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Google's Gargantuan Wireless Bid Puts FCC on the Spot

Google (GOOG - Get Report) is flexing its muscle in the mobile broadband business.

The company said Friday it would bid for $4.6 billion worth of wireless spectrum at a coming federal airwave auction -- but only if the Federal Communications Commission adopts so-called open standards for a speedy wireless broadband alternative to existing phone and cable Internet connections.

A key point of Google's proposal would involve a so-called open devices licensing condition, under which the FCC would mandate that consumers be enabled to use any wireless device on any company's network. The telcos who run the big existing networks oppose this concept.

Google's bold move comes just a day after the Mountain View, Calif., Net giant disappointed Wall Street with mixed second-quarter numbers . Google shares tumbled 7% in late trading Thursday and were maintaining that level Friday morning, down $36.10 to $512.40.

Google has been very interested in the 700MHz air waves, which are being vacated by analog UHF TV broadcasters who have been forced to move to digital signals. The newly available spectrum offers a prime swath of wireless real estate where the frequencies are particularly conducive to data transmission and can travel through walls.

The Federal Communications Commission is overseeing the auction and Chairman Kevin Martin has called the 700MHz band an opportunity for a "third pipe" and a "national wireless broadband alternative."

In recent months, Google has been busy trying to guide the FCC's policies on the auction and on the use of the spectrum. Google says its analysis suggests that conventional wireless players like AT&T (T - Get Report) and Verizon (VZ - Get Report) have a big advantage in the auction and the imperative to consolidate the new spectrum.

In a letter to the FCC on July 9, Google attorney Richard Whitt stressed that the company was interested in the new wireless opportunities the radio waves could open up.

"The 700 MHz auction may well be the FCC's most important wireless-related action for many years, because it could lead to the introduction of new facilities-based providers of broadband services, wielding new business models," Whitt wrote.

On Friday, Google reiterated its interest in the auction but said it will bid only if the FCC adopts four types of "open" platforms as part of the license conditions, including one that would allow consumers to choose a device and use it on any network.

One way or another, Google is planning on getting involved with the so-called fourth generation wireless or 4G business. If Google acquires a slice of the radio waves it will likely push an open platform approach and act as a wholesaler allowing other companies to resell a variety of services.

"Whether we ultimately bid, and do so successfully, we are also considering various post-auction business arrangements, such as joint partnerships and anchor tenancy," Whitt wrote.

A pricey dive into the wireless auction could put more pressure on expenses and further hurt the stock, says one money manager who is short the stock. By some estimates, if Google won spectrum, it would face as much as $6 billion in additional expenses as it builds a national wireless network infrastructure.

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