Jammed Shut: Google Is Worried What Verizon Might Have For Future Customers Behind Door No. 2
During the FCC’s recent auctions of the 700MHz wireless spectrum, Google risked owing the government slightly more than $4.6 billion simply to ensure that the open access rules it fought for would be imposed on whoever won. Verizon won, and now it must allow allow any device and any application to run on the future wireless broadband network it will build on that spectrum. Or does it?
Google is so worried that Verizon wlll try to find a loophole in the rule that it filed a petition with the FCC on Friday asking it to preemptively enforce the rule on Verizon. Excerpt (full text embedded below):
The Commission’s open access rule is clear that C Block licensees “shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice….†The rule also is explicit that C Block licensees may not “disable features on handsets it provides to customers.†The rule thus plainly proscribes a C Block licensee from selling handsets to customers that hinder a customer’s ability to use applications of their choice, and applies to all customers of a C Block licensee.
Notwithstanding the clarity of the rule, Verizon has taken the public position that it may exclude its handsets from the open access condition. Verizon believes it may force customers who want to access the open platform using a device not purchased from Verizon to go through “Door No. 1,†while allowing customers who obtain their device from Verizon access through “Door No. 2.â€
Is Google just paranoid? Not exactly. There is a huge, gaping loophole in the rules. Namely, Verizon can block any device or application it deems to have a negative impact on the performance of its network. And while Verizon hasn’t explicitly said one way or the other how it will abide by the open access rules since winning the auction, it’s actions in the past do not inspire confidence. It tried to sue to stop the rules, and when it announced that it would “open up” its current network last fall, what it meant was that it would create a two-tier system. Verizon phones and apps will continue to get preferential treatment, and everyone else’s will be relegated to a separate part of the network.
The justification was—guess what?—to make sure that those pesky unapproved apps and devices don’t mess up the network. It should not surprise anybody if Verizon tries to use the same reasoning to de-fang the open access rules whenever it decides to build its 700MhZ network. Google can petition all it wants. It might not do any good.
(Photo by Jurek Durczak).
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Regional Bets Pull Ahead in Wireless Spectrum Auction
A notable turn of events just happened in the FCC’s auction for 700 MHz wireless spectrum that began on January 24. Throughout most of the auction, the highest bid has been for the nationwide C-block, which topped out at $4.7 billion last week. But that just changed in round 30 of the auction that closed less than an hour ago. Now, the cumulative bids for the regional licenses are more than the $4.7 billion, and they have taken pride of place as the “provisional winning bids” (i.e., the bids to beat). Corporate participants in the auction such as Google, Verizon, and AT&T can try to bid on a nationwide license or on individual regional and metro licenses in their attempts to get the desirable C-block of wireless spectrum.
On Friday, I noted that the bids were increasing for the regional licenses, and put out a theory I call the Mississippi Valley Sneak Attack, because the bids for the Mississippi Valley region were visibly climbing at the end of last week. But they never were high enough, along with the bids for the other regions, to become the winning bids until just now. The working theory is that we may be witnessing an attempt by one or more of the deeper-pocketed players to stay in the auction without showing their entire hand until the very last minute. The participating companies are not allowed to discuss the auction until it is over.
Anyone can watch the auction electronically as it occurs. Go to this FCC Web page for Auction 73, click on “View Auction Result,” then click on the Results tab.
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Wireless Spectrum Auction is Over For Coveted C-Block. But Who Won, Google or Verizon?
The most closely-watched part of the wireless auction for the 700 MHz spectrum that started earlier this week appears to be over. The auction for the coveted C-block of spectrum, which is a nationwide license and is subject to special open-device/application rules, was won by a $4.7 billion bid—just a smidgen above the $4.6 billion minimum required by the FCC. Until the entire auction is over for the other blocks of spectrum, the FCC won’t disclose who the winner is. But the consensus is that the winner is ether Google or Verizon.
Bits blogger Saul Hansell at the NYT has been watching the spectrum auction like a hawk. His theory, after looking at the pattern of bidding for the C-block, is that either there were two bidders playing a drawn-out game of chicken or only one bidder slowly raising its price, almost reluctantly. That one bidder could have been Google, which showed its hand earlier by publicly stating it would bid the $4.6 billion minimum to support its suggested open access rules (and stuck by that pledge even though only two of its four suggested rules were adopted ).
