Google Ends Silence On C Block Auction

Phurge found a post on the Google Policy Blog in which they lift the cone of silence that had been imposed by regulation over the recently concluded FCC spectrum auction. As some had speculated, Google was in it mainly to force some openness into the wireless industry. "Based on the way that the bidding played out, our participation in the auction helped ensure that the C Block met the reserve price. In fact, in ten of the bidding rounds we actually raised our own bid — even though no one was bidding against us — to ensure aggressive bidding on the C Block. In turn, that helped increase the revenues raised for the US Treasury, while making sure that the openness conditions would be applied to the ultimate licensee."

Comments

Smart Move?

[Anonymous Coward]

So they artificially bumped up the price to make AT&T and Verizon have to pay more?

Very nice!

Re:Smart Move?

[morgan_greywolf]

Haven't you figured out by now that corporations do not pay for things like that, their customers do? Sort of. That would be 100% correct if corporations could always price their products and services however they wanted. The reality is that they can't really build everything into their pricing structure. In a free market economy, there are other factors such as competition and the law of supply and demand. Some costs do come out of a company's bottom line.

Re:Smart Move?

[OpenGLFan]

Haven't you figured out by now that corporations do not pay for things like that, their customers do?

This sort of statement always puzzles me -- why do people assume that the price of goods is strongly dependent on the cost to produce them when there's ample evidence that this is false? Shoes cost $2 to make and are sold for $80, etc.

A company does not think "Oh, we just need to make $x million in profit, and we'll stop there." If a company can produce a widget X at $2, then develops a way to produce it at $1, what will it charge for the widget? AS MUCH AS POSSIBLE WITHOUT KILLING DEMAND. In absence of competition, it will not reduce price -- and this is more true as demand elasticity falls.

Now, a drastic supply cost drop may allow the company to support price structures unavailable before (100 people will buy a Ferrari that costs $50k to make for $75k, but 1000X will buy a Ferrari that costs $5k to make for $50k, etc.) But since they're negotiating over a one-time cost for licensing, that's not likely to happen.

In short, if the largest profit comes from people buying a NiftyPhone for $300, that's what it'll get sold for. If you start at the beginning and make the company pay $1 million for licensing, they'll STILL get the most profit by selling NiftyPhones for $300. And if you waived that licensing cost -- or even gave them $1 million outright -- would they sell the NiftyPhone for less, out of the goodness of their heart? Nope.

(This is simplified, but not as heavily simplified as the Joe's Bait Shack "We Pass The Savings On To You" model, and it's generally more accurate.)

Re:Smart Move?

[Atario]

Am I wrong?

Sadly, you are wrong. Though probably not how you meant.

Watch The Corporation . Corporations are legally required to act solely to increase their shareholders' value. You can act morally, but such action must always be overridden by the shareholders' purely monetary interests, in the case of a conflict. This is, of course, technically, almost always the case.

So, why are you wrong? Because it's not true that morals and ethics usually don't factor in -- they almost never can factor in.

Whatever morals and ethics Google has managed to slip in post-IPO have been allowed because their stock keeps rising and no one complains. Let the situation turn sour, though, and I guarantee you'll see the subset of their shareholders who are asshats suing for the company to pursue immoral/unethical courses of action to increase profit/stock value.

Android phones coming this year

[BadAnalogyGuy]

The real take away from this press release is that Google is expecting that the first phones based on Android will be released later this year. That is good news for those who are interested in open platforms and enjoy hacking. link

I wonder how happy Verizon's stockholders are going to be when they find out that Google was bidding up the price for essentially no reason at all and Verizon jumped in on top of that. not too bad, it seems

Re:Android phones coming this year

[Blahbooboo3]

Just small correction. I would say that if Android is an open system, you don't hack it :) iPhone related might qualify as hacking, but Android is not being *hacked* it is being used in the open design as Google intended.

Re:Android phones coming this year

[Anonymous Coward]

Just a small correction, but you do hack it http://wordnet.princeton.edu/perl/webwn?s=hack

(v) hack, hack on (fix a computer program piecemeal until it works) "I'm not very good at hacking but I'll give it my best"

You are looking for

(v) crack (gain unauthorized access computers with malicious intentions) "she cracked my password"; "crack a safe"

http://wordnet.princeton.edu/perl/webwn?s=crack

So how does this work?

[Van Cutter Romney]

From TFA:
"As you probably know by now, Google didn't pick up any spectrum licenses in the auction. Nonetheless, partly as a result of our bidding, consumers soon should have new freedom to get the most out of their mobile phones and other wireless devices."

also,

"But it was clear, then and now, that Verizon Wireless ultimately was motivated to bid higher (and had far more financial incentive to gain the licenses)."

