----- Original Message -----
From: "John Oram" <[EMAIL PROTECTED]>
To: "Lonnie Nunweiler" <[EMAIL PROTECTED]>; "Marlon Schafer"
<[EMAIL PROTECTED]>
Sent: Thursday, April 13, 2006 6:17 PM
Subject: Google, eBay and Amazon may build their own wireless Internet
http://www.investors.com/editorial/IBDArticles.asp?artsec=17&artnum=1&issue=20060410
Internet & Technology
Internet, Media Outfits Could Bid For Spectrum
BY REINHARDT KRAUSE
INVESTOR'S BUSINESS DAILY
Posted 4/10/2006
Analysts are speculating that Internet and media companies could team up
to bid for radio spectrum in order to launch wireless broadband services,
as a way around the phone companies.
Rumors that nontelecom companies could bid for wireless spectrum have
floated around for a few years. The new speculation focuses on large
Internet content firms such as Google, (GOOG) Amazon.com, (AMZN) and eBay.
(EBAY)
Fueling the talk is a regulatory battle — the network neutrality issue —
pitting Internet firms against phone companies AT&T, (T) Verizon
Communications, (VZ) and BellSouth. (BLS)
Phone companies want to charge Internet firms for moving movies, video
games, music and other bandwidth-hungry content over their networks. This
is aside from the subscription fees they charge broadband subscribers.
Under their plan, Internet firms would pay extra to transmit content via
faster and more secure lanes on the Internet highway.
Internet firms object. They want lawmakers and regulators to guarantee
network neutrality. That means all Internet traffic would be treated the
same, and that phone company customers couldn't get special treatment over
others.
Phone companies and cable TV operators provide most high-speed connections
to homes. Cable firms are part of the debate, but for now phone outfits
are in the forefront.
By owning their own radio spectrum, Internet and media firms could deliver
services to homes via their own wireless broadband pipe. But that's only
if they pay the billions of dollars the spectrum is expected to garner at
auction, plus build wireless networks.
Few Taking Any Bets
That's a big if, but phone companies are watching closely because the
stakes are so high.
"It wouldn't shock me to find a range of unusual bidders in the upcoming
spectrum auctions," said Jim Cicconi, AT&T senior vice president for
legislative affairs.
But there's no question about his point of view.
"Experience has shown that some companies haven't needed a well
thought-out business plan to bid (in earlier auctions)," he said.
The federal government has two big spectrum auctions in the works. One is
scheduled for June and involves spectrum in the 1710-1755 and 2110-2155
MHz frequency bands.
The second auction would involve frequency in the 700 MHz band. That
auction depends on TV broadcasters returning spectrum to the government
after they move to high definition. That auction might not occur until
2008.
Cicconi suggests that wireless broadband might not be the best business
for Internet or media firms. He says they might be better off cutting a
deal with AT&T or other phone companies, which are experienced network
operators.
"Any content provider would have a build vs. buy (bandwidth) decision to
make," he added. "What's the cost of building out your own network as
opposed to contracting for a service?"
Real-Time Video Isn't Easy
Cicconi adds that it would be challenging for Internet firms to deliver
streaming video services reliably via wireless broadband.
Some methods that Internet and media firms seem to be eyeing don't involve
real-time streaming.
Instead, video or other content could be downloaded to a computer, digital
video recorder or portable device. That's less taxing on a network.
AT&T and other phone companies have promised not to block network access
or degrade service to companies that don't agree to pay a premium rate.
And current services that gobble up bandwidth — such as Google's video
store and Apple Computer's (AAPL) iTunes music service — seem to be doing
fine.
Internet companies are eyeing bigger bandwidth-hungry services, analysts
say. Amazon, for one, is expected to launch a digital distribution service
including music and movies by year-end.
Phone carriers say it's unfair for them to invest more in network
infrastructure to carry Internet firms' content if they can't make more
money as the middleman.
It's unclear whether Congress or the Federal Communications Commission
will adopt any broad policies involving network neutrality. One bill in
Congress would let the FCC address complaints from content firms on a
case-by-case basis.
Web companies that have pushed for Congress' help include Google, Amazon,
eBay, Microsoft (MSFT) and Yahoo. (YHOO)
Walt Disney (DIS) has said it doesn't think legislation to guarantee
network neutrality is yet needed.
Yahoo has kept a low profile on this issue. It has big plans to deliver
on-demand content. It also is an Internet partner of AT&T and Verizon.
Both AT&T and Verizon use Yahoo's Internet portal for their broadband DSL
(digital subscriber line) customers.
Yahoo didn't return phone calls or e-mail messages seeking comment.
Bidding Could Reach $15 Bil
It's expected that bidding in the June and 700 MHz auctions could reach
$10 billion to $15 billion.
Many observers say Internet and media firms will bid in June. But George
Dellinger, an analyst at research firm Washington Analysis, says the 700
MHz auction is the one to watch. That auction offers a bigger block of
spectrum at a likely lower cost.
"A consortium of new media companies could wind up leading the pack to buy
that spectrum and provide a third (broadband) pipe into homes," he said.
Much speculation centers on Google. It will have close to $10 billion in
cash after it completes a planned $2 billion secondary offering. And it's
already a player in municipal Wi-Fi wireless broadband networks. Last
week, a San Francisco panel approved a bid by it and EarthLink (ELNK) to
provide Wi-Fi to that city. A basic service would be free and a premium
service would cost $20 a month.
Some question whether Internet firms will bid for spectrum. Stifel
Nicolaus analyst Blair Levin said companies might back off when "it's time
to put down the money."
Paul Gallant, an analyst at Stanford Research, said it would be a tough
call for any media company to "venture out of their core expertise in
creating content and into running a network."
© Investor's Business Daily, Inc. 2000-2006.
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