The 19 Billion 250 Million Dollar Question

So it looks like the cell phone companies are doomed. Auction 73 finished in March with a result not many people thought would turn out, or agree with or for the most part understand the ramifications behind. Auction 73 was the federal auction for the 700MHz spectrum. For those who don't know, the 700MHz spectrum is the wave length at which calls, text messages and emails are sent and received via cell phone. The auction started in January with a few interested bidders such as AT&T, Quailcom, Virgin Mobile and oddly enough, the advertising power-house knows for it's search engine, Google. Google's explanation for the want for the 700MHz was simple: if it costs the same to chat with someone across the street from you or on the other side of the world, all your simply paying for is the Internet connection. Why should it be any different for phone calls. However, Google took it one step further and asked themselves, why should we have to pay for our hardware (cell phones, PDAs, Black Berries) and then pay a monthly fee to use said hardware we just purchased? Their final plan was to make the 700MHz a free access point to use your hardware that you purchase from the big cell phone companies. How can they afford to shell out the billion dollars to buy the spectrum and to what use would it be to them to just give it away you ask? Google's main income is brought in by their advertising, and with an entire spectrum at their disposal there would be plenty of room to advertise and plenty of revenue to be made. When the large cell phone companies got wind of this they were obviously not happy campers. The estimated revenue generated from the auction was thought to be in the neighbourhood of five to seven billion dollars, but when the auction finished, the bids added up to almost twenty billion dollars. The large jump in the 700MHz value was because all the other companies wanted to keep the spectrum out of Google's price range, making the biggest winners in the auction AT&T and Virgin Mobile. I've read a lot of blogs and message board on the loss of Google, most people are upset and would have liked to see a different outcome. I think, if anything, this outcome may benefit us in the long run. Of course the rumour mill has started moving and it seems Google may have found a niche in this newly delegated 700MHz spectrum... more profitable for themselves and more damaging for the big cell phone companies. What I've heard from my professors and peers is that Google plans on leasing some 700MHz space and giving it away for free, just like they wanted to before, but in addition they will be manufacturing cell phones and giving them away at no cost! All of this is with in Google's budget because they would be using the cell phones to send you text messages or phone calls to advertise things. This of course would make them huge bucks. Seeing that no cell phone companies will be making any money off selling service because Google is just giving it away, next time the 700MHz spectrum goes up for auction no one is going to want it and Google could possibly pick it up for possibly a few thousand dollars... talk about depreciation. Of course the only downside I can see in this situation is the advertising. We are already advertised at left right and center. I think a bit more is completely worth not having a cell phone bill or needing to pay for the hardware. If this trend actually comes to fruition I could see us one day not needing to pay for Internet access and being handed a computer by some company as long as we promise to read one email a week about their newest products and services. As of now, were all still slaves to the cell phone bills but hopefully soon Google will save us. Cheers!