U.S. telecoms and Internet search leader Google are in an all-out air battle to shape the future of wireless communications on a soon to be available piece of airwaves real estate once television departs to go digital in 2009.
With that valuable TV frequency's ability to easily penetrate walls and travel longer distances with lower power requirements, the owner of the spectrum could lower its operating costs and improve the efficiency of a new wireless network.
The main issue at stake concerns the government's auction for wireless spectrum and Google's (Nasdaq: GOOG) preconditions for bidding. Google wants U.S. regulators make the new 700 megahertz band 'open-access,' which could result in making the airwaves usable by any mobile device or software program.
Proponents say that an 'open' network will foster innovation for consumers.
While bidding for such an opening in the wireless spectrum has been traditionally limited to telephone companies, Google is attempting to bring its billions of dollars to bear upon the situation, $4.6 billion to be exact.
That's how much Google says it would be willing to start biddding for the wireless spectrum at auction if only the government would adopt its rules. Final bids could soar into the $20 billion dollar range according to some estimates.
It proposes that bidders be required to open up the spectrum to more competition, instead of building a closed network.
If the government accepts Google's rules, the company wouldn't necessarily have to win the auction to claim victory, as the winning bidder would be required to go along with its 'open access' plans.
The current model of doing business on the wireless waves requires that only certain models of cell phones can be used on a carrier's network. For example, the iPhone is currently restricted to AT&T's (NYSE: T) network. The current system also allows phone companies, for the most part, to restrict what kind of software runs on the cell phone.
From instant messaging, to video playback, calendars and ring tones, phone companies have wide latitude to decide what goes on their networks' phones. Apple's (Nasdaq: AAPL) iPhone, again, is an exception due to the success-driven clout and marketing prowess the iPod and Macintosh maker brings to the negotiating table.
Customers hoping that their smart phones can soon be equipped with Internet phone service Skype can forget about it for now since carriers want voice calls to run on their networks, not the Internet where fees could be very cheap or non-existent on international calls, for example.
Verizon Communications (NYSE: VZ), the parent company of Verizon Wireless, has shown strong opposition to Google's proposals, claiming that such rules would place wireless companies who want to bid at a disadvantage.
The government's airwaves regulator, the Federal Communications Commission, is in the spotlight for the role it must play in deciding what the ground rules for the auction will be.
Regulators are debating whether such 'open access' requests will be useful. Already, FCC chairman Kevin Martin has circulated a proposal that would allow any device or software to operate on a network.
However his draft doesn't go as far as one of Google's preconditions for bidding that some of the available spectrum be allowed to be leased from the winning bidder on a wholesale basis, letting smaller players enter the competitive mix by running their leased spectrum as they wish.
The FCC must first make its draft proposal public and then vote on it.
On Thursday, Verizon came out against the 'open access' conditions, warning that the rules could limit the amount the government would get from bidders.
Imposing any such requirements in the competitive wireless market would reduce the revenue the government will receive from the spectrum auction and limit the introduction of new and innovative wireless services, Verizon said in a statement.
If the open access rules were imposed, Verizon says it would want the government to allow customers to enter into the same kinds of agreements that currently exist, which make the carrier responsible for optimizing all aspects of the customer experience.
AT&T, meanwhile, favors the current draft allowing for any device or software on the network, but which does not include Google's wholesale leasing requirement. A vice president at AT&T said last week that the FCC chief's draft plan was adequate, adding that it was now time for Google put up or shut up.