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Cellphones The Internet

Spectrum Auction Could Be A Game of Chicken 193

Posted by Zonk
from the who-will-blink-first dept.
Ardvark writes "Google promised some time ago to bid at least the reserve price for the C block of 700Mhz spectrum if the FCC accepted its demand for an open access rule for devices using the band, which the FCC did over Verizon's objections. If the reserve price is not met the rule will be dropped and the block re-auctioned. It appears now that bidding has stalled just short of the reserve price. It's assumed that Google has no interest in becoming a cell phone company and with a recession looming the 700MHz spectrum now seems worth a whole lot less. If Google's strategy was to force the bidding above the reserve but still lose the auction, Verizon could be calling their bluff, threatening them to live up to their word and buy what to Google could be the equivalent of a $4.6 billion 'doohickey.'" Update: 01/31 16:01 GMT by Z : And just like that, the plot thickens: the C block has hit the reserve price during bidding.
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Spectrum Auction Could Be A Game of Chicken

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  • UK 3G (Score:5, Interesting)

    by SimonGhent (57578) on Thursday January 31, 2008 @11:07AM (#22246482)
    I'm not surprised that US companies aren't falling over themselves to bid.

    Take a look at what happened in the UK when the 3G air was up for sale - they threw money at it and ended up with next to no customers.

    With the way things are economically at the moment, people are not looking to up their monthly spend on their mobile phone bill. Companies will have a hard time recouping a huge outlay.
  • Clever (Score:5, Interesting)

    by TheMeuge (645043) on Thursday January 31, 2008 @11:10AM (#22246522)
    The telecoms can take the heat for being heartless monopolies, for providing terrible service at a high price, and for leveraging their monopolies to avoid upgrading their taxpayer-financed infrastructure.

    They can't, however, be accused of not doing what will profit them the most in the short term.

    In this case, they've collectively called Google's bluff. I don't see Google having $4.6B in spare cash, to purchase the spectrum they have no idea how to make money on. This is a tough spot for Google, because not only do they stand to lose their coveted "shared spectrum" rule, but they also stand to lose much of their perceived invulnerability on the market.
    • In addition to the possibility of losing open access as well. It was a smart move by Google, call it what you will, but from my perspective, bidding the minimum in hopes that you will be outbid (which obviously has not occurred), which will result in Google losing the spectrum to the winner, but still being able to freely use the spectrum was genius.. okay maybe not genius, but a good business move on their part. Call it spectrum poker (I think I will trademark that reference :) ), Googles hand is about t
      • Re:FIOS (Score:5, Interesting)

        by TheMeuge (645043) on Thursday January 31, 2008 @11:23AM (#22246736)
        FIOS isn't "good" because it's a good service. FIOS is only "good" because this is Verizon's final "fuck you" to the taxpayers that helped fund its infrastructure, and an open attempt to become a totally unregulated monopoly. You see, they HAD TO lease the copper lines, because FCC mandated it. They don't have to share the fiber optics. As a result, they've been busy building the fiber network that would cement them as a monopoly, while completely ignoring troubles with their copper... leveraging the reduction in the quality of service over the copper lines, to attract people to the fiber.
        • Re:FIOS (Score:5, Interesting)

          by bleh-of-the-huns (17740) on Thursday January 31, 2008 @11:35AM (#22246916)
          The reason they had to lease the copper, was the original copper infrastructure was gov subsidized. The fiber costs are being eaten completely by Verizon, and while I am sure there are some tax breaks involved, there is no subsidy from the gov, state or local. Surprisingly though, the service itself is great, I have had very few problems, (yes there are some that had horrible installs and could never get some things working), the only issue I have is with the billing department which I have to call every month to get the appropriate triple play discount credited to my account since their system keeps losing it, and their CS.. it is abysmal and thats me being nice to them. The install actually was pleasant, and its not subcontracted like comcasts installers, they get paid hourly, not by the number of jobs they get done, so whether they do 5 installs in a day, or spend all day at your house rewiring your internal cable infrastructure, they get paid the same.
          • by Tassach (137772)
            Even Verizon paid for the fiber itself, it still runs over (and under) public land and right-of-ways, giving the government a legitimate right to regulate how they can use it.
          • I think people forget that in the 90s, the Telcoms were pretty heavily subsidized so that they could, in fact, replace the fiber infrastructure. This is just a the first, probably biased, link I could find on the topic:

            http://www.tispa.org/node/14 [tispa.org]

          • by Firehed (942385)
            Where do you think the money that's paying for the fiber came from? I don't suppose it could be from the profits seen from the subsidized copper...

