The ongoing auction of choice, 700 megahertz radio spectrum by the Federal Communications Commission is a game for high rollers, including telco giants and Google. One company will likely pay more than $4.6 billion for the rights to that realm. Through that space, the auction winner--and competitor--could eventually beam all kinds of signals, including voice, digital video, data, to your toaster.
But there is a cheaper way to get data through the airwaves. Just ask Google (nasdaq: GOOG - news - people ).
Google intends to be a big player in the airwaves. At the recent World Economic Conference in Davos, Chief Executive Eric Schmidt said that mobile devices with location-based advertising could spark a "huge revolution," more interesting than the personal computer. But along with taking part in the FCC's auction, Google has also been trying to get into the so-called "white space"--slivers of unlicensed, unused spectrum that lie between television channels. And that makes the telcos nervous. The white space channels were originally designed to prevent radio waves on adjoining channels from bleeding into each other. They're considered too narrow to be auctioned off. Even so, they're in a choice portion of the spectrum where analog television currently lives, an area that could be used for data services, much like the 700 MHz spectrum. Use--if approved--would begin in February 2009. The idea of utilizing white space spectrum has bounced around for years, stymied by concerns of TV signal interference and the objections of the powerful broadcast lobby. Then anticipation surrounding the 700 MHz auction renewed interest in all areas of spectrum, says Scott Ellison, IDC's vice president of mobile and wireless communications. "People were looking at other things in the broadcast space … tech companies probably thought, 'Can't we start using this spectrum in a more efficient way?' " Exactly what Google would do in the white space is a subject of debate.
Is Google's zeal for white space a hedge against losing the auction? That seems a bit of a stretch, particularly since there has been widespread speculation that Google isn't worried about winning the auction--just about ensuring that anyone can send data through the spectrum. Last summer, Google nudged the FCC to adopt a provision that gets triggered if the auction price exceeds $4.6 billion. That provision ensures that networks built in the newly sold spectrum would be open to all third-party devices. By actively bidding, Google can make sure that the final price is north of that magic reserve number--and so make the spectrum open.
Google's interest could simply be a land grab for any available slice of spectrum. "Anything that provides a way to push ads while not benefiting existing carriers is beneficial for Google," says Rory Altman, director of telecom consulting firm Altman Vilandrie & Co. Or it could create a low-cost experimental playing field that lets technology companies try out new services without the added cost of spectrum access. Companies "could experiment with new devices and services away from the incumbents, then use the experience to expand into other [spectrum] areas," notes Phil Asmundson, U.S. Technology, Media & Telecom Industry Leader at Deloitte & Touche. The vacant channels have also attracted other technology bigwigs, including Microsoft (nasdaq: MSFT - news - people ), Intel (nasdaq: INTC - news - people ), Dell (nasdaq: DELL - news - people ) and Hewlett-Packard (nyse: HPQ - news - people ).
In late 2006, those companies joined with several other firms and organizations--and Google--to form the White Spaces Coalition, which advocates using the unlicensed space. In 2007, coalition members gave the FCC two portable wireless devices designed to operate in the white spaces without interfering with adjourning television broadcast channels. The FCC reported in July 2007 that a gadget built by Philips Electronics didn't consistently detect broadcast signals and one built by Microsoft had flunked the tests. But a failed first attempt has never stopped a technologist.
The companies regrouped and by January had resubmitted four coalition-made devices to the FCC for fresh testing. The process is expected to take two to three months. A successful trial could usher in a new set of competitors for telcos, which are already battling cable providers and satellite TV companies for customers for data services. That's a big growth sector for telcos, which have been struggling to offset declining voice revenues. That's spurred No. 3 and No. 4 operators Sprint and T-Mobile to ask the FCC to regulate use of white spaces and earmark it for established carriers. Google responded by requesting the FCC ignore the carriers' request, describing their proposal as "not the most efficient, or even marginal, use of the white spaces."
AT&T (nyse: T - news - people ) and Verizon (nyse: VZ - news - people ) haven't publicly opposed the use of white spaces, presumably because their larger networks better shield them from such competition. "They are so advantaged in the amount of spectrum they own, these small slivers aren't all that threatening to them," says Asmundson. They also know how complicated it is to build out a profitable service. Mobile data services generally require a good chunk of spectrum--say 20 MHz to 30 MHz--to support a business. "You could have some interesting applications in these little bands, but the technology is not at the point to do anything in a major way," says Ellison.
Still, the idea of Google wiggling into the white space as a cheap route to consumers has the carriers watching their back. Adds Ellison, "Google has the heft, money and know-how to play all the fields and see what works."