All Things Digital

Those on-again, off-again talks between Sprint (S) and Clearwire (CLWR)? They’re on again. In fact, they’re so on that they’re already over. This morning the two companies announced a $14.5 billion multi-player joint venture backed by cable operators Comcast and Time Warner as well as Intel and Google.

The alliance will see the four cable and tech companies investing $3.2 billion in the nationwide wireless network that Sprint and Clearwire have been struggling–with profound unsuccess–to roll out. Comcast (CMCSA) will contribute $1.05 billion, Time Warner Cable (TWX) $500 million. Intel (INTC) will invest $1 billion, Google (GOOG) about $500 million. The new venture will be majority owned by Sprint, but it will take the Clearwire name and be run largely by Clearwire execs, among them cellular industry pioneer Craig McCaw.

For the cablecos, which have yet to settle on a clear wireless strategy, the deal is a quick and dirty way to establish the high-speed wireless network they need to compete with telcos like AT&T (T) and Verizon (VZ). For Sprint and Clearwire, it’s a chance to make their non-starter of a WiMax network viable and something happy to talk about when conversation turns to Sprint’s stock price, which has fallen nearly 60% over the past 12 months.

That said, the deal is not without its problems–top among them WiMax itself. As Craig Moffett, an analyst with Bernstein Research, explained in a note to clients earlier this year, the 2.5 GHz spectrum upon which Sprint and Clearwire are building their network isn’t nearly as good as the spectrum Verizon and AT&T just purchased in the FCC’s 700 MHz auction. “Serious questions remain about penetration through walls and windows,” Moffett explained. “Elsewhere in the world, operators have also raised questions about WiMax’s real-world bandwidth, latency and non-line-of-site coverage. How competitive the offering would be versus Verizon’s or AT&T’s planned LTE broadband service therefore remains to be seen.”

That it does–though there have been some indications that it may not be quite up to par. Speaking at an international WiMax conference in Bangkok in March, Garth Freeman, CEO of Buzz Broadband, Australia’s first WiMax operator, described the technology variously as a “disaster,” “miserable failure,” and a standard “mired in opportunistic hype.”

So will that prove true for Clearwire as well? We won’t know for some time. Building out a massive network like this will take some doing. “We’ll likely to see early trials in 2010, but a full-fledged build-out will take longer,” Clearwire CEO Benjamin Wolff said during a conference call this morning. “Building faster is a matter of logistics. The build plan we’ve laid out will be one of the largest and fastest build-outs ever done. We have the capability to do it, but it’s a massive undertaking.”

After nine days of nail-biting excitement, the Federal Communications Commission’s auction of the 700 MHz spectrum is beginning to wind down.

The FCC instituted the auction’s “Stage Two Transition” this morning, requiring participants to bid more actively or withdraw. The move inspired hundreds of new bids, pushing the auction total to $19.02 billion. That said, aside from two middling bids on the Alaska C-Block license, no new bids were entered for the C Block licenses covering the 50 states.

With just a few more days to go, it’s looking more and more like the C Block will be sold to the bidder who offered $4.74 billion for the regional licenses that comprise the national C-Block license. Presumably, that bidder is Verizon. Which means that Google, which supposedly pushed the C-block auction over its $4.6 billion reserve price, thus activating its open-access provision, is off the hook. If it wants to be, anyway.

“Verizon wants more spectrum to close the gap between it and AT&T,” Stifel Nicolaus analyst Rebecca Arbogast told Forbes. “I’m reasonably confident that Google does not have the spectrum now.”

PREVIOUSLY:

• The 700-MHz Auction Is Decadent and Depraved
• We Want the Airwaves, Baby …
• The 700 MHz Club

You wouldn’t know it to look at the headlines, but Microsoft’s hostile bid for Yahoo isn’t the only big news in tech this week. The Federal Communications Commission’s 700-MHz spectrum auction took an unexpected turn yesterday when a new bidder emerged for the the highly prized “C” block spectrum, which could be used to build a new national wireless broadband network.

C block bidding now stands at $4.74 billion. But what’s most interesting is how it got there. No bids were made for the C block at all Friday, and the $4.71 billion bid for the block’s national license stood. Then yesterday, eight separate bids were made for the individual regional licenses that comprise the national C license. The sum of those bids totaled $4.74 billion, barely eclipsing the $4.71 billion potential winning bid.

Who made them? We don’t know; bidding is anonymous until the auction concludes. That said, analysts speculate that the bids were likely placed by Verizon. “This could reflect a continued battle between two original bidders–most likely Verizon Wireless and Google–on the C block, or could represent an entirely different bidder or combination