Wireless Auction Yields Different Classes of Winners

The Federal Communications Commission recently ended its wireless spectrum auction, which included almost $20 billion in winning bids. In other news, the United States Court of Appeals rejected Qualcomm, Inc.’s request to lift an injunction from selling technology that infringes on the patents of Broadcom Corp.  

Focal Points:

• The FCC recently completed its auction for 700MHz wireless spectrum. Both AT&T, Inc. and Verizon Wireless won the majority of the spectrum at auction. Together, the two companies bid 80 percent of the $19.8 billion dollars. AT&T paid $6.6 billion for 227 licenses, while Verizon spent $9.4 billion for 109 licenses. The "D" Block auctions, which were to be used in conjunction with local governments for public service, did not draw the minimum required money the FCC was willing to take for the spectrum. Experton Group believes the collapse of Frontline Wireless LLC, a startup funded to bid for this spectrum, and the bid requirement to negotiate with public-safety agencies to build a network that supports their radios created this major FCC setback.
• One of the big winners in the FCC wireless auction may well be Google, Inc. They ended up not spending a single dollar on any spectrum, but were able to insert wording into the auction process that required the winners of spectrum to open their networks to other carriers' devices. The requirement Google requested also allows consumers to use any software they desire on any part of the spectrum. These two clauses will allow Google to put its applications and services on any devices to let Google services run across the entire newly auctioned spectrum.
• The US Court of Appeals for Washington, DC recently rejected Qualcomm's request to lift an injunction set at the request of Broadcom, since a jury found that Qualcomm had infringed on some of Broadcom's patents. Qualcomm is appealing the verdict, and thought it would be able to continue selling its third-generation (3G) chipsets for wide-band code division multiple access (WCDMA) during the appeal. One of Qualcomm's key customers, Sprint Nextel, unsuccessfully attempted to intervene to allow the sale of its chips. This announcement will continue to delay the launch of Sprint's QChat service.

Experton Group believes Google ended up the large winner in the FCC spectrum auction. Its ability to allow its demands for open devices and applications, combined with it not having to pay any money for that demand, was a big win for allowing Google applications and services to become the money-making feature of future wireless communications. This will position Google to have the ubiquity in wireless services that it has today on the Internet. While physical infrastructure is needed to enable these services, Google can create these services in a central manner, and remain agnostic about which device or service provider any client is using. This will have the effect of further commoditizing the end device and service, which will further increase Google's value. IT executives should develop customer-facing services with open standards that will be able to take advantage of these future points of presence.