Wireless poised for a major leap


The Atlanta Journal-Constitution
Published on: 03/22/08

New York — Big changes are expected for the world of mobile phones and Internet devices in the wake of a crucial radio airwaves auction dominated by the nation's top two wireless carriers.

The overwhelming wins this week by Verizon Wireless and AT&T Inc. put them in strong position to roll out a new generation of speedy on-the-go broadband. For many wireless customers, the auction also will likely mean more choices when picking mobile gadgets and software, thanks to an open-access requirement prompted by Google Inc.

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The auctioned airwaves will be transferred next year from TV stations, which are switching from analog to digital broadcasts. These government-owned airwaves are considered prime real estate on the spectrum because of their ability to penetrate walls and send signals farther with less power.

The record-setting auction brought in more than $19 billion in bids, including $6.6 billion from AT&T and $9.4 billion from Verizon Wireless, which won spectrum licenses covering every state except Alaska.

The Federal Communications Commission identified the winners Thursday.

As widely expected, Internet search giant Google bid but won no licenses.

However, Google achieved a lot by prodding the government to add the open-access requirement to the nationwide swath of airwaves largely won by Verizon Wireless. Google's early bid was enough to ensure the requirement went into effect.

Verizon Wireless, jointly owned by New York-based Verizon Communications Inc. and Britain's Vodafone Group PLC, said before the auction that by the end of this year its customers will be able to use cellphones and mobile applications from other companies.

That was good news for Google, which wants to bring its software and lucrative advertising business to mobile devices.

"Google was the happy loser," said Rebecca Arbogast, an analyst with the Stifel, Nicolaus & Co. investment firm.

She said the hope for open access is that it will generate "innovation because we won't have the small handful of equipment makers making devices to the specifications of the phone companies. Now anybody can."

Google said in a statement that the auction was a major victory for consumers that will bring them "Internet-like freedom to get the most out of their mobile phones and other wireless devices."

Consumers are unlikely to see huge changes immediately, but over time the mobile Internet should work more like the one at work and home, where people can use any service from any access provider, Arbogast said.

Traditionally, U.S. carriers have tightly controlled which devices and mobile programs consumers can use. They also have subsidized handsets, making them much cheaper when subscribers sign up for long-term contracts.

The open-access policy from Verizon means third-party gadgets may be more expensive and that instead of shopping at the carrier's stores, "you might be buying devices at a Best Buy or a Circuit City," said Charles Golvin, a Forrester Research analyst.

Golvin said a little-mentioned concern is that while a new generation of third-party devices may work on the recently auctioned airwaves, they may not function if they lose coverage and have to fall back to an older network.

The auction has drawn criticism that it did little to create new competition sought by the FCC and merely strengthened the phone companies' hold on Internet access.

FCC Chairman Kevin Martin was more optimistic, pointing to the third-biggest winner, Frontier Wireless LLC, which is owned by EchoStar Communications Corp., operator of the satellite Dish Network. The company bid nearly $712 million and won licenses to create a nearly nationwide wireless footprint.

Satellite firms have sought new ways to compete with cable and phone companies that offer bundles of services. EchoStar may be interested in the airwaves to provide broadband Internet, enhanced satellite video or mobile video services, analysts said.

Cable firms also have been exploring the wireless business to better take on their phone company rivals. Some have discussed teaming up with Sprint Nextel Corp., which did not bid in the auction.

While Comcast Corp. and Time Warner Cable also did not participate, Atlanta-based cable provider Cox Communications Inc. won airwaves by bidding $304.6 million as Cox Wireless Inc.

Cox Communications is owned by Cox Enterprises, which also owns The Atlanta Journal-Constitution.

The auction was not completely resolved, since bidding for a large chunk of airwaves failed to reach the FCC-imposed minimum of $1.3 billion. Those airwaves were set aside for shared use with public safety agencies to create a national emergency network, but a leading contender to bid dropped out before the auction after apparently failing to obtain financing.

The FCC is investigating why that part of the auction failed.

When the FCC tries to auction those airwaves again, likely with different requirements, Verizon Wireless or AT&T might snap them up as well, Arbogast said.

Most auction winners have not made public comments because of an FCC-imposed "quiet period" that lasts into April, but AT&T and Verizon Wireless issued brief statements, saying their new airwaves will enhance their existing services and prepare the foundation for what comes next.

San Antonio-based AT&T said that combined with previously acquired airwaves, the latest wins mean the company will have "quality spectrum available for new services covering 95 percent of the U.S. population."

Golvin said he expects the carriers to use their newly won airwaves for next-generation technology, providing high-speed mobile Internet access.

That means new consumer devices are at least two or three years away, Golvin said. He said that technology will go beyond phones to include a variety of Internet-connected devices such as media players and cameras that go online to send live photos and videos.

"It's a much richer Internet on-the-go experience."

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