... Job Role: Other Location: Hyd, India Member since: 03/29/2007 ^ | Who is this guy? Why are American affairs suddenly international business? Go talk about the selling of the airwares in your own country. Oh that's right. India wouldn't sell its airwaves. ;)

GrandmaTech
GrandmaTech

I have heard it said that there are foreign companies investing heavily in the American market; possibly with the idea of 'taking over' some american 'territories' (such as our air waves)and causing HAVOC here in the USA. Is there even a remote possibility of a foriegn market trying to rule our air waves? Some of them do have the money.

cmereau
cmereau

Hello Jason, this is a great article as usual. I thought that Google was spreading wireless to cover the city of San Francisco. What of that effort? Do you know anything about that? Could it be that this is going to influence their choice?

DCR-Mo
DCR-Mo

I noticed that the range of coverage is 20 miles...that could mean a more cost-effective means of opening up more rural/remote US residences to high-speed internet coverage. Do you thing that is part of the plan?

TheHow1
TheHow1

This was very informative and I wanted to thank you for posting it. I work for one of the communication giants and have often wondered why they have not pursued VoIP more aggressively. But I am nothing but a peon and may not be fully aware of what they are doing with VoIP. And I have seen projections that in the near future wireless subscribers will out number landline subscribers. So I can see how this would be a very hot commodity.

lmenningen
lmenningen

Isn't that what we would be deluged with if Google wins anything?

Mike Thompson
Mike Thompson

Microsoft is building a web ad organization to rival Google. Were they one of the prescreened bidders?

ptg187
ptg187

didn't your mom ever tell you if you don't have anything nice to say, don't say anything at all? i wrote that on my pda while commuting. i already did my report with MLA citations, and I'd be happy to sell it you after a sample of my writing skills. but unless you've got an offer leave your emotional need to be an asshole at home. mkay, thanks -gabriel.

vfullmer
vfullmer

Amen. I don't want to take away from the real intent of this blog thread but...... how in the world are we ever going to become a better society, one in which is capable of showing the world the technology advancements we are making, if we don't have the society base to communicate. What an embarrassment! The Enligh language continues to be annihilated and few seem to care. This truly is a "Pity".

Master G
Master G

I dont think we are free in any way. Something simple as tax is not legal - It doesnt say it anywhere in the Constitution. Made up by the government fat cats. Look at health care, it's extremely blown out of proportions - Government does not care about people but yet feed from the people. For example the war - big business, the only beneficiaries are...yes and every single institution that is involve in weapon development, government officials who approve d it. The losers - they guys that the gov sends over to get killed. And when they come back they get nothing in return. We are attached to a system that only works of who is a the top and in control - nobody thinks on lower class and not even the middle class. It's just like a prison - Can't even get a parking space in NYC without a meter man watching if you are 2 meters of the yellow line. let me stop before I get CIA on my tail because even freedom of speech will soon disappear. Now let's go back to the topic!

ptg187
ptg187

Have been the same since WWI. The delay of this information is how certain people make a lot of money. And we've had a branch of government created to control flow between the two, called the CIA. Just like every other country in the world, it's the government's agency for Intelligence Gathering. However unlike every other government in the world, we don't acknowledge its purpose in keeping the US afloat in a global economy. You wanna hear about how we sold out? look up Woodrow Wilson quotes from during and after his presidency. Ya know the ones about how he signed over America's Freedom when he created the PRIVATELY OWNED federal reserve bank.

doctordawg
doctordawg

Musicians and public speakers already use this spectrum for our wireless guitars and lapel microphones, and have spent millions of dollars on equipment that will be rendered useless by this land grab. I'm supposed to be alright with it since the money will go to my government and so, indirectly, to me. Yeah. Right.

NickNielsen
NickNielsen

[i]Why are American affairs suddenly international business?[/i] Unfortunately, given the tone of your post, explaining the inter-relationships of the American economy and the world economy would be futile.

dschoene
dschoene

I just don't understand the legalities of all this. Good ole Uncle Sam has got to have their hands in everything. How can you own frequencies, or sell them?? Who owns the oceans?? Who owns the air you breathe??? Who owns the land you live on?? This whole thing is laughable. I just hope the average consumer gets the good end of this deal.

jasonhiner
jasonhiner

Google was going to help build a city-wide network of Wi-Fi access points. Those plans fell through for economic and political reasons. I wouldn't be surprised if Google made San Francisco its first city to test a rollout if it wins the 700 MHz auction, but this wireless strategy is definitely a larger nation-wide (and eventually global) play for Google.

jasonhiner
jasonhiner

Wireless Internet will make rural broadband much more economically feasible. WiMAX will start that process in 2008 and 2009.

Sagax-
Sagax-

Which internet are you using? Mine is NOW covered in ads. Or it would be if there were a 64 bit Flash Player.

jasonhiner
jasonhiner

I think Microsoft wants to remain a software and services company. Microsoft is building an ad network, as you mentioned, but for mobile ads I think they would be much more likely to build a strong partnership with a big vendor.

