Google Plans to Bid 4.6 Billion on 700MHz Band

NickCatal writes "The Wall Street Journal is reporting that Google plans to bid $4.6 Billion on the 700 MHz radio spectrum being auctioned off by the FCC. What is most interesting is that they are not planning on partnering with other companies to raise the cash, they are going to spend their own cash and possibly borrow some. With partners such as Sprint Nextel and T-Mobile in their 'Open Handset Alliance' is this a sign that they are willing to directly compete with the people they courted to join?"

Its called revrse MVNO

[shareme]

its called reverse MVNO. The open Handset Alliance Mobile Operator partners will be operating or servicing that spectrum that Google will bi don as a Google MVNO in reverse with the Google Brand name.. Sometimes it does help to ask a mobile expert.. Fred Grott Mobile Expert http://www.jroller.com/shareme [jroller.com]

Re:why?

[Ducu2002]

4.6 billion is the minimum price the FCC is willing to actually sell for, as in if nobody bids as much as 4.6 the FCC won't actually sell. So by saying to the FCC we'll bid 4.6 they assure the FCC they'll get the price they wanted. In exchange for this assurance Google got 2 out of 4 condition for free access to the frequency.

Re:f me thats a lot of money

[Roofus]

Googles Market Cap is $198 Billion [cnn.com]. I think they can find the capital if need be.

Re:f me thats a lot of money

[Bill Dimm]

According to Yahoo's stock info for Google [yahoo.com], Google has $13B in cash and it makes $4B per year in profit.

Re:f me thats a lot of money

[siliconwafer]

At the close of their most recent quarter Google has more than $13B in cash in the bank. They also have no debt to speak of.

With a market capitalization of nearly $200B, no debt, and a 22% return on equity, Google should have absolutely no problem raising cash if necessary. I suspect they will tap into their cash reserves rather than debt financing or raising capital by diluting existing shareholder equity.

The numbers are here:
http://finance.yahoo.com/q/ks?s=GOOG [yahoo.com]

It's part of the government

[dewarrn1]

From http://www.fcc.gov/aboutus.html [fcc.gov]

The Federal Communications Commission (FCC) is an independent United States government agency, directly responsible to Congress. The FCC was established by the Communications Act of 1934 and is charged with regulating interstate and international communications by radio, television, wire, satellite and cable. The FCC's jurisdiction covers the 50 states, the District of Columbia, and U.S. possessions.

Proceeds from auctions appear to be paid to the Treasury, although I admit I didn't wade through the entire act and it has been amended piecemeal since enactment http://www.fcc.gov/Reports/1934new.pdf [fcc.gov] (PDF warning):

(C) DEPOSIT AND USE OF AUCTION ESCROW ACCOUNTS.-- Any deposits the Commission may require for the qualification of any person to bid in a system of competitive bidding pursuant to this subsection shall be deposited in an interest bearing account at a financial institution designated for purposes of this subsection by the Commission (after consultation with the Secretary of the Treasury). Within 45 days following the conclusion of the competitive bidding-- (i) the deposits of successful bidders shall be paid to the Treasury; (ii) the deposits of unsuccessful bidders shall be returned to such bidders; and (iii) the interest accrued to the account shall be transferred to the Telecommunications Development Fund established pursuant to section 714 of this Act.

Re:f me thats a lot of money

[Frank Battaglia]

Not necessarily. The purchaser will most likely utilize the spectrum in the way which makes the most profit. For Google's business model, that may entail unencumbered access to get as large a user base as possible for directed advertising.

Re:f me thats a lot of money

[TheRaven64]

There are approximately 300 million people in the USA, so this works out at just over $15 per person. If they get 20% of people to use their service, it's $60 per person (over the lifetime of the licence). I strongly suspect that they can make this much profit. The cost of building the infrastructure is likely to be much more than this.

Re:f me thats a lot of money

[StringBlade]

There are already network transparency provisions on this frequency which makes it particularly appealing for consumers to buy devices designed to run on this spectrum. Last year Google petitioned the FCC to include four conditions of sale for this spectrum including network transparency for devices (meaning you can't be locked in like you are with Sprint/Verizon/AT&T/T-Mobile when you buy a phone) and something about requiring the high bidder to provide access to competitors for a reasonable price.

The FCC shot down two of the four suggestions, but the network transparency provisions stayed in. I'm holding off on buying a new phone for a while because if I can get a device (from any carrier) on this frequency I know I'm not locked in by the technology according to the conditions of sale.

Verizon and Sprint are fighting this condition in a lawsuit against the FCC.

Re:Its called revrse MVNO

[RzUpAnmsCwrds]

Sometimes it helps to write sentences that people can understand.

MVNO = Mobile Virtual Network Operator
"bi doin" = be doing (I think?)

OK, let's try that, and a few more fixes:

It's called reverse MVNO. The Open Handset Alliance Mobile Operator partners will be operating or servicing that spectrum that Google will be doing as a Google MVNO in reverse with the Google brand name. Sometimes it does help to ask a mobile expert.

Well, it still doesn't make sense.

Let me rephrase entirely:

Google intends to lease the spectrum to traditional carriers (MNOs, or Mobile Network Operators). The MNOs will handle things like network operations, billing, and possibly customer support. Google gets to brand the resulting service (e.g. as Google Mobile), develops the hardware and/or software, and gets a share of the revenue made by the MNO.

This is similar to what Apple has done with the iPhone, except that:

• Google can brand the service
• Google owns the spectrum

The end result is that Google probably will have more control over service pricing, and will probably get a bigger share of the revenue.