The Federal Communications Commission's upcoming auction for wireless spectrum is attracting interest from several unlikely bidders, including cable companies such as Time Warner and Internet companies such as Google.
But what, exactly, will these companies do with this expensive asset?
The auction, scheduled to begin June 29, will sell off slivers of 90MHz radio spectrum in the 1.7GHz to 2.1GHz bands, which could be used to roll out more third-generation, or 3G, mobile networks or newer, 4G wireless technology that would shuttle voice, data, video and other services at even higher speeds.
"It's ideal spectrum," said Craig Mathias, an analyst with Farpoint Group. "I'd say it's as good as PCS (personal communications services) spectrum. It allows the owners of the spectrum to use any number of technologies, including next-generation cellular technology and Wimax."
On Wednesday, Verizon Wireless filed a Short Form Application with the FCC to participate in the auction, and other mobile operators, such as T-Mobile, are also expected to aggressively bid for spectrum. In addition to the traditional phone companies, other companies, such as Google and Time Warner, may also throw their hats--not to mention their checkbooks--into the ring.
On Wednesday Time Warner CEO Glenn Britt confirmed that Time Warner is considering bidding, along with Comcast, Cox Communications and Advance/Newhouse Communications. The four cable companies are already linked in a partnership with cellular provider Sprint Nextel that they announced last November.
It's difficult to know how aggressive Time Warner and the other cable companies plan to be. Britt said Time Warner may not even actually bid, but that it wanted to keep its options open.
Other rumored bidders, such as Google, have been mum about their plans. Google co-founder Larry Page said during the company's first-quarter earnings call that Google was looking into new ways to "expand" Internet access possibilities for users. Page didn't confirm the company's plans to bid on new spectrum, but he didn't deny the rumors either. Google CEO Eric Schmidt said at a press event Wednesday that the company would more than likely partner for spectrum. He indicated Google might consider teaming up with a partner to acquire new spectrum, or it might simply partner with a company that already owns spectrum.
"All these companies want to leave their options open right now," said Albert Lin, an analyst with American Technology Research. "Being a partner with a cellular provider is convenient, but it's also expensive. And even though spectrum is expensive, it's generally considered a rare commodity. The opportunity doesn't come along every day to buy it."
An alternative to standard networks?
What would these companies do with these licensed airwaves? Lin believes it's unlikely that they're looking solely to get into the already crowded cell phone business. Instead, it's much more likely they plan to use the spectrum to deliver wireless broadband services.
Time Warner and the other cable operators involved in the Sprint Nextel partnership have already indicated that adding wireless to their product suite means much more to them than simply adding cell phone service to their bundled packages.
These cable operators see wireless as a way to distribute their content to mobile devices. They also see potential in wireless to let customers interact with existing services in a new way. For example, Comcast and Time Warner have already talked about allowing users to program their DVRs remotely from their cell phones. Owning wireless spectrum would provide cable operators more control over how they distribute content and develop mobile services for their customers, said Lin.
For Google, the licensed spectrum would provide an alternative way to reach its users. Google is already building Wi-Fi networks in cities such as San Francisco and Mountain View, Calif., in an effort to circumvent existing carriers' access networks.
"A lot of the new players looking to get in on these auctions could be motivated by the current legislation and policy coming out of Washington that doesn't seem to favor Net neutrality principals," Lin said, referring to proposals that would prohibit network operators from prioritizing Internet content and services on their systems.
Phone companies such as Verizon and AT&T have said they're considering charging content owners and distributors, such as Google, additional fees to carry high-bandwidth content over their networks. For Google and other Internet companies, this could spell big trouble. Building their own access network to bypass these carriers could alleviate the problem, Lin said.
A pricey asset
But obtaining licensed spectrum won't be cheap. Though spectrum licenses may have sold for hundreds of millions of dollars a few years ago, as bankrupt wireless companies scrambled to deal with the dot-com bust, the spectrum currently up for auction is expected to go for billions. Many analysts are predicting the 1,122 available licenses could generate between $8 billion and $15 billion for the government.
The 1.7GHz and 2.1GHz bands of spectrum are particularly good for wireless technologies because they allow for a wide array to be used, including next-generation cellular, and new IP-based technologies like WiMax, which can support peak data speeds of about 20Mbps, with average user data rates between 1Mbps and 4Mbps. WiMax can also transmit data from a few hundred feet in densely populated areas to between 1 and 2 miles in suburban areas.
"Because WiMax is able to use more-powerful radios, it can blanket a city and penetrate walls fairly easily," Lin said. "Getting Wi-Fi to work inside as well as outside has been a significant problem for many cities deploying Wi-Fi citywide."
Though WiMax is still in its early days, Intel, along with several corporate sponsors, is working with the wireless industry to drive deployment of WiMax networks. Sprint Nextel is already considering the technology as its top choice for its 4G wireless technology using its 2.5GHz spectrum.
Still, some experts say cable operators or other potential contenders for the new spectrum may not use WiMax, but instead other cellular technologies.
"WiMax technology is still too immature," Mathias said. "I think it's much more likely that the companies bidding for spectrum will use a combination of cellular and Wi-Fi technologies."
CNET News.com's Elinor Mills contributed to this article.