NickNielsen
NickNielsen

I got drama in return. Get your fun where you can... ;)

yellow911
yellow911

you three gentlemen are quite honestly hilarious....after several of your overly dramatic "grammar" posts, i began to perceive a definite satirical subtext going on....reminiscent, i believe, of the old "who's on first base...." classic. please keep it up, gentlemen, you quite made my day.....

NickNielsen
NickNielsen

The only thing I was able to get from his original post was that "google" did something and then something else and talked to somebody and "give comcast a run for their money." If that was the conclusion, I missed it. He failed to communicate, primarily due to poor sentence structure and paragraph construction. And it's somehow my fault? Wrong answer.

NickNielsen
NickNielsen

Final question. Why are you in college and just now learning to write (at $100/day)? Why didn't you learn it in grade school and high school (when it was essentially free)? Edit: [i]Can you honestly say that you've never contributed to the dumbening [/i][sic][i] of the US?[/i] I don't doubt I've made at least one contribution, but none quite like that one.

relativity1977
relativity1977

I wouldn't call your post a model of perfect grammar or spelling, Fink. I hope you were trying to be funny. "Why do you notice the splinter in your brother's eye, but do not perceive the wooden beam in your own eye?" (Matthew 7:3)

MGP2
MGP2

[i]I really thought you had a valid point in your original post. But my anally-obsessed-with-proper-English-in-writing mind couldn't get past everything else to see what it was.[/i]

RFink
RFink

"Now, about you're problem with people using poor grammar." [sic] That's funny. Using poor grammer to complain about poor grammer. It should be "your" not "you're".

relativity1977
relativity1977

I appreciate proper grammar as much as the next guy, but your comments are completely ridiculous and not nice. In spite of the poor grammar you're accusing Gabriel of you still got his point, and I think it's quite alright to check some grammar formalities at the door when posting on a forum. I've seen far worse grammar on this site. Your comments had nothing to do with the topic. I apologize for contributing to the digression, but somebody had to check you guys.

ptg187
ptg187

I understand the need for Grammar, Punctuation, and Clear Cohesion in a paper. However, I take these posts about as seriously as I do my MySpace posts, not at all, and what matters to me is the discourse. I pay people about $100 a day to check my grammar and teach me how to write, it's called college. so you say "i really thought you had a valid point" but you couldnt see past everything else to see what it was... Maybe the point was to let go of the anal retention attached to your staus and hear someone out as human being. I understand the accumulation of wealth is done by atomistic individuals doing their own thing in an economic market. (economic sociology is one of my favorite classes right now) But, can the atom know the molecule if it is still holding onto the fact that it's an atom? Don't you deal with enough Politically Correct bull at work? Now, about you're problem with people using poor grammar. Did you ever think that innovative technology used with a Utility-Maximizing Mentality, may have adverse affects on society as a whole? That, maybe creating systems to count change for the cashier at McDonalds, weakens our country's intellectual infrastructure? Can you honestly say that you've never contributed to the dumbening of the US? I understand how computers have evolved from processing data, to information, to knowledge. Any good IT person knows this. But Society doesn't know that this means their College Level Jobs are now being outsourced. The highest demand in jobs in the US has been temp jobs for at least 4 years now, who do we have to thank? IT. I have no problem with poor grammar, just like I have no problem with the crackheads in philly, I respect them as a neccesary facet on a faceless machine. If there is no economic system that does not serve an economic purpose, then there are no social reprocussions without a need to inform. Thankfully it's not what you do it's how you do it, which is the only reason im still in this field in this country.

NickNielsen
NickNielsen

1. I thought I was being nice. I never once stooped to name-calling. 2. My BlackBerry has a shift key and punctuation keys. So does my Palm. 3. Even under adverse circumstances, proper grammar and spelling are still proper. 4. If you were behind the steering wheel during this commute you mention, I strongly suspect you were a primary contributor to road rage in your area this morning. 5. Not going to make an offer. I've already got a sample of your writing skills... and finally... I really thought you had a valid point in your original post. But my anally-obsessed-with-proper-English-in-writing mind couldn't get past everything else to see what it was.

ptg187
ptg187

im just happy to be critically thinking, which is it's own reward. thank you for reminding me what's important. compassion and understanding.

MGP2
MGP2

Obviously, neither of you realize that intelligence has NOTHING to do with spelling or punctuation. Give me a society of people with compassion and understanding over pernickety, robotic jerks who think that grammar is the end-all be-all. Get a life, Jerks!

yellow911
yellow911

i think, sir, should you have the time and/ or interest to honestly examine your nations history, you will find, surely, that the u.s. has not exactly been shy and un-forthcoming in the "neck-biting" area either....let he who is without sin...etc., etc.....

megamanv
megamanv

Yep, the world couldn't survive without biting America's neck every now and then to suck more blood.

riverlightdesign
riverlightdesign

yes and where would the technology be without proper regulation? Do you have any idea how many different kinds of RF devices there are out there and how much chaos there would be if the airwaves were not controlled by the FCC?

cmereau
cmereau

Thank you Jason. I am always looking forward to your articles so keep them coming.