Auction presages on-the-go broadband

The Baltimore Sun

NEW YORK -- Big changes are expected for the world of mobile phones and Internet devices in the wake of a crucial radio airwaves auction dominated by the nation's top two wireless carriers.

The overwhelming wins this week by Verizon Wireless and AT&T; Inc. put them in strong positions to roll out a new generation of speedy on-the-go broadband.

For many wireless customers, the auction also will likely mean more choices when picking mobile gadgets and software, thanks to an open-access requirement prompted by Google Inc.

The auctioned airwaves will be transferred next year from TV stations, which are switching from analog to digital broadcasts.

These government-owned airwaves are considered prime real estate on the radio spectrum because of their ability to penetrate walls and send signals farther with less power.

The record-setting auction brought in more than $19 billion in bids, including $6.6 billion from AT&T; and $9.4 billion from Verizon Wireless, which won spectrum licenses covering every state except Alaska.

The Federal Communications Commission identified the winners Thursday. As expected, Internet search giant Google bid but won no licenses.

Verizon Wireless, jointly owned by New York-based Verizon Communications Inc. and Britain's Vodafone Group PLC, said before the auction began that by the end of this year its customers will be able to use cell phones and mobile applications from other companies.

That was good news for Google, which wants to bring its software and lucrative advertising business to mobile devices.

"Google was the happy loser," said Rebecca Arbogast, an analyst with the Stifel, Nicolaus & Co. investment firm.

She said the hope for open access is that it will generate "innovation because we won't have the small handful of equipment makers making devices to the specifications of the phone companies. Now anybody can."

Google said in a statement that the auction was a major victory for consumers that will bring them "Internet-like freedom to get the most out of their mobile phones and other wireless devices."

Consumers are unlikely to see huge changes immediately, but over time the mobile Internet should work more like the one at work and home, where people can use any service with any access provider, Arbogast said.

Traditionally, U.S. carriers have tightly controlled which devices and mobile programs consumers can use. They also have subsidized handsets, making them much cheaper when subscribers sign up for long-term contracts.

The open-access policy from Verizon Wireless means third-party gadgets may be more expensive and instead of shopping at the carrier's stores, "you might be buying devices at a Best Buy or a Circuit City," said Charles Golvin, a Forrester Research analyst.

Golvin said a little-mentioned concern is that while a new generation of third-party devices may work on the recently auctioned airwaves, they may not function if they lose coverage and have to fall back to an older network.

The auction has drawn criticism that it did little to create new competition sought by the FCC and merely strengthened a phone company hold on Internet access.

FCC Chairman Kevin J. Martin was more optimistic, pointing to the third-biggest winner, Frontier Wireless LLC, which is owned by EchoStar Communications Corp. The company bid $712 million and won licenses to create a nearly nationwide wireless footprint.

Satellite firms have sought new ways to compete with cable and phone companies that offer bundles of services. EchoStar may be interested in the airwaves to provide broadband Internet, enhanced satellite video or mobile video services, analysts said.

Cable firms also have been exploring the wireless business to better take on their phone company rivals. Some have discussed joining with Sprint-Nextel Corp., which did not bid in the auction.

The auction was not completely resolved, since bidding for a large chunk of airwaves failed to reach the FCC-imposed minimum of $1.3 billion. Those airwaves were set aside for shared use with public safety agencies to create a national emergency network, but a leading contender to bid dropped out.

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