Forget the Past and the Future, Here in the Present, Ignorance is Bliss

1. Google Has A Different Vision For the Wireless World It Can Only Achieve By Owning Licenses.

Google needs the licenses so that it can create an Open marketplace - a "mobile broadband" industry to replace the current "wireless phone" industry.

In this world, people do not buy "mobile phone service" with the option to load all manner of various features for additional prices onto their phones. People buy a wireless service contract for a "dumb pipe" similar to what they buy (now) from cable and DSL companies. ... Google would very much like to replicate this wire line experience in the wireless world. But this would require the equivalent of a slash-and-burn on the existing wireless business model. Unsurprisingly, existing wireless carriers will not become party to this radical reshaping of the industry unless they have no choice. But if consumers can chose a wireless network that gives them flat rate dumb pipe (as the basic contract, with the option to add on more customer service for additional fees), then over time they will, and the closed wireless carriers will respond to the competitive pressure by changing their business models.

When you think about it, it's not altogether unlike what Steve Jobs did with iTunes and the iPod. Rather than wait for the recording industry to reform itself, he went around them with an alternate business model. Feld highlights the history of the ISP business, where in the beginning AOL sold expensive metered service in a walled garden environment, but over time, competitors forced them to abandon that model for a more open system.

This is where the analysis gets really exciting! it's not just about whether Google can expand their empire to include wireless devices. If Google is not successful in getting an Open paradigm for the wireless space, there's a very real chance that the Telecoms will be successful in bringing the metered, Closed paradigm from wireless over into the wired world. And that would suck for Google (not to mention the rest of us).

2. Google Has No Desire To Be A Network Provider. But It Wants To Be A Network Architect.

Consider why open source software competes against Microsoft, despite the best efforts of MS to kill it. The answer is because open source plays by a very different set of rules. Open source can't be "Netscaped" because it doesn't play by the same rules as Microsoft. So the tricks that put MS at the top of the proprietary tree and help it cut down any serious competition don't work on open source products.

Here, Feld draws the comparison of Open Source software and Microsoft. Open Source advocates don't follow MS rules, but are able to compete because they play a different game.

...to repeat, the fact that Google doesn't want to run the network is a strength not a weakness. Google wants the consequences of an open network, and wants to absolutely ensure that the network will be totally and completely open. ... When you combine Point 1 + Point 2, the idea of Google being serious about winning makes more sense. They cannot get what they really want any other way. And they will avoid the doomsday scenario feared by the investment analysts.

Google won't go broke if it wins this spectrum, blazing headlong into becoming a network operator. They'll get others to build and operate a network according to Google's rules, because it's Google's spectrum.

3. Anonymous Bidding Changes Everything.

Dare we hope that our government is getting wise and will run an auction that can't be gamed by the big guys?

For the first time, the FCC will operate under a system of anonymous bidding. Analysts really have not digested just what that means to bidding strategies and behaviors. ... Google appears to understand that under this new set of rules, a well funded new entrant has a host of new opportunities to overcome the advantages of incumbents. And at the same time, Google cannot count on a more "open friendly" bidder winning the licenses. To meet its goals with certainty, Google must acquire a national footprint. At the same time, parties trying to block Google (or other new entrants) from acquiring a national footprint will have a very difficult time doing so. It is impossible to be strong everywhere, and parties that have relied on the mutual interests of similarly situated bidders to guarantee that a new entrant will meet with stiff resistance on every front find themselves forced to rely on their own devices without assistance. ... this promises to be the single most unpredictable auction in FCC history. Such uncertainty favors bold well funded newcomers like Google, to the disadvantage of traditional winners like Verizon and AT&T.

4. When Google Commits, It Does So All The Way.

Sure, Google dabbles, but when it jumps in, it does so with both feet.

Consider Google's acquisition of YouTube for what some analysts judged as the excessive sum of $1.65 billion. ... Google's decision to jump into the wireless auction and take on the likes of AT&T and Verizon mirrors its decision to acquire YouTube and take on media giants such as Viacom. It's extremely high-risk, and it remains unclear to conventionally-minded analysts focused on the bottom line how Google will come out ahead. ... Mind you, I don't say that Google definitively will win. Verizon and AT&T are not slouches when it comes to getting what they want, even when they have to fight fair (they may not prefer it, but they can do it if they must).

Just as I wouldn't underestimate Google in this competition, nor would I underestimate AT&T or Verizon. I think they are starting to see that they are in for the fight of their lives with Google (even if they don't fully grasp the scenario Feld laid out in his article).

As I wrote this summary, it dawned on me that when municipalities seek to bring in a third-party to operate a network according to Open Access principles, whether the city owns the network or not, they are mimicking the Google strategy that Feld described. Rather than wait on incumbent broadband providers to bring in new infrastructure or business models that better serve all the public, they're brining in the infrastructure themselves and installing the new business models that will bring about robust competition and lower rates.

I think it's interesting to note that no matter what happens in February at the auction, the incumbents are not going away. They are classics who have shown an ability to adapt when they have to. Much of the change we discuss on these pages can be seen as efforts by different parties to force change on the incumbents or to simply go around them.

But don't count them out, not just yet. They have lots of money, political connections, customers, and technology experience, and I think they will be around and influential for years to come. They just need a 2x4 to the head once in a while and would be well advised to follow both Joni's admonition about appreciating what you have while you still have it, as well as Harold's observation that most don't know the future until it bites them in the ass.

And do give the Counting Crows credit for recognizing something to appreciate after it has passed and gone on. Joni's Big Yellow Taxi is one for the ages, brought back to a new generation by the Crows...