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Google Confirms - To Bid in FCC Wireless-Spectrum Auction

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Google said Friday it plans to bid for spectrum in a Federal Communications Commission auction to be held early next year, confirming speculation that the Web search giant intends to make a costly foray into the wireless market.

Details of exactly how Google plans to make use of the spectrum remain unanswered, however. In a statement, Google said it will make its bid without a partner more steeped in the nuances of operating a wireless network, raising questions about how much control and accountability the Mountain View, Calif.-based company wants to assume.

Google had prefaced its bid with a successful push for the FCC to designate a portion of the airwaves up for bid to be open to mobile devices and software provided by companies. This runs counter to more traditional arrangements.

"We believe it's important to put our money where our principles are," Google Chief Executive Eric Schmidt said in a statement early Friday, announcing the company's intention to bid.

Google's push to open part of the spectrum has brought it into conflict with wireless-industry incumbents, such as Verizon Wireless, a joint venture of Verizon Communications and Vodafone Group. Verizon, however, recently announced that it also will open up its network to outside devices and software by the end of 2008.

Google is likely to be bidding in the January auction against Verizon, AT&T and others. The 700-megahertz spectrum on offer is particularly valuable, as a strong variety capable of penetrating walls and other physical obstacles.

Some analysts are skeptical, however, of Google's move into a new market that requires considerable investment and hosts sharp competition among a handful of large, well-funded companies.

"They're crazy," said Gartner analyst Ken Dulaney.

Dulaney said building out a nationwide network with sufficient coverage could ultimately cost upwards of $100 billion. While Dulaney allowed that Google could bring in a partner to help it run its network, he said simply owning the spectrum brings the company well out of its traditional comfort zone. "Having expertise in search engines doesn't do much for you here," Dulaney said.

News of its planned spectrum bid follows the unveiling by Google earlier this month of a specialized software infrastructure for mobile phones, called "Android," which it hopes will make the company's Internet applications more readily accessible on a variety of phones.

The Android initiative was designed to bring a number of wireless players together in partnership with Google. But Dulaney wondered whether those partners - including Sprint Nextel Corp. (S) and Deutsche Telekom's T-Mobile - will now feel threatened by Google, following its announced intention to gain its own spectrum. "They're raising the question now of whether they're just trying to guide everyone onto their own network," Dulaney said.

Shares of Google fell slightly by early afternoon, to $696.75.

Not everyone was skeptical of Google's intention to bid alone for spectrum, however. BMO Capital Markets analyst Leland Westerfield wrote in a note to clients that the move will afford Google more flexibility in its bid-rendering decisions.

"After the auction, if Google prevails, with the (spectrum) in hand, Google would carry greater leverage as it seeks more open-access for its Android third developer partners," Westerfield wrote.

Schmidt framed his company's intention to bid as just another move to push the wireless industry as a whole in a new direction.

"No matter which bidder ultimately prevails, the real winners of this auction are American consumers, who likely will see more choices than ever before in how they access the Internet," Schmidt said in a statement.

The FCC auction for the 700-megahertz spectrum is set to begin on Jan. 24. Google is required by anti-collusion rules to remain quiet about its bid after Monday. The FCC is expected to publish an announcement in mid-December disclosing all of the eligible bidders.

-By John Letzing; 415-439-6400; AskNewswires@dowjones.com

(END) Dow Jones Newswires

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