Lawmakers Complain That Google 'gamed' Auction

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Three lawmakers complained Tuesday that Google "maneuvered" its way into an open wireless network without having to come up with a winning bid in the U.S. Federal Communications Commission's recently completed 700MHz spectrum auction.

U.S. Representatives Cliff Stearns and John Shimkus, both Republicans, suggested Google out-maneuvered the FCC when the agency required the winner of about a third of the spectrum that was auctioned to operate under open-access rules. A third lawmaker, Representative Eliot Engel, a New York state Democrat, also said he was concerned that after the auction ended, Google said its primary goal in bidding in the auction wasn't to win, but to make sure the open-access rules happened.

Most lawmakers speaking at a hearing on Tuesday gave mixed reviews of the 700MHz auction, which wrapped up in March. Many Republicans voiced concerns about the money raised, and many Democrats complained that large incumbent carriers won much of the spectrum.

Google promised to bid at least US$4.6 billion on the 22MHz C block of spectrum if the FCC would require the winner to allow outside devices and applications to operate on the network, but Verizon Wireless outbid Google and won most of the C block licenses.

Two Google officials, in an April 3 blog post, said the open-access rules were their top priority for the auction.

"Based on the way that the bidding played out, our participation in the auction helped ensure that the C Block met the reserve price," wrote Richard Whitt, Google's Washington, D.C., telecom and media counsel, and Joseph Faber, Google's corporate counsel. "In turn, that helped increase the revenues raised for the U.S. Treasury, while making sure that the openness conditions would be applied to the ultimate licensee."

Stearns, from Florida, complained Tuesday that the FCC allowed Google to manipulate the auction and get a "free ride" on the C block spectrum. Google in November launched a mobile operating system project along with the Open Handset Alliance

"I suspect that if Google had been interested in more than just maneuvering within the system, it could have prevailed in the C block and become a new [wireless] entrant," Stearns said during a hearing in the House of Representatives' Subcommittee on Telecommunications and the Internet. "I suppose we cannot blame them for trying to get free access to the spectrum; what is more concerning is, that even though we knew what they were doing, we let them maneuver this way anyway."

Stearns complained that the open-access conditions limited the bidding on the C block. While the 700MHz auction raised a record $19.1 billion for an FCC auction, some estimates suggested it would raise $30 billion, Stearns said.

FCC member Robert McDowell agreed that the open-access requirements slowed bidding on the C block. Spectrum in some other 700MHz blocks sold for three times the value that the C block did, he noted, although other spectrum sold in smaller regional blocks.

Shimkus, from Illinois, echoed Stearns' concerns. "Do you believe Google was simply gaming the system and duping the commission during the auction?" he asked FCC members. "I think Google tried to gain access [to a wireless broadband network] without having to really pay for deployment."

FCC Chairman Kevin Martin, also a Republican, disagreed, saying the open-access rules will benefit a wide range of people and companies. "Our goal, in adopting the openness conditions, was not to prohibit someone else from winning, but to actually [require] whoever won that spectrum to have an open platform," Martin said.

Subcommittee Chairman Ed Markey, a Massachusetts Democrat, said the open-access rules will create new innovation in the wireless industry, although he and some other Democrats complained that large wireless carriers Verizon Wireless and AT&T won a large portion of the 700MHz spectrum. Democrats raised concerns that the auction didn't produce a new nationwide competitor that would build a wireless network to challenge broadband offerings from Verizon, AT&T and cable modem providers.

However, the open-access conditions "will unleash hundreds of millions of dollars in investment in wireless devices and applications, and create new jobs in an economy that sorely needs them," Markey said.

Google spokesman Adam Kovacevich dismissed lawmakers' concerns about Google's auction strategy. "Consumers were the big winner in the auction, not any company," he said. "This auction generated not only a record amount for the U.S. Treasury, but also historic new rights for wireless consumers as a direct result of Google's bidding. By any measure, that's a huge success for consumers, and we're proud of our role in helping make that happen."

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