Paul Allen Vs. Google?
By most accounts, Paul Allen has a terrible record in the cable business. Since investing around $8 billion to form Charter Communications in 1999 (a company now worth around 1/16 that total), the coaxial biz hasn't been too kind to our Mercer Island friend. So why not double down on his bet by bidding on billions more in wireless?!? Last week the FCC noted his presence among 266 registered bidders for an upcoming auction of what's called the 700 megahertz band of spectrum, worth about $15 billion in all. (It's being abandoned by the TV industry in 2009, which is making the shift to digital.)
Allen's got a new venture, Vulcan Spectrum LLC, and it's listed among the big boys readying their bids for the auction on Thursday, January 24. Those names include AT&T, Verizon, Cox Cable, and a certain little Bay Area start-up that's been adding greatly to its Northwest presence: Google. And lest we forget: What benefits Google tends to hurt Microsoft's share price, which is like opening up a big, fat hole in Allen's pocket.
Google previously lobbied semi-successfully for the FCC to designate a chunk of the 700 MHz band as open-source, meaning the eventual owner would have to allow new gizmos to work with—and profit from—its new acquisition. To buy the so-called "C Block," Google would have to spend a minimum of $4.6 billion (that being reserve price if no other bids are received). Then, if it were hiding some sort of magical new G-Phone up its sleeve, it would still have to build an entire network to pair spectrum with device, which would cost billions more (or require a partner such as AT&T or Verizon). Or it could buy a chunk of spectrum and license it back to the big telcos (again meaning AT&T and Verizon) under terms that would later optimize its hypothetical G-Phone.
What about Allen? Buying up spectrum could allow him to provide wireless services to over five million Charter customers. (In our state, the St. Louis-based company serves lesser markets like Ellensburg and Wenatchee.) Bundling cable with cell and Internet could help bail out at least part of his Charter investment. Or, like Google above, he could choose to partner with a bigger telcom, acting as landlord on his bandwidth. And if he buys some of said C Block spectrum, he could even end up a facilitator of Google's future open-source applications. Or even its mythical G-Phone.
The story is already making our head spin. (See Gizmodo for a nice overview of the auction, without reference to Vulcan). We'll likely have more to write on the subject before or even after the blind auction, which can take weeks or months to complete before bids are opened. So maybe it'll be Allen versus Google. Or Allen marries Google (though Bill Gates would definitely not attend the ceremony). Or, given the latter's expansion here and the former's empire of office space in South Lake Union, the two could even become landlord and tenant.
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