Telecom & Wireless

Google (GOOG) To Bid For Wireless Spectrum, But Then What?

The Wall Street Journal claims that Google (GOOG) is about to invest at least $4.6 billion in buying wireless spectrum at the FCC auction in January. Owning a big piece of the wireless pie might make a good book-end with the new Google handset operating system. The OS, called Android, will work on a number of phones, is free to the consumer, and open to developers. It is not clear how Google will make money on this software, but the industry assumes that it will run advertising along side the software applications.

Figuring out the spectrum bid is a bit tougher. If Google can give consumers access to wireless broadband across the US, how does the company make money? Other wireless firms like AT&T (T) charge for time spent using the network for voice or data applications. Google certainly does not want to be viewed as another AT&T. Perhaps the search company can charge relatively low access charges and let consumers use any handset they please. But, does that handset have to be running the Google mobile OS?

Google might also use the spectrum to capture customers and then run advertising on the handsets from that user base. But, once again, how does Google get the ad onto the phone without the phone being loaded with its software.

Google cannot make money on the $4.6 billion investment it may make unless it can entice consumers to put Google mobile software on their phones. It could be that it has to offer free wireless service to do that, but the customer may not feel the Google program is any more "free" than AT&T’s. Both take away some measure of freedom in picking mobile applications and appliances.

Google may think it can make money on all of this, but it looks like a mess.

Douglas A. McIntyre

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