<< by on May 24th, 2007
Google recently filed Comments in FCC dockets regarding the future auction of analog television spectrum licenses that will be now be used for wireless technologies with the coming of digital TV. To read the press about it, you could almost mistakenly think that Google is asking to take over the entire FCC spectrum auction system.
That however is not the case. The FCC spectrum auctions are a remarkably complicated and highly competitive process. They are made that way for good reason, the potential for abuse with simpler auction processes and subsequent litigation are very high. For the most part communications Giants rule these auctions and the little guys and people in rural areas are squeezed out by the bidding power of the major players and the FCC’s strict adherence to upfront payment for spectrum.
Even with all the participation of these giants of communications and FCC build out requirements only about 5% of the licensed available wireless spectrum is currently being utilized. The upfront costs for some of these bands of spectrum are astronomical and having money left over after the auction to actually build the high tech facilities to actually utilize the spectrum can be financially challenging. Enter Google.
Google has proposed that the FCC allow the auction winners of licenses in the upcoming spectrum auctions the ability to use an dynamic auction system to where a designated entity or clearinghouse, say perhaps like Google AdWords, could provide the spectrum to others on an as-needed basis. For the most part this use would be secondary to what the license holders are planning on using for.
Google proposes payments in perpetuity as the spectrum is being used, rather than months or even years in advance. The FCC’s incentive to allow this would be facilitation of infrastructure build-out and removal of barriers to entry for smaller and intuitive entities.
This doesn’t mean elimination of upfront payments. A company called NextWave previously defaulted on payment of about $4.7 billion for spectrum wireless licenses and after years of being in court as a result the FCC’s a little sensitive about upfront payment. The secondary auction would just allow licensees to recover their costs over time by allowing them to charge third parties for use.
If Google is interested in being the FCC’s auction clearing house it signals the first time it has looked for use of its bidding technology for something besides advertising. They obviously dominate online marketing, are working on broadcast advertising and print using the AdWords model.
After working in communications regulation, including a few FCC auctions, for about 10 years and working with Google AdWords on a daily basis for over a year, I have to admit I’m a little skeptical. I think they mean well, I just really have my doubts about the collision of business and FCC regulation being effective.