• by Laurie Sullivan  @lauriesullivan, August 1, 2007

The Federal Communications Commission shook up the wireless market Tuesday, approving rules supported by Google that give consumers more choice in their cellular phone and wireless device purchases. The vote clears the way for an auction in 2008 of the 700-megahertz airwaves that could raise more than $10 billion and introduce innovations, from software to advertising platforms not previously offered.

The much-debated "open-access" provisions pushed by FCC Chairman Kevin Martin would allow consumers to use whatever phone and software they want on about one-third of the network planned for auction. This creates a wireless alternative for third-party services sold by technology and cable companies that introduces competition for AT&T, T-Mobile and Verizon Wireless, whose networks now work only with technologies they approve. Apple's iPhone, for example, today won't work on any network other than AT&T.

Google, eBay's Skype Web-phone service, and public interest groups Public Knowledge, Free Press and the Open Internet Coalition wanted to see open-access policies that spurred even more innovation and entrepreneurship, says Art Brodsky, communications director at Public Knowledge. But the FCC chose to reject the "wholesale open-access" condition that would have required a licensee to sell access to its network on a wholesale basis.

Google had pledged to bid about $4.6 billion for airwaves on the 700-megahertz spectrum to build its own free wireless network. Some believe the Mountain View, Calif.-based company wants to create a platform for ad services and software running on mobile devices. It now appears more remote that the newcomer to the wireless industry will have to make investments in the billions.

"Google wants to be the program guide of the new digital world," says Laura Martin, analyst at Soleil-Media Metrics.

Given Google's excellent track record for innovation, Martin thinks the move will prove positive for consumers, but whether it's good for Google shareholders depends on the applications developed to run on the spectrum.

That's a matter of opinion. Trip Chowdhry, Global Equities Research senior analyst, doesn't think Google's push to create a neutral spectrum will positively impact consumers. "You're likely left with an infrastructure that few would want to invest in," he says.

If Google did bid and win the spectrum airwaves, it wouldn't need to split profits for mobile advertising and search with carriers, which typically get 20-30% of sales, Chowdhry says.

The FCC will auction off about 60 megahertz, of which 22 will follow the "open access" rules. The national public safety network will receive about 10 megahertz. The open airwaves come from the freed-up radio spectrum, as television broadcasters continue to switch from analog to digital formats--a change required by 2009.