Verizon could have sat the auction out, deciding not to bid and instead watch Google squirm as it realized it was the only one in the game. There is a lot of skepticism about how serious Google really is in its desire to actually win the auctions as opposed to influence their outcome and the rules of the game. When it became apparent that there was only one other bidder in the early rounds of the auction, Verizon could have calculated that Google would bid just shy of the $4.6 billion if it realized it was on its own. If that had happened, the FCC would have almost certainly re-auctioned the C-block at a later date without any of those pesky open-device and open-application rules that Verizon really doesn’t like.
But somebody did make the minimum bid, and those rules will be in effect. If Google indeed was the lone bider, it might have just swallowed hard and decided to go ahead and buy the spectrum. Maybe it was worth more to Verizon to see Google pay a $4.7 billion penalty for stepping on its turf than to have the spectrum for itself. Or maybe it wanted the spectrum all along, and it waited until the last minute to put in the minimum bid, betting that Google wouldn’t respond. Either way, Verizon might feel like it snookered Google on this one.
But we’ll all be better off for it because whoever builds the next wireless network on this spectrum won’t be able to discriminate between devices or applications. And if it turns out that Google did in fact win, there would be nothing stopping it from pursuing its two other goals of opening the network up to other service providers through wholesale leasing and other networks (both wireless and wireline) as well. That would help make the wireless world less a collection of silos and more Internet-like.
So who snookered who?
(Photo by Steve Jurvetson)
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Wireless Spectrum Auction Might Be Over For Coveted C-Block. But Who Won, Google or Verizon?
Update: It looks like some of us jumped the gun on calling this, including the New York Times. It turns out that there are still enough bidding units left in the C-Block for one or two deep-pocketed companies to still make a bid. So it is not necessarily over yet. Because of the secrecy surrounding the auctions—companies are not allowed to talk about it until it is over—we can only guess what is happening. The post below is entirely speculative.
The most closely-watched part of the wireless auction for the 700 MHz spectrum that started earlier this week appears to be over. The auction for the coveted C-block of spectrum, which is a nationwide license and is subject to special open-device/application rules, might have been won by a $4.7 billion bid—just a smidgen above the $4.6 billion minimum required by the FCC. Until the entire auction is over for the other blocks of spectrum, the FCC won’t disclose who the winner is. But the consensus is that the winner is either Google or Verizon. Update: We’ll see in the following days whether any other bids emerge. This could just be a pause in the bidding.
Bits blogger Saul Hansell at the NYT has been watching the spectrum auction like a hawk. His theory, after looking at the pattern of bidding for the C-block, is that either there were two bidders playing a drawn-out game of chicken or only one bidder slowly raising its price, almost reluctantly. That one bidder could have been Google, which showed its hand earlier by publicly stating it would bid the $4.6 billion minimum to support its suggested open access rules (and stuck by that pledge even though only two of its four suggested rules were adopted ).
Verizon could have sat the auction out, deciding not to bid and instead watch Google squirm as it realized it was the only one in the game. There is a lot of skepticism about how serious Google really is in its desire to actually win the auctions as opposed to influence their outcome and the rules of the game. When it became apparent that there was only one other bidder in the early rounds of the auction, Verizon could have calculated that Google would bid just shy of the $4.6 billion if it realized it was on its own. If that had happened, the FCC would have almost certainly re-auctioned the C-block at a later date without any of those pesky open-device and open-application rules that Verizon really doesn’t like.
But somebody did make the minimum bid, and those rules will be in effect. If Google indeed was the lone bider, it might have just swallowed hard and decided to go ahead and buy the spectrum. Maybe it was worth more to Verizon to see Google pay a $4.7 billion penalty for stepping on its turf than to have the spectrum for itself. Or maybe it wanted the spectrum all along, and it waited until the last minute to put in the minimum bid, betting that Google wouldn’t respond. Either way, Verizon might feel like it snookered Google on this one.
But we’ll all be better off for it because whoever builds the next wireless network on this spectrum won’t be able to discriminate between devices or applications. And if it turns out that Google did in fact win, there would be nothing stopping it from pursuing its two other goals of opening the network up to other service providers through wholesale leasing and other networks (both wireless and wireline) as well. That would help make the wireless world less a collection of silos and more Internet-like.
