Google Enters the Cell Phone Race

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This week NPR is examining the fast-changing world of wireless communication. Next month, the federal government will auction off a swath of airwaves that is expected to usher in a new generation of wireless devices and services. Google is among the companies that says it will bid.


It's Christmas MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.

This week, we're exploring the fast-changing world of wireless communication. This year, the Apple iPhone was introduced with great hype. Fans cooed over the sleek design and a flashy Internet access. But chances are that within a few years, even the iPhone is going to seem outdated.

Next month, the federal government auctions off a new swat of airwaves. And that's expected to usher in a new generation of wireless devices and services. The companies getting into the act include Google.

NPR's Jim Zarroli reports.

JIM ZARROLI: Among the significant but little remark upon changes in the wireless business this year was this one - the industry's main trade group, the Cellular Telecommunications Industry Association changed its name. It now calls itself CTIA-The Wireless Association. There is a reason for the change.

Mr. JOE FERRAN (Spokesman, CTIA-The Wireless Association): What was a phone a little while ago is no longer a cell phone.

ZARROLI: The association's spokesman Joe Ferran says the term cellular phone has become obsolete because the average cell phone has morphed into a wireless device.

Mr. FERRAN: It is now a lifestyle tool. It's how you can e-mail; it's how you surf the Internet. You can watch live video. You listen to your favorite music, take and send photos and, of course, yes, it still does make a phone call.

ZARROLI: To see how much wireless technology has exploded, pay a visit to the electronic store J & R Music World in lower Manhattan. There are as many as 150 types of wireless devices on sale here. Even the trendy clothing company, Prada, now sells one. Marty Singer(ph) is the store's head of corporate sales.

Mr. MARTY SINGER: What we're starting to see was seeing the device is getting the lot smaller. We're seeing the device that's becoming more and more powerful. So they're having more memory, the access time is becoming a lot faster, and the prices are coming down. So that's allowing the average consumer to enjoy the technology.

ZARROLI: The pace of innovation and wireless has been fast and furious, and starting next month, it will accelerate. The government is auctioning off part of the broadcast spectrum. It's the part that's now being used for analogue TV signals and that's being freed up because TV channels have been moving to digital technology.

Joe Ferran says as spectrum goes it amounts to prime real estate.

Mr. FERRAN: It's very rich spectrum. It has very good propagation features. It can travel through walls. It does a lot of things that other spectrum bands can.

ZARROLI: In short, it's the kind of spectrum that companies developing wireless services and products can't wait to get their hands on, says telecommunications analyst Roger Entner of IAG Communications.

Mr. ROGER ENTNER (Senior Vice President, Communications Sector, IAG Communications): Having spectrum is like money. You never have enough. And they are expecting increase demand from the - from customers to actually use that. And so, they are preparing for the future.

ZARROLI: The spectrum is so desirable that more than 200 companies and individuals have told the FCC they'll bid on part of it. They range from tiny regional phone companies to mega-players like AT&T and Verizon.

But the bidder that's really shaking up the auction is none other than Google, the search engine company and Internet-advertising giant. Google didn't want to comment for the story. Like all the bidders, it's restricted by the FCC from saying much about the auction ahead of time. So it's not clear what Google plans to do with the spectrum.

But Roger Entner says Google isn't going to be selling phone service.

Mr. ENTNER: They want to control the advertising space and how people are accessing information. And the best way how they can do that is if they also control the network.

ZARROLI: In other words, he says, Google wants to make sure that Internet users can readily access its search engine and use its other services. And it might not be able to do that if these new wireless networks are controlled by giants like AT&T. Google even helped persuade the FCC to change the auction rules for part of the spectrum. Winning bidders will be barred from placing restrictions on who uses the network. That means anyone can develop new services and software for wireless devices and the networks have to carry them.

John Leibovitz is executive vice president at Frontline Technologies, which is among the bidders.

Mr. JOHN LEIBOVITZ (Executive Vice President of Business Development, Frontline Wireless): And this means that there'll be just a huge amount of innovation and new services created. Many of which no one has thought of yet. Some will be thought of by little companies' garage-stage entrepreneurs, and some of them will be thought of by big companies.

ZARROLI: Leibovitz says one lesson of the wireless revolution has been that when people can access the Internet from anywhere, they tend to use it a lot more. They use it to find restaurants, when they're in an unfamiliar neighborhood or to answer questions that come up at meetings.

Next month's wireless auction will usher in a new era of technological innovation. And that means the Internet will end up being an even bigger part of people's lives than it is now.

Jim Zarroli, NPR News, New York.

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Up for Grabs: Airwaves (and Cooler Cell Phones?)

