SAN FRANCISCO — Google Inc. confirmed its plans to bid for a prized piece of the airwaves in an upcoming government auction, further underscoring the Internet search leader's determination to shake up the wireless market and seek more profits from mobile phones.
Friday's announcement wasn't a bombshell because the Mountain View, Calif.-based company previously signaled it might participate in the Federal Communications Commission auction scheduled to begin Jan. 24.
In a mild surprise, Google will enter the competition without a partner more experienced in the wireless industry. Going it alone will be expensive and potentially risky, even for a company as rich and technologically adept as Google, which ended September with about $13 billion in cash.
The bidding for the swath of 700 megahertz spectrum that Google wants will start at $4.6 billion, with analysts predicting the final price will be substantially higher. Building out the network for national coverage might cost an additional $5 billion to $7.5 billion, based on estimates from Citigroup Global markets analyst Michael Rollins.
Lingering questions about how the possible wireless expansion might affect Google's finances and focus on its core Internet business threaten to weigh on its stock in the months ahead.
The uncertainty could last a while, since the winner of the airwaves auction might not be identified until March.
The airwaves up for grabs are widely coveted because the frequencies travel long distances and easily penetrate walls, advantages that will require fewer radio towers while promising better connections than other wireless networks. The spectrum is being freed up as part of the switch to digital television in February 2009.
Whoever wins the rights to the
spectrum being eyed by Google must accommodate all types of phones and mobile software. Google lobbied the FCC to adopt the "open access" condition, arguing that consumers shouldn't be restrained by market restrictions that limit the kinds of handsets that work on wireless networks.
Google's decision to throw its hat into the ring for the wireless auction might be part of a strategy to turn the heat up even higher on Verizon and other major carriers such as AT&T Inc., said Cantor Fitzgerald analyst Derek Brown.
"Google is taking an aggressive stance that shows it's a legitimate threat to the entrenched players," Brown said. "They are clearly trying to stir the pot and are doing a pretty good job of it so far."
Unless they declare their intentions publicly as Google did, the other bidders in the auction might not be known until the FCC releases a list of participants in mid-December. The deadline to apply for acceptance into the auction is Monday.