Google’s Bids

Communications Daily ($) cited my recent post comparing Google’s limited objectives for the 700 MHz auction with the expansive objectives it outlined to the Federal Communications Commission last summer, and it included the following reaction to my comments from Richard Whitt of Google:

Whitt said in response that Haney had misread his company’s comments from last summer. “We consistently have argued that the open access license conditions adopted by the FCC would inject much-needed competition into the wireless apps and handset sectors, but would not by themselves lead to new wireless networks,” he said Monday. “Only if the commission had adopted the interconnection and resale license conditions we also had suggested — which the agency ultimately did not do — would we have seen the potential for new facilities-based competition.”

Another way to look at this is if there wasn’t any potential for new facilities-based wireless competition without the interconnection and resale license conditions Google wanted, why would Google have submitted bids for the spectrum which it might have won and had to pay for?

I do agree that prior to the FCC’s adoption of two of the four open platform principles Google proposed the company consistently premised its commitment to participate in the auction on the FCC adopting all four principles.  I also agree Google was clear that it believed all four principles were necessary to promote competition.

Then it participated in the auction anyway.

This case may reveal how some regulators and some legislators are shrewd, have their own ideas about how to get what they want and even think they know what’s in the best interest of corporations like Google.

It makes sense, as Whitt told Communications Daily, that the interconnection and resale license conditions would seem necessary to a hypothetical competitor who is a network provider.  But in its Jul. 9th letter (and in the statement to Communications Daily) Google characterizes all four principles as being relevant to whether a new entrant would bid for the spectrum.  For example:

Should the Commission not adopt the four open platforms requirements listed above, we believe it is doubtful that even the most determined and committed new entrant will be able to outbid an equally  determined and committed incumbent wireless carrier, or consequently pave the way for second order competition. 

In other words, each of the principles could be of interest to a new entrant who might bid for the spectrum.  That seems logical, and the proof is Google.  A new entrant who isn’t a network provider – such as Google – might be more interested in open platforms for applications and handsets upon which its lucrative advertising plans depend.  It might be worth it for Google to become a wireless broadband competitor in order to promote its highly profitable legacy business model.

Google was presenting an all-or-nothing offer.  But in Washington all-or-nothing deals are rare.  Google must have known this.  Google got half of what it asked for (the typical return on investment here).  And half a loaf seemed to be enough in view of the fact Google participated in the auction.

If in its prior conduct Google was saying only that it intended to ensure that the reserve price was met but it had no interest in owning the spectrum itself, that wasn’t particularly clear.

Reasonable people might differ, but I think if Google never intended  to win the spectrum (unless there was no way around it), and it was merely advancing its hypothesis that the four open platform conditions would summon  forth hypothetical new entrants that wasn’t especially clear at the time, either.  Nor would it have seemed  convincing to many people.  Google’s proposal wouldn’t have acquired much momentum.  The excitement was around the possibility Google would become the competitor.  Google’s Jul. 9th  letter said “Google remains keenly interested in participating in the auction” and its subsequent behavior continued to highlight that interest. 

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