            It may be a good service (and believe me, if it were available where I lived, I'd have it), but the money being used comes as a result of the initial copper wiring subsidy. Had they never had the copper subsidized, they could have never come up with the profits to build the fiber infrastructure.
    • Re: (Score:3, Informative)

      by neurovish (315867)
      Google is sitting on about 5 billion in cash as of last September, while Verizon has about 700 Million.
      Google: http://finance.yahoo.com/q/bs?s=GOOG [yahoo.com]
      Verizon: http://finance.yahoo.com/q/bs?s=VZ [yahoo.com]

      From a cash perspective, google looks in much better condition to go on a $4.6B shopping spree.
      • by nelsonal (549144)
        Verizon could borrow many times google's cash balances much easier than Google could borrow money. Bond holders are exceedingly conservative (to the point they might consider Microsoft a good credit).
      • by njfuzzy (734116)
        Interestingly, Apple has about $17 Billion in liquid assets right now. (Does anyone remember if they are involved?) I am surprised Google has so much less cash than Apple.
    • by TubeSteak (669689)

      In this case, they've collectively called Google's bluff. I don't see Google having $4.6B in spare cash, to purchase the spectrum they have no idea how to make money on.

      Translation:
      TheMeuge (645043) has no idea how Google would make money on the next big thing in wireless

      http://investor.google.com/releases/2007Q3.html [google.com]
      As of September 30, 2007, cash, cash equivalents, and marketable securities were $13.1 billion.
      (I'm not sure how much of that cash went towards the $3 billion they dropped on DoubleClick.)

      If Google wants to blow $5 billion "to purchase the spectrum they have no idea how to make money on" AKA "the next big thing in wireless", I highly suspect they can afford t

    • by yog (19073) *

      The telecoms can take the heat for being heartless monopolies, for providing terrible service at a high price, and for leveraging their monopolies to avoid upgrading their taxpayer-financed infrastructure.

      They can't, however, be accused of not doing what will profit them the most in the short term.

      In this case, they've collectively called Google's bluff. I don't see Google having $4.6B in spare cash, to purchase the spectrum they have no idea how to make money on. This is a tough spot for Google, because not only do they stand to lose their coveted "shared spectrum" rule, but they also stand to lose much of their perceived invulnerability on the market.

      I don't quite follow your reasoning. Having its own national slice of broadband would be terrific for Google. This 700Mhz band would be a great thing to own--penetrates walls really well, wide area networking potential is great. Google could lease its bandwidth to hundreds of startup wifi phone providers and give established companies like Vonage and Skype a nice alternative pipeline.

      Can you imagine what a cheap or free search-ad supported wifi network would do to the existing local monopolies? Skype r

  • Nah . . . (Score:5, Funny)

    by MBGMorden (803437) on Thursday January 31, 2008 @11:15AM (#22246578)
    I bet they're just waiting. 30 seconds before it ends all their auction sniper programs will bid it up another 30%.
    • Re: (Score:3, Interesting)

      by terraformer (617565)
      You know, I thought the same thing (and yes, I know you were joking, but I think you are on to something). I have observed some other FCC auctions and they have a more regular pattern of bidding but I would not be surprised if the eBay sniper approach is being played here. There is a great deal of uncertainty and this may be a way to try to hedge and keep the bidding low.
  • by acherrington (465776) * <acherrington.gmail@com> on Thursday January 31, 2008 @11:15AM (#22246594) Homepage
    First, go here https://auctionsignon.fcc.gov/signon/index.htm [fcc.gov] Then put in Auction number 73 under public access... then click go. According to this, they are at a total of $11.5 billion now for the total... next round starts in ten minutes.
    • by Hobbex (41473)
      Well, round 17 didn't end, and the bid for the C block didn't change.
    • by Ed Avis (5917)
      $11.5G is for all of it, the C spectrum is only part of that. But according to TFA it has reached $4.3G, which is only 300M off the reserve price. If Google is forced to buy it for the reserve price presumably they could resell it to the second-highest bidder for $4.3G (or at least, negotiate with them for an acceptable price) and they wouldn't lose the whole amount.
    • by HogGeek (456673) on Thursday January 31, 2008 @11:38AM (#22246958)
      New bid, just went to $4,713,823,000...

