Did Don Google make an offer the FCC couldn’t refuse?

Sons Wally and Scoop are just discovering that there were great movies before “Get Rich or Die Trying.” So we have been watching the Godfather movies. The other night in “Godfather 2” we learned how Vito Corleone (played by Robert DeNiro and, eventually, Marlon Brando) became a gangster. He started doing favors for people – you know, helping them out. Pushing the bad guys around for the benefit of the good guys. The benevolent bully is an endearing (and fallacious) stereotype. But there was always something in it for Vito/Robert/Marlon.
So when Google paid a visit to the FCC to make an offer, where they playing the New Media Don? The FCC is going to auction off spectrum – the airwaves are the precious commodity that service providers like AT&T, Verizon, and Sprint use to manufacture money. Because all TV stations are going to have to move to a new part of the spectrum to broadcast High Definition by 2009, the FCC is going to have some excess airwave inventory. And this 700MHz spectrum is the good stuff – those radio waves go farther and penetrate further. So the FCC is going to auction it off to the service providers to make money for the government potentially bringing in ten to fifteen billion dollars. Sure the standard cell phone companies are going to bid. But now Google steps in and says if the FCC puts rules in place to ensure openness and competition, then Google would be willing to bid $4.6B for some of the spectrum.
What did Google want? They want whoever wins spectrum to make it possible for us to connect any device to the network. So you wouldn’t have to buy a phone from AT&T to use the AT&T network – you could buy the phone you want. They also want the consumer to be able to download anything she/he wants to her/his phone. Now you can only get the applications and content that the providers want you to have. And they want a requirement that whoever wins the spectrum auction has to resell it at wholesale prices to other companies. That looks great for the consumer right? More choices for handsets and content, right? More players in the provider space means lower price and better service, right?
But is Google only thinking of us? With these rules, Google is the big winner. The application that most people would use if they were free to is Google. And word is out that Google might sell its own handset. Google would grow even stronger if service providers had to play by these rules.
And there is a way that these Google-friendly rules can hurt us. With these new rules, the 700MHz spectrum becomes much less desirable. A network where you don’t control all the pieces is much more expensive to build and maintain. So there is a chance that the providers will bid much less for the spectrum. That means less money from telecomm companies to run our government.
So what did the FCC do? They gave in to some of Google’s requirements. In 2009, when the spectrum winner starts offering service, we will be able to connect any device to that network. We win there – maybe. If the bids aren’t high enough, the FCC can scrap the whole auction and start again.
But in the future, we need to carefully evaluate arguments for changes in the “public interest.” In short, beware of “offers we can’t refuse.”