Google Backs Wireless Net Neutrality Commitment with $4.6B: Ovum Comments

By: Jan Dawson, VP, US Enterprise Practice, Ovum
(Business News & Technology News, 24 Jul 2007)

On Friday, Google's CEO Eric Schmidt sent a letter to the FCC reaffirming its position calling for net neutrality in the forthcoming US spectrum auction, which it hopes to bid for if the conditions are right. It also offered a $4.6 billion surety payment to guarantee that Google will pick up certain spectrum if over-burdensome rules put off all other bidders.

Jan Dawson, VP of Ovum's US Enterprise Practice comments:

"While Google clearly hopes this will deal with an objection some have raised¡ªthat the Commission (and therefore the US taxpayer) might not receive as much from the sale of the spectrum if stringent rules are applied to it¡ªsome have understandably suggested this may be seen as a bribe on the part of Google to adopt its rules.

Of course, there's another side to this debate, too. The wireless carriers who currently make a business out of heavily subsidising exclusive handsets in return for two-year commitments to their service plans have every interest in perpetuating that model, and have so far resisted calls for wireless net neutrality. Verizon has been strongly opposed to any form of neutrality provisions in the rules, while AT&T's position has been a little more nuanced, supporting some of Google's proposals while ultimately suggesting that it should bid for and win the spectrum itself if it wants to see a neutral approach to the spectrum.

At this point, the most important thing is for the FCC to determine what the rules will be quickly, giving all parties enough time to build business models for the use of the spectrum by the time of the auction¡ªand all parties appear to agree on this. However, on virtually everything else there is still a gulf between Google and its supporters and the wireless carriers, with the FCC stuck in the middle. The FCC is stuck with a conundrum here: it favours a light regulatory approach, which would suggest as few rules as possible. On the other hand, it also favours intermodal competition (competing infrastructures, rather than competing services over regulated infrastructure), and would love to have a third 'pipe' to the home emerge in the form of wireless, in addition to the current duopoly between cable companies and telcos.

At all costs, the FCC must see beyond the dollar bills Google is waving around in support of its proposals and determine which outcome is most likely to produce both the best price for the spectrum overall and provide a platform for the next wave of wireless services in the US. It should err on the side of less regulation, but provide incentives for open and flexible use of the spectrum¡ªmany of Google's other proposals around the structure of the auction are actually very sensible. Ultimately, if Google's proposed business model is really as attractive as it suggests, it ought to be able to win the auction and push forward with that business model with its own spectrum, rather than enforcing the same business model on all other participants in the auction. But whether the FCC will be brave enough to resist calls for favourable treatment for one business model under the guise of 'what's best for consumers' remains to be seen."

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