Some lawmakers aren't too happy about that. In particular, Reps. Cliff Stearns (R-FL) and John Shimkus (R-IL) "suggested Google out-maneuvered the FCC when the agency required the winner of about a third of the spectrum that was auctioned to operate under open-access rules."San Francisco - Three lawmakers complained Tuesday that Google "maneuvered" its way into an open wireless network without having to come up with a winning bid in the U.S. Federal Communications Commission's (FCC's) recently completed 700MHz spectrum auction.
Um, guys? Let me tell you a secret.
Remember the last round of auctions after the 1996 Telecommunications Act? They were a disaster. Ensuing litigation from licensees who couldn't afford to both build out their networks and pay the FCC held up the deployment of PCS services for years. Does anyone remember NextWave? I suggest all of you, yes, every single one of you, go to Amazon and buy "A Tough Act to Follow?" by former FCC Commissioner Harold Furchtgott-Roth.
Furchtgott-Roth, who incidentally, is an economist who used current FCC Chairman Kevin Martin (aka K-Mart) as a legal adviser during his tenure on the Commission, tells the NextWave story in great detail.
Now, let me tell you about Europe. Over there, GSM is the standard, because governments subsidized the built-out of wireless networks. So, instead of a patchwork of country-to-country incompatibility, they agreed on GSM and use it, with great success. Unfortunately, if someone tried that here, they'd be shouted down as communists before the idea got off the ground.
Enter Google. Their proposal for a reserve price and open access was supported by Chairman "K-Mart," who probably has nightmares about NextWave when he thinks of auctions. Why?
Easy. "K-Mart" can't order or ask for a subsidized network, but the FCC can order a reserve price, open access, and a build-out requirement.
What's the result? The 700mhz auction suddenly becomes a de facto low bid contract. Google hit the reserve, and the rest of the players simply bid enough to win, hoping the other would lose, because either way, the network would be open to everyone. The FCC won because they got their open network, allowing for more competition ("K-Mart" likes competition) and Google won because they can develop their Android phones and be assured that they will have a network to operate on.
This wasn't an auction. It might have started as one, but it finished as a low-bid RFP...and that's a good thing for all of us.
FCC Chairman Kevin Martin, also a Republican, disagreed, saying the open-access rules will benefit a wide range of people and companies. "Our goal, in adopting the openness conditions, was not to prohibit someone else from winning, but to actually [require] whoever won that spectrum to have an open platform," Martin said.
Subcommittee Chairman Ed Markey, a Massachusetts Democrat, said the open-access rules will create new innovation in the wireless industry, although he and some other Democrats complained that large wireless carriers Verizon Wireless and AT&T won a large portion of the 700MHz spectrum. Democrats raised concerns that the auction didn't produce a new nationwide competitor that would build a wireless network to challenge broadband offerings from Verizon, AT&T and cable modem providers.
However, the open-access conditions "will unleash hundreds of millions of dollars in investment in wireless devices and applications, and create new jobs in an economy that sorely needs them," Markey said.
Google spokesman Adam Kovacevich dismissed lawmakers' concerns about Google's auction strategy. "Consumers were the big winner in the auction, not any company," he said. "This auction generated not only a record amount for the U.S. Treasury, but also historic new rights for wireless consumers as a direct result of Google's bidding. By any measure, that's a huge success for consumers, and we're proud of our role in helping make that happen."
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