Steven Kurt Baughman Strategic Management of Tech
NETW-583-11265
Professor Ted Mikell
June 15, 2013
Why Google's attempted to buy into wireless via the 700 MHz Spectrum Auction
Google saw a chance to enter into the wireless marketplace and become a cellular network operator with a 50 state network. Google would not only compete with AT&T and Verizon by entering this market, but it would have had the opportunity to network with other entities and develop innovative new products. The 700MHz frequency is able to travel long distances and penetrate walls, everyone in the mobile telecommunications market sees the potential to extend mobile broadband services by using this frequency if they can obtain a controlling block of the wireless licenses the FCC was auctioning off. [“The FCC is auctioning 1,099 wireless licenses in the 700 MHz band, but the most attractive spectrum for many bidders is the “C-block” of 12 regional licenses that may be combined to create a 50-state network.” ]http://en.wikipedia.org/wiki/United_States_2008_wireless_spectrum_auction
What do they hope to accomplish?
Google saw the chance of entering into the wireless market and the potential growth it could bring to the company in core competencies and product development. The executives of the company realized the risks associated with taking over this new area of broadcasting, including the multi-billion dollar cost of building and maintaining a 50 state network. But their goal was probably centered on growing a large wireless software portfolio currently includes Gmail, Maps, Docs, Calendar Sync and various other applications. Google may have wanted to control downloading applications to smart phones. No-one beyond Google’s Board of Directors and top executives really know what they hoped or planned to do if they gained the control of the 700MHz broadcast frequency in all 50 states. However, had they succeeded in what they set out to do they would have upset the traditional spectrum auction applecart.
How does Google's support for Open Access fit into Google's plans? “Google has said it would bid on the 700MHz spectrum only if the FCC guarantees certain open-access principles; including open access for companies wanting to buy wireless capacity wholesale.” (http://news.cnet.com/Googles-battle-for-wireless-spectrum---page-2/2008-1039_3-6199374-2.html) Google wanted to instill the following criteria/regulations on the winning bidder: 1.) Open applications: The same freedoms found on the Internet to download software, content, or services 2.) Open devices: Devices must access any network consumers want. 3.) Open services: Fairness in wholesaling use of the spectrum to third parties; which means the winning bidder would have to resell bandwidth wholesale to other companies, like was done with AT&T’s phone system back in the 70’s. 4.) Open networks: Internet-type rules for connecting networks together. http://en.wikipedia.org/wiki/Federal_Communications_Commission
The above listed conditions basically mean that people would have the freedom to choose what networks and applications they would use with the smart phones they had purchased, and the open access rules would give service providers the ability to connect with the winning bidder’s networks and the ability to purchase wholesale minutes from network owners to resale to consumers.
With the open access rules it insisted on Google's goal could be a move toward getting its applications into the hands of more smart phone and tablet owners, instead of being a new way to make money by operating mobile networks. http://www.pcworld.com/article/139762/article.html Google has already taken steps toward getting its applications into the hands of more consumers through offering versions of its Web applications for Apple’s iPhone and beginning the Open Handset Alliance to promote its Android operating system for mobile devices.
It looks like Google wants to get into wireless, yet wireless is not one of Google's core competencies. What should Google do about this?
Most analysts are skeptical as to whether Google can benefit from trying to capitalize on the deal by itself. Why? "Wireless spectrum and network management are nowhere near Google's core competency. Its competence is in one market; online advertising." http://www.pcworld.com /article/139762/article.html. For the aforementioned reasons Google should not try such a venture alone, but should seek a partner or partners as it has done in other markets. The company needs a partner to build and run the network for it and some analyst’s reports I read suggested Google should partner with Sprint for the venture; especially where they are already working together on the WiMax services.
APPLY AS MANY TCOS AS YOU CAN TO GOOGLE’S MIGRATION TO DIGITAL.
A - Google may be centering its desire to obtain the 700 MHz broadcast frequency on its core competencies of search applications, and advertising to expand its business of providing access to information the information highway while gathering in money for providing advertising on the internet.
D – In the organizational context Google’s acquisition of the 700 MHz broadcast spectrum will allow it the ability to develop new capabilities through collaboration and internal innovation.
Had Google have won the 700MHz auction, the company would have taken in a partner to help manage the network to ensure a presence in mobile broadband market and to improve its advertising revenue.
E – Google would have developed a new product strategy in mobile applications and advertising. Although it did not win the auction Google got the open access rules it wanted and it must now focus on its core competencies: of operating the best search engine on the internet and running its advertising market.