So who snookered who?
(Photo by Steve Jurvetson)
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Verizon Says It Will Support Google’s Android
Although not yet officially part of the Open Handset Alliance that is supporting Google’s open-source Android mobile operating system, Verizon Wireless CEO Lowell McAdam tells BusinessWeek, “We’re planning on using Android.” Why not? Talk is cheap when you are trying to come across as all open on the eve of the biggest wireless spectrum auction in a decade. But if it means more support for Android and open networks in general, that is a good thing.
The BusinesWeek story is a big wet kiss that lovingly details Verizon’s seriousness about opening up its network. (The CEO keeps a list with him always of why openness is important to Verizon. Crumpled. In his pocket. The thing is practically near his heart!). Sorry, but the whole thing smells like a well-timed plant. We are still waiting for Verizon to officially join the Open Handset Alliance. And if it really were embracing openness, it wouldn’t treat open devices and open apps like second-class citizens, separate and at a safe distance from its 64 million subscribers.
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The 700 MHz Spectrum Auctions. Who’s In, Who’s Out.
The deadline to apply to participate in the FCC’s upcoming auction of wireless 700 MHz spectrum passed on Monday. And we still don’t know exactly who the bidders will be. But we have a pretty good idea.
Google is in. So is AT&T, Frontline Wireless, and Craig McCaw’s Clearwire. Comcast and Time Warner are out. But Cox Communications is in.
Verizon Wireless isn’t saying either way, but everyone expects it to bid. Sprint Nextel is sitting this one out, as is Microsoft. And T-Mobile isn’t expected to play a big role.
At least initially, there seems to be two major camps. Google and Frontline on one side, looking for an opening in the entrenched wireless industry. And AT&T and Verizon on the other, trying to keep the technology pirates from climbing aboard their ships. And Craig McCaw as always, is the wild card.
As for other possible bidders, you can never count out Qualcomm, or the handset manufacturers like Nokia or Sony Ericsoon, who might like to bypass the carriers for once. Smaller wireless companies like Alltel or Leap Wireless could bid on a regional basis.
I would not be surprised if at some point Google and Frontline combine forces. Any auction strategists or game theorists out there have any advice for how they can improve their chances of winning? Please enlighten us in comments.
(Photo by Steve Jurvetson)
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3G iPhone On Track For Next Year
In remarks at the Churchill Club, AT&T’s CEO confirmed what most Apple-watchers have been suspecting: a 3G iPhone will come out next year. Sounds like they fixed that battery-drain problem. Hopefully, these things won’t start exploding like those laptops a year ago.
Mike makes fun of me for toting around a Blackberry, but I’d rather wait for the 3G version of the iPhone to come out before thinking about switching. AT&T’s slow-as-molasses EDGE data network cripples the current iPhone (IMHO). The WiFi option for surfing the Web on the iPhone today is a nice backup, but you can’t really count on it for constant mobile connectivity. A 3G iPhone would certainly become yet another Apple lust object/upgrade, but will it be enough to accelerate sales to hit the 10-million mark Steve Jobs set as a goal for next year. It all depends on the price, and you can be sure that isn’t going to be cheap. My guess is $599.
During the same talk, AT&T CEO Randall Stephenson also pooh-poohed Verizon’s supposed plans to open up its network. According to Bloomberg:
Stephenson called the Verizon Wireless plan “overblown.” “The industry’s headed that way,” he said. “We are probably one of the most open networks in the world, not just the U.S.”
Thousands of developers create features for AT&T’s network, and consumers can buy phones at the full price if they don’t want to buy a subsidized model and sign a contract to use the company’s wireless service, Stephenson said.
I have my issues with AT&T’s network (slow and spotty coverage in my experience), but at least I can download any app I like to my Blackberry without going through them. The same cannot be said for Verizon, which only allows approved apps on its phones (usually ones where it is getting a cut of the download fees).
Verizon’s “Open†Network Will Really Be Two-Tiered
Verizon’s newfound openness when it comes to its wireless network is not all that open after all. As I reported yesterday, Verizon Wireless announced that it would allow “any device” and “any app” to operate on its existing network. But that is not exactly so.
