Google Stands to Benefit from Verizon’s Auction Win
Verizon has been declared the winner of the recent FCC auction, but many analysts say that it is Google who stands to gain even more out of the new deal.
The 700 megahertz “C block” network was the most coveted piece up for grabs in the government-run auction which earned a record $19.12 billion. The network will be available in February 2009 after the mandated nationwide analog-to-digital switch occurs.
Google stands to gain more by spending less through a provision that will require the network to equip new devices with Google’s Android platform. This will bring Google more money through advertising without shelling out billions of dollars to own the network.
"By creating a system that is completely open, Google may prevent carriers from using their monopoly position to drive users in a particular way to their services," Cowen & Co analyst Jim Friedland said, adding that Google’s goal was to open up closed networks, not to own a telecom network.
"Consumers soon should begin enjoying new, Internet-like freedom to get the most out of their mobile phones and other wireless devices," Google lawyers Richard Whitt and Joseph Faber wrote in a statement.
It is likely that Google’s role in the government auction was strictly to drive up the price for its competitor, Verizon Wireless, which is comprised of Vodafone Group Plc, AT&T Inc and Frontier Wireless.
"AT&T’s strong spectrum holdings position the company to further enhance the quality and reliability of existing wireless broadband and voice services, and to set the foundation for new-generation wireless broadband technologies and services," Ralph de la Vega, head of AT&T’s wireless unit, said in a statement.
With the lagging economy and their recent $3.2 billion acquisition of online ad service DoubleClick Inc., Marianne Wolk of the Susquehanna Financial Group said Google has enough things to deal with.
“This (wireless network) would have been a ‘nice-to-have," but it’s certainly not a ‘must have,’" said Wolk.
Also, some analysts warned against Google’s purchase of the expensive c block, noting that it may result in a lowering of its stock price and cause unrest among the firm’s employees who also own shares in the company.
On Thursday, Google’s shares increased by $1.55, finishing at $433.55.
Verizon’s shares closed 2.8 percent higher to $36.12, while AT&T finished the day up 2.2 percent at $36.85 on the New York Stock Exchange.
The lingering question is whether or not Google can count on Verizon to closely abide by the rules set up by the FCC.
"Whether or not Google can be charged for access to the devices or if customers can be surcharged for using Google applications remains unclear for now," Sanford C. Bernstein analyst Jeffrey Lindsay.
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