Google Ends Silence On C Block Auction 162
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."
Google you just did evil (Score:4, Insightful)
But ultimately the winners are going to have to make their money back by sticking it to the consumer. The bidding system is basically a government tax on something that's free, the airways. So the revenues Google so kindly helped raise for the Feds are ultimately gonna be paid for by the end user.
Re:Implicitly (Score:3, Insightful)
Re:Google you just did evil (Score:1, Insightful)
They are not bidding on free airwaves.
They are bidding on a government-protected monopoly of a certain spectrum.
The "owners" of this spectrum license will call upon the government to prosecute others who brodcast on this spectrum.
Re:Smart Move? (Score:3, Insightful)
Very nice!
Brilliant!
Re:Android phones coming this year (Score:3, Insightful)
Re:Google you just did evil (Score:4, Insightful)
It will be interesting to how this admission of gaming the auction system plays out.
Verizon could file a complaint.
-- and/or --
Google may find itself in hot water, if this admission means that Google violated any federal bidding rules...
Re:Google you just did evil (Score:5, Insightful)
Re:eBay (Score:2, Insightful)
Re:Smart Move? (Score:4, Insightful)
Not to slam Google, but would an "evil" corporation actually admit to doing evil?
Shouldn't we take a closer look at corporations that specifically say, "we do no evil"?
Sorta like when paper companies create commercials on how earth friendly they are right before a new paper mill is built or when they are under investigation for discharging too much pollution.
Re:So how does this work? (Score:4, Insightful)
Step 2: Google bids on the auction, but only until the reserve price is met. This ensures that the openness conditions stick, whether they end up winning the auction or not.
Step 3: Google stops bidding, and Verizon outbids them. From Google's perspective, they have what they came for, and actually buying the spectrum isn't relevant.
The confusion is that apparently the auction is sufficiently arcane that Google had to keep the bidding up themselves to get the price above the reserve price (the auction didn't start at the reserve price), but that once it got there Verizon did in fact outbid them.
Re:Google you just did evil (Score:3, Insightful)
That's somewhat true, but not entirely. Pricing is often more complicated than people think. When you buy something, you aren't necessarily being charged cost plus some fixed percentage.
So to avoid getting theoretical, my point is that Verizon has probably done a calculation already of what price will maximize their profits. So let's say (hypothetically) they can provide service for $10/month and make no profit, or they can charge $200/month and make $190 profit. Why wouldn't they just charge $200/month (or more)? Because they wouldn't have as many customers, so they'll make less profit overall.
That's just how these calculations work. So if I can sell a product and make $10,000 profit, but can only sell 2 units-- or I can sell it cheaply enough that I can sell 2 million units, but only make $2 per sale, I'm better off selling it cheaply. So companies try to figure out what the optimal pricing of a product is, where raising the price will lower your overall profits by diminishing the volume of sales, and lowering the price will lower your overall profits because you won't be making enough more sales to make up for the loss of profit per unit.
So my point is, there is probably an optimal price Verizon expects to charge on wireless internet access, regardless of how much it actually costs them to provide this service. If they could somehow provide this service for free, they wouldn't pass those savings on to consumers. Likewise, if providing the service becomes more expensive, there's still no sense in raising your prices beyond the optimal level, because you'll only end up making less money.
Re:So how does this work? (Score:3, Insightful)
Most services Verizon offers aren't really in competitive markets. If they were, their costs would be the largest factor in the prices they charge.
Monopolies and oligopolies are when the price charged for something is independent of the actual cost.
Re:Google you just did evil (Score:2, Insightful)
Re:Smart Move? (Score:5, Insightful)
I'm guessing (without reading TFA of course) that the scenario went like this. If the reserve price hadn't been met, then the carriers could say, "obviously this spectrum has no market value unless it is for creating a closed network." Then the FCC would declare the auction void and conduct a new auction under conditions more favorable to the carriers and less favorable to the public.
Is stopping that scenario evil? Well, if Google had won, they'd have to put their money where their mouth was and become a wireless carrier themselves. They were hoping the industry would rather let their customers choose the hardware they wanted to use in this spectrum rather than to invite Google in as a competitor.
So it's a win all around. Google keeps the spectrum open for its servies and for its android partners; users get more choice in hardware and services, and the current providers don't have to worry about Google doing to them what they'd planned to do to Google. It's not as lucrative for the carriers as they hoped, but that's what competition is for. They'll make at least a normal profit, but not as much more as they'd have liked, and the public gets better services.
Re:A little too altruistic (Score:5, Insightful)
Re:Google you just did evil (Score:3, Insightful)
Re:Google you just did evil (Score:3, Insightful)
Throw in a few dozen metal coathangers and we can get started on construction.
Re:Smart Move? (Score:2, Insightful)
Yes. However, it should be noted that Google doesn't say that. They say they have a goal of "Do no evil", they have never, to the best of my knowledge, claimed that they never do.
Of course, that's a point in there favor. It's easier to trust a person who says they try not to sin than one who says they've never sinned. The first assertion is much more believable. The second one is probably lying.
Re:Smart Move? (Score:5, Insightful)
I'd say that's true of individuals (people), but we're talking about corporations here. Corporations are legal entities, but they don't have a conscience. Many corporate boards (dare I say most) use only the law to determine if they should or shouldn't do something. If its not illegal, its fair game. Morals and ethics usually don't factor into their decisions, unless its specifically stated in their bylaws or policies.
Am I wrong?
Re:Interesting (Score:5, Insightful)
In effect Google was saying "we want the block to pass the $4.6 billion mark so badly that we'll pay it ourselves if we need to"
Once bidding had passed that mark, they didn't really care if they or someone else footed the final bill. The thing they wanted had come true.
Re:So how does this work? (Score:3, Insightful)
Now if it was $10/phone unlimited, then I could see how you may say it is competitive.
Basically the marginal price is more connected to what people will pay for a service, and less what it actually costs to provide that service.
There isn't enough competition in the wireless market to drive the price down to the marginal cost of delivery, unfortunately.
Re:A little too altruistic (Score:3, Insightful)
Re:Smart Move? (Score:2, Insightful)
You and I do not share axioms (Score:3, Insightful)
I don't consider that a good thing. It won't cause the US government to take less of anybody's money, and it will make it easier for the US government to take actions which I consider wrong.
Re:Smart Move? (Score:3, Insightful)
Yahoo never really thought the same way; their philosophy was more like "Don't get crushed by Evil (with all due respect to Evil)". It didn't quite occur to them that doing the Internet the same way software was always done could be a weakness. They made/bought some good products, whored their brand out, and occasionally stumbled across openness and compatibility. It didn't have the same focus as explicitly stating that Microsoft's approach was the wrong way to do the Web.
[* "If I commit to your platform, how do I know you won't screw me later on?" If you're not locked into a system, you don't have to trust the provider nearly as much.]
Re:Google you just did evil (Score:2, Insightful)
Precisely. In fact, Verizon's bid was calculated something like this:
(Predicted revenue from service on the spectrum) - (cost of providing service) - (reasonable return on investment) == maximum spectrum bid.
They already figured on what consumers were willing to pay for the services they'll sell on this spectrum. If the price of the spectrum went too high for those pricing expectations to be able to fund the bid, they wouldn't go ahead and buy the spectrum and jack up prices to compensate, they just wouldn't make the bid. Similarly, if they got the spectrum for cheap, they wouldn't just give away the services. They still sell them at the market rate and pocket the increased margin. With Google pushing up the price, that money goes into the treasury and reduces the deficit instead of lining the pockets of Verizon investors. I'd call that a win for the rest of us.