By Eric Auchard
SAN FRANCISCO (Reuters) -
Google Inc's losing bid for
coveted wireless airwaves may prove a victory for the Web
search leader as it still stands to get access to mobile
networks without spending tens of billions of dollars to build
one, analysts said on Thursday.
Wall Street analysts said the Silicon Valley Internet
search and advertising giant has succeeded in forcing open
network requirements upon winning bidder Verizon Communications
via Google's apparent strategy of "bidding to lose."
Verizon will control the open network but will be required
to allow devices and applications from other companies to use
it.
"Google was never in this game to actually build out a
telecom network. Their key goal was to open up closed
networks," Cowen & Co analyst Jim Friedland said of the control
that carriers hold over handsets and services on their
networks.
Google's participation in the U.S. government's auction of
wireless licenses is credited with helping to drive up the
price Verizon paid to win a nationwide wireless license, giving
it control of a major piece of the airwaves being vacated by TV
broadcasters as they move to digital signals early next year.
Verizon Wireless, a joint venture of Verizon Communications
and Vodafone Group Plc, AT&T Inc and Frontier Wireless, a
partner of U.S. satellite TV company DISH Network Corp, took
the lion's share of new airwaves.
The auctions raised a record $19.12 billion for government
coffers.
"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," Friedland said.
Google and rivals Yahoo Inc and Microsoft Corp have stepped
up moves over the past year to help ensure that consumers will
one day be able to use the Internet services on mobile phones
in the way they now use computers.
Google believes making the Internet easier to use for
billions of mobile phone users will translate into increased
demand for its Web search and advertising services.
"Consumers soon should begin enjoying new, Internet-like
freedom to get the most out of their mobile phones and other
wireless devices," Google attorneys Richard Whitt and Joseph
Faber said in a brief statement following the FCC auctions.
Earlier this year, investors had begun dismissing the idea
that Google was seriously aiming to win licenses to build a
nationwide U.S. wireless network as a way to expand its Web
services business from computers to phones.
"Glad they didn't win it. Glad Google isn't going to be a
wireless network operator," Global Crown Capital Martin
Pyykkonen said. "Look at the margins of wireless operators!"
Google's extremely profitable business involves selling
online advertisements alongside its Web search services.
Building out and operating mobile networks could have slashed
operating margins now in the high 30 percent range to network
operator levels in the mid-teens or low-20s, Pyykkonen said.
What remains up for debate is the degree to which Google
can make Verizon live up to auction rules that protect
independent Internet services such as Google from being kept
off phones and other devices by network owner Verizon.
"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 said in a research note.
(Editing by Gary Hill)
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