Now, if they pushed Verizon to bid higher to win the contract won't they just charge the end users more?

Re:So how does this work?

[pavon]

Now, if they pushed Verizon to bid higher to win the contract won't they just charge the end users more? That was my first thought reading the summary - bidding-up just to raise the final price is not a cool thing to do, and does not benifit citizens/tax-payers/consumers, as it will increase the cost of anything deployed in the C Block, and delay uptake. However ...

Google's top priority heading into the auction was to make sure that bidding on the so-called "C Block" reached the $4.6 billion reserve price that would trigger the important "open applications" and "open handsets" license conditions. We were also prepared to gain the nationwide C Block licenses at a price somewhat higher than the reserve price ....

We're glad that we did. Based on the way that the bidding played out, our participation in the auction helped ensure that the C Block met the reserve price. In fact, in ten of the bidding rounds we actually raised our own bid -- even though no one was bidding against us -- to ensure aggressive bidding on the C Block. It does sound like they were only bidding up against themselves when the price was below the reserve - but I don't know why they would bid below the reserve to begin with if they were genuinely determined to see the reserve met, and genuinely willing to purchase the spectrum at that price.

In turn, that helped increase the revenues raised for the U.S. Treasury. I still find it extremely odd that they would mention this as a "good thing" at all. Seeing as how the number of rounds were not fixed (bidding continued until a round occurred with no increases in bids), the bidding strategy they described was not the best way to obtain their stated goals - they should have placed their first bid at the reserve price and then not bid higher until/unless someone else outbid them. Unless they were bidding themselves up above the reserve because had an unstated goal of running up the price for their competitors.

Re:So how does this work?

[Raineer]

Now, if they pushed Verizon to bid higher to win the contract won't they just charge the end users more? Myself, I am happy they did it, even if it drives prices up. I'd rather pay more for an open solution than have just another closed one, even if it is C-block. Openness in this space can transform the country.

Open in theory

[markov_chain]

It seems logical the telcos will try to hamper the unwanted participants on their network, just like they did with the DSL resellers. Nothing like being the operator.

Re:A little too altruistic

[Hadlock]

Didn't they specifically make it blindingly clear that by buying google stock you're agreeing that you're in it for the long run? I thought that was the whole point behind the google stock value was that they're looking at the long term and not worrying about short term gains.

I'll believe it when...

[icejai]

... the winning company actually *implements* the "intended" level of openness and has it in their terms-of-use section in their contracts.

A popular thing for telecoms to do these days seems to be re-interpreting words in contracts. "Unlimited access" is re-interpreted to mean "Unlimited connection time", even though there are at most 744 hours per month. "Unlimited internet service" is re-interpreted to mean "unlimited, as long as you don't transfer more than XXGB a month". I don't even want to get into what Comcast redefined to get their computer-impersonating policies to fly. Companies are redefining words like it's going out of fashion.

Google may be cheering and patting each other on back for a job well done, but to be honest, I don't think they've achieved anything they've set out to do. All they've done is get the FCC to say "Oh yeah, and the network must be open to other devices", while everyone nods "M-hm, oh yes of course" while looking at their toes.

Going so far as telling everyone how clever they were the first opportunity allowed seems a bit premature. The network's not up, the company's services aren't for sale, the consumer-end terms-of-use contracts aren't drafted, so what exactly are they cheering about when they got a telecom company to say "Okay, we'll 'allow' 'open' 'devices' and 'open' 'applications'"?

Re:Google you just did evil

[wcbarksdale]

The bidding system is basically a government tax on something that's free, the airways. The airways are "free" only in the same sense that natural resources like oil, gold, and lumber are: the government may not have paid anything for them, but they are still in limited supply. Should the government not charge for mining rights on public land?

Why underbid?

[huckamania]

Because if they won the nationwide C block, they could enact "open applications" and "open handsets" rules themselves. The government wasn't going to stop them from using their shiny new nationwide C block if their lower bid was the final bid.

Re:Interesting

[gladish]

Yes, suprisingly, I read the blog post. I'm just a little ambivalent with the strategy that they used. It seems by the wording of the article that they really didn't care whether they won or not, actually suggesting they didn't even want to win. They simply wanted to "manipulate" a market. Let's say you and I are at the Toyota dealer and you want the last car on the lot. Instead of letting you get it for the fair value (whatever that is), I decide to bid over the fair value just so you have to pay more. Why? Well maybe I think the Toyota salesman will look favorable at me the next time I'm shopping for a Toyota. Or maybe I just have so much money that I don't care if I have to pay over fair value. I just want the chance to make you pay more for it.