By “any device” Verizon means you can bring any CDMA device to its network. Verizon has a CDMA network, so only CDMA phones will work on it—fair enough. It was always clear about that. But what exactly does it mean by “any app”? I dug a little deeper and asked Verizon whether any of the new apps developed for the bring-your-own devices would also be available to its existing customers who bought their phones through Verizon. The answer for now is, “No.” Although a spokesperson tells me that they are looking into it. Unless it figures that out, Verizon is not really building an open network. It is building a two-tiered network: One for its preferred customers who play by its rules (i.e., its current 64 million subscribers), and one for the rabble not satisfied with its choice of phones and apps.
If there is no crossover capability on the apps, then the “open” part of Verizon’s network will be barren. The appeal of developing an open app for Verizon would be to gain access to those 64 million subscribers. Nobody is going to go through the trouble of creating apps just for the handful of people who want a CDMA phone that Verizon does not already sell. Making the whole open network even less appealing will be the fact that these phones are not likely to be subsidized by Verizon, and thus far more expensive.
Unless Verizon creates at least the semblance of a level playing field between the open part of its network and the closed part (where all the subscribers are), then all the talk about open networks will remain just that. Talk. And Verizon knows how cheap that can be.
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Verizon Wireless Opens Up Its Network. Who’s Next?
In what is either a response to Google’s Android mobile operating system or an attempt to butter up the FCC for the upcoming 700 Mhz spectrum auctions or just a smart business move, Verizon Wireless is opening up its cellular network to any device or application that meets the “minimal technical standard” to run on its network. That means pretty much any CDMA device or application, even ones that are not officially offered by Verizon. The devices and apps will have to be tested and certified in a new $20 million Verizon lab being set up for that purpose, but by early next year if you don’t like the phones that Verizon sells, you will be able to bring your own unlocked CDMA phone to the network—maybe one you bought from Sprint or overseas.
This move could help Verizon in its bid for the upcoming 700 MHz spectrum auction, which will require that any winners allow open access to devices and applications on any resulting wireless network. By adopting those same principles for its current network, Verizon is showing a lot of good faith that could win it points in Washington. Maybe the other wireless carriers (AT&T, Sprint Nextel, T-Mobile) will feel compelled to do the same. That would be good for consumers, entrepreneurs, and innovation. The wireless networks should be more like the Internet. Any device or app should be able to run on any wireless network, as long as it meets a minimal set of technical and security requirements.
When Google was trying to gear up support for its open-source mobile operating system Android, Verizon was one of the companies Google was rumored to be talking with, but did not end up being part of the Open Handset Alliance (which included T-Mobile and Sprint Nextel). Verizon may still join the Open Handset Alliance in its own sweet time, but this move suggests that it would rather compete by trying to attract mobile developers to its own network. Verizon is not embracing an open-source approach (which is probably why Microsoft is all gung-ho about the announcement), but it will give mobile developers access to its vast network and 64 million subscribers. You didn’t think Verizon was just going to let Google waltz right in and take its customers for a spin, did you? But if Verizon doesn’t make it easy for developers and unaffiliated device manufacturers to get onto its network, it could end up tripping over its own feet.
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Google Tries To Land Mobile Phone Deals With Sprint, Verizon . . . Anyone
If things go well, we might finally see that Gphone by the middle of next year. Google is in heated talks with wireless carriers in the U.S., including Verizon, Sprint, and T-Mobile, (and Vodafone internationally) to carry the Gphone, reports the WSJ. Google already competes (and cooperates) with some of these carriers. It recently fought with Verizon, for instance, over the rules of the upcoming 700 Mhz wireless spectrum auctions, while it is partnering with Sprint on its upcoming Wimax network. The only carrier not mentioned is AT&T, which carries the iPhone.
When the Gphone does come out, chances are that there won’t be just one Gphone, but many. In the next two weeks, Google is also expected, says the WSJ, “to announce new software and services that handset makers could use to build customized Google-powered phones.” Just as in social networking, Google wants to make mobile phones an open platform that developers can build lots of applications on top of. We may very well see a mobile 2.0 platform war brewing between the Gphone, the iPhone, Windows Mobile, and Nokia’s Ovi.
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