      Open Access is good to go!
      • Re: (Score:3, Interesting)

        by keithjr (1091829)
        Finally some good news! Too bad it's still anonymous. I'd love to know who broke the barrier.

        Why is Verizon so against the concept of a 700MHz open network when they've stated that they're going to open up their own network [arstechnica.com] some time this year?
        • It's speculated that Verizon did that to divert consumer attention from the 700 MHz auction. Presumably, they'd like the ability to close "their spectrum" if opening it becomes disadvantageous.

        • They're not against an open 700MHz network, they're against being required to keep it open, on the grounds that they want the ability to go back to being a much of control freaks again in the event that the next group of idiot CEOs decides they think closed networks are "where it's at."

      • by MBCook (132727)

        Seeing as that happened, I wonder if that section will now see tons of bidding (they don't have to worry about making it free, it's already there) as companies try to get (some) control over it, or will bidding be mostly dead since the companies lost their (theoretical) game of chicken and now they have to comply with open access rules... making it less profitable (in theory) to buy?

  • by LWATCDR (28044) on Thursday January 31, 2008 @11:17AM (#22246620) Homepage Journal
    I trust Google will not let us down. They are just waiting to see if they can get it for 4.6 instead of 4.7 Billion.
    And then when they get it they will build out a solar powered wireless network that will offer broadband everywhere. Not only that it will be free and be faster than FIOS. It will be IPv6 so every user can have their own block of static IPs and it will smell like home made cookies and be as warm as a puppy.
    Yea that is it.
    • by bhima (46039) *
      What about the Pony? Surely this comes with a pony.
    • by Yvanhoe (564877)
      Could they not buy it 4.7 billions and reselling it cheaperto a cell phone company afterwards ? That way they would have opened a protocol for a small sum.
      They could as well make a 6 billions package and buy a small cellphone company for the 1.3 billion that's left...
  • Game Theory? (Score:3, Interesting)

    by jwietelmann (1220240) on Thursday January 31, 2008 @11:21AM (#22246698)
    Whatever Google is maneuvering to do, they're probably more likely to employ the kind of people who know how to play the game than Verizon is. Whatever Google is trying to achieve, my money's on them. (Well, not really; I don't have any GOOG shares.)
  • Did! Did Not! (Score:5, Interesting)

    by Nom du Keyboard (633989) on Thursday January 31, 2008 @11:27AM (#22246796)

    the FCC did over Verizon's objections.

    The article summary is garbage, or should I say simply wrong?

    Google set 4 conditions it wanted to see. The FCC agreed with 2 of them, so Google is faced with half a glass. (Yes I know the Engineer's view of half a glass.) I don't recall them saying they'd bid reserve to ensure only half of their wishes.

  • If Google wins, and they don't know what else to do with it, I think they should release their block of the 700 MHz bandwidth under the GPL.

    RMS would be so happy!

    • by Mr. Underbridge (666784) on Thursday January 31, 2008 @11:43AM (#22247048)

      If Google wins, and they don't know what else to do with it, I think they should release their block of the 700 MHz bandwidth under the GPL.

      It would be worth it just to see approximately a million dorks have their heads explode as they endlessly debate what it means to copyright bandwidth.

      • Oh, I'm just waiting for Theo to come in and demand Google release it under the BSD license, accusing the Google people of being "inhuman"...

  • they called it "seward's folly"

    it was a joke. why did we spend $7 million on some permafrost again?

    same with anyone who doubts the value of this auction

    i can't see why a monopoly on a prime band of communication spectrum can't be anything but pure gold. there's only so much spectrum, but more and more people and more need for communication tech every day
    • by EvilNTUser (573674) on Thursday January 31, 2008 @12:42PM (#22247906)

      same with anyone who doubts the value of this auction

      i can't see why a monopoly on a prime band of communication spectrum can't be anything but pure gold. there's only so much spectrum, but more and more people and more need for communication tech every day

      The auction is a gigantic tax and nothing more. If the markets are efficient, the winning company will be rewarded only related to the risks it is taking. Everything else will be going to the government, and out of the pockets of consumers.

      It's laughable how the auctions are being sold as a good way to raise funds for the government without impacting the taxpayer. Who doesn't use communications technology if not the taxpayer? This is the perfect way to cripple a single industry, because a) the winning company will have less immediate funding available for infrastructure b) consumer prices will be much higher, lowering the adoption rate significantly.

      Just look at what happened in Europe. A lot of countries did the smart thing and gave the spectrum to the companies that were willing to guarantee the best service levels for the cheapest consumer prices, but then a few large countries ruined it for everyone by suckering companies into auctions. (To be viewed as a serious competitor, you had to take part in the largest markets.) The end result was what I described above, and we are only now starting to recover.

      If you think that the beauty contest model will result in excessive profits for the winner, keep in mind the guarantees, and the fact that one winner wasn't awarded all the spectrum.

      • by LehiNephi (695428)
        It's laughable how the auctions are being sold as a good way to raise funds for the government without impacting the taxpayer. Who doesn't use communications technology if not the taxpayer?

        I think I understand your logic, but you're not taking it far enough. True, the money will come from Google, or Verizon, or whoever else ends up winning. And that company will pay for it out of the money they charge their customers. However, There's nothing that says that I must pay [auctionwinner] any money. If Goo
    • i can't see why a monopoly on a prime band of communication spectrum can't be anything but pure gold.

      I thought that was the whole point of this. If it passes the threshold, then there is no "monopoly on a prime band.. yada yada".

      Getting the band for unlimited use for your company's product would be a goldmine, especially for 4.638 billion, just under the threshold.
      But, if you bid more than 4.638 billion, I'm not sure what you get. You can't promise your customers that their phones will work, becau

  • Now that's what I call overclocking!
  • And no new bids. Watch it in REAL TIME: https://auctionbidding.fcc.gov/auction/results/results.htm [fcc.gov]
  • by Vellmont (569020) on Thursday January 31, 2008 @11:37AM (#22246944)
    That the bidding often stalls in the middle of the auction, and picks up like crazy near the end. This isn't ebay of course, but it's certainly an example of auction behavior to pay attention to.

    This auction will go on for months, and we're at the one week mark now?

    Anyone who says Google is "bluffing", or the price won't go up is full of it. Google may not bid as much as they say, they may, someone else might bid more, or who knows? It's just way to early to be saying much of anything about the auction, what the different strategies are, and who will win.
    • by langelgjm (860756)

      That the bidding often stalls in the middle of the auction, and picks up like crazy near the end. This isn't ebay of course, but it's certainly an example of auction behavior to pay attention to.

      According to the article, the FCC has certain rules about bidding in the auction (you must bid every round unless you are the high bidder, you have three waivers that you can use to skip a round, etc.), so I don't think we'll be seeing eBay style auction-sniping here.

      • by Vellmont (569020)

        so I don't think we'll be seeing eBay style auction-sniping here


        You're focusing too much on one example I gave. It's not about sniping, or ebay, or whatever. It's about making dumb predictions and prognostications at barely the start of the game. Strangely enough, this one already turned out to be dead wrong.
  • They're obviously just waiting till the last minute so they can snap it up for 4,299,999,999.99.

    I bet they have a wicked fast sniping script. After all they're Google!
  • Bidding on round 17 just ended and now it has been bid up to $4,713,823,000, meeting the reserve price.

    This article was just wasteful speculation. I guess that shouldn't surprise me.
    • I wish they didn't set a reserve. How much money will they now waster in fees! That's government for ya.
  • by RaigetheFury (1000827) on Thursday January 31, 2008 @12:05PM (#22247382)
    Here's the link for status
    http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=73 [fcc.gov]

    Under Results click: View Auction Results (buttheads are using javascript for linking so no direct linking possible).

    Please note it wants you to run some java. I clicked no and everything runs fine.
  • by ficken (807392) on Thursday January 31, 2008 @12:05PM (#22247384) Journal

    Google has no interest in becoming a cell phone company and with a recession looming the 700MHz spectrum now seems worth a whole lot less
    Who said anything about a recession? You do not know you are in a recession until after it happens. How do you know we're not spiraling into a depression?
    • You do not know you are in a recession until after it happens.

      Well, you can't know (under one common definition) until you've already been in it for at least half a year (that doesn't mean its over).

      How do you know we're not spiraling into a depression?

      A depression isn't a term with any generally accepted concrete definition, its just a common term for a really severe recession. So if we're "spiraling into a depression", we then, ipso facto, are either in a recession or have one looming.

    • by TubeSteak (669689)

      You do not know you are in a recession until after it happens.

      That's assuming the recession lasts just long enough to meet the newspaper* definition of a recession (2 quarters), then turns itself around.

      How do you know we're not spiraling into a depression?

      Because the definition of a depression is a long or severe recession?

      According to your logic, we won't know that there was a depression until after it happens.
      According to real logic, we'll know when real GDP shrinks by >10%.

      *A more accurate definition is that real GDP declines by 10% in a recession

    • We won't see anything like the 1930's for a long time, because support structures are in place to soften impacts now.

      You can also know you are in a recession ... as it happens when certain indicators come in.

  • by rickb928 (945187) on Thursday January 31, 2008 @12:10PM (#22247440) Homepage Journal
    Lemme see. Reserve is 4.6B, bid is 4.3B. 6.5% difference, 300M. If I were buying a rusty old Duster for $600, this would be a difference of $40.

    Obviously this is just gamesmanship.
  • by mzs (595629) on Thursday January 31, 2008 @12:10PM (#22247444)
    The NY Times blog was just useless speculation from yesterday:

    https://auctionbidding.fcc.gov/auction/home/announcementDetail.htm?ann_id=402 [fcc.gov]

    Announcement

    1/31/2008 11:00:41 AM
    C Block Reserve Price Met in Round 17
    At the conclusion of Round 17, the provisionally
    winning bids for the C Block licenses exceeded the
    aggregate reserve price of $4,637,854,000 for the
    block.
  • by timster (32400) on Thursday January 31, 2008 @12:59PM (#22248154)
    Since hitting the reserve price brings more clarity, wouldn't it be more accurate to say "the plot thins"?
  • by hyperz69 (1226464) on Thursday January 31, 2008 @01:05PM (#22248228)
    All the other telcom companies companies come under a massive DOS attack from the middle east / central asia and google wins at reserve price. :)
  • by swschrad (312009) on Thursday January 31, 2008 @01:43PM (#22248756) Homepage Journal
    they can rent it out if they win it. as in beer. they could throw it open to all carriers using an open GSM platform using whatever flavor of G3 data they like so it's fully world-compatible.

    there's an idea that should have "it's MY network, and all these guys behind me will beat you if you disagree" shivering.

    yes, bring your BT, NTT, Korean phone over here with you. it will work. every time you hit send, two cents to Google for use of the C block airwaves. one cent if the home phoneco had built the network in that regional area.

    profit per click. no investment in the backbone. that's something they know about.

    it can work.
  • My guess is that the D Block is the real game here.... First off... it's tied to government subsidies in order to maintain the public safety portion. This is something that the big telecoms LOVE.

    Second, the rules are that the FCC has an OPTION to reauction that block if it fails to meet its reserve. The PSST can also negotiate with the high bidder of portions of its own pieces of the spectrum.

    So... why not get Google to run after the C block and then turn around and pull some back room deals to pull out the
  • Either Google isn't the winning bid (which would make sense given that the price went up once more after it passed $4.6 billion) or somehow that information isn't showing up in Google's stock price.
    • Re: (Score:3, Interesting)

      by Orange Crush (934731) *
      Google can't talk about the auction until it's all over so anybody without insider information only knows that Google might or might not get the spectrum which we've known for months. Really, the only new information available is how much the spectrum cost and that the open access rules are a certainty--but this was widely expected any way. So I don't see any reason why Google's stock should move right now because of the auction.
      • by khallow (566160)
        I'm aware of that. I'm also aware that there's more than enough money at stake to compromise the security procedures for this auction.
        • Those are laws, not just security procedures. An information leak could cause the FCC to redo the auction all togheter. Also, in looking over the auction history, Round 13 saw the previous high bid (stil below reserve). Round 17 saw the $4.7bln bid. It could very well be Google, since that's the only bid above the reserve . . .
  • So if $4.7B is the reserve, what's the significance of the $13,823,000?

    A random number? A secret message indicating the bidder (they can't say during bidding, and no, 18323 is not a valid US zip code)? Google revenues while I was writing this message?

    Any ideas?

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