An artist's concept of cell phone communication

The upcoming wireless spectrum auction may revamp the wireless web business — and perhaps the very way we use our cell phones. Digital Art/CORBIS hide caption

toggle caption Digital Art/CORBIS
Cell Phone Video

Our Cell Phones, Ourselves

Americans spend, on average, seven hours a month talking on cell phones. But that figure doesn't capture how much the cell phone has become a part of our lives. It is, increasingly, a second skin — itchy at times, prone to blemishes, but essential to life.

From making us more likely to be tardy, to redefining how we socialize, read an essay on how the cell phone has changed modern living.

The imminent transition from analog to digital TV has opened up a coveted swath of the public airwaves. On Jan. 24, the FCC will begin selling off that prime wireless spectrum in an auction that is expected to fetch at least $15 billion for the federal government. For telecommunications firms—and anyone who uses a cell phone—the stakes are even higher: control of a big chunk of the burgeoning wireless Web business and, possibly, the very way in which we use our cell phones.

What is wireless spectrum, exactly?

Think of it as an invisible highway in the air. It's divided into different "lanes," or frequencies, that accommodate television, radio and wireless Internet services. Like a real highway, the wireless spectrum can get crowded and there is only room for so much traffic. The FCC acts as traffic cop, assigning different lanes for different uses and different companies.

There have been other auctions like this before? Why is this one so important?

Because it is probably the last of its kind. Every other prime part of the radio spectrum is already spoken for. "Beachfront property," is how one industry analyst describes the airwaves up for grabs. Even more important, the FCC has agreed to set aside a portion of the spectrum being auctioned off as "open access."

How is "open access" different from the way the system works now?

Until now, the cell phone business in the U.S. has been relatively closed — among the most closed networks in the world, in fact. The big cell-phone firms control everything from phone design to which Web sites and what videos users can view on their handsets. The carriers assert that this lets them control the quality of the customer's experience. Critics argue that is has severely limited the types of cell phones that consumers can purchase.

So what does this mean for consumers?

Under the new system, consumers will have more choices when it comes to networks and phones. If, for instance, Verizon Wireless were to buy a chunk of spectrum, consumers would pay Verizon for access to its network but could use devices of their own choosing on it. No longer would switching networks mean buying a new phone.

Who are the bidders in the auction?

They range from wireless giants like Verizon and AT&T to little-known firms like Vermont Telephone Company and Guam Cellular & Paging. And it's not just telecommunications firms that are bidding. Chevron, the oil company, is expected to bid, ostensibly so it can remotely monitor oil wells. All together, there are some 266 firms participating in the auction. However, the most talked about—and feared—-bidder is Google.

Why would Google care about some radio frequencies?

For one thing, it wants more people to use its search engine from cell phones and other wireless devices. Right now, Google co-founder Larry Page lamented recently, those searches are "still pretty slow." Google sees a huge business potential in the wireless Web. Already, the number of Internet-enabled wireless devices, such as cell phones and Blackberrys, outnumber PCs by a factor of three to one.

That's great for Google, but why should an ordinary person care about this auction?

Because it is expected to change the way you use your cell phone. Consumers will have more choices when it comes to making cell-phone calls and other wireless services. Analysts predict much easier cell-phone access to online banking, stock trading, videos, Web search engines, music downloading, as well as new versions of e-mail designed specifically for cell-phone use. Google is talking to a number of cell-phone manufacturers about making a phone tailored to its services, and there's speculation that Google might set up a system where companies offer free or cheap wireless service to users who agree to view Google ads and content.

That's great, but aren't Europeans and Asians already doing much of this?

Yes. In many ways, they are ahead of the U.S. Europeans and Asians are more likely to use their cell phones to surf the Web or send text messages. They also have a lot more flexibility when it comes to networks — and the cell phones that are compatible with those networks.

Why is the U.S. lagging behind in the cell-phone business?

For a number of reasons, but essentially it boils down to the way the cell-phone industries evolved in different parts of the world. European and Asian systems grew as an integrated whole, where different devices could "talk" to one another across different networks. In the U.S., the industry took the form of a number of competing, proprietary networks. For years, consumers couldn't call—or text—across this divide.

Who is likely to win the lion's share of the upcoming auction?

That's hard to say, but certainly, Google has the deepest pockets. It's not entirely clear, however, that Google wants to win the auction. Some analysts speculate that Google was more interested in prodding the FCC into creating an open-access system than actually owning the radio spectrum. At least one phone company, Verizon, isn't waiting for the auction to make these changes. It recently announced that it will allow consumers to pick new phones, ring tones, games and other applications to run on its network—even if they don't buy them from Verizon.

Are other wireless firms likely to follow Verizon's lead?

Yes. And even if they don't, the FCC has made it clear that it's moving towards a more open-access system. So if these firms don't choose to change, the new wireless world will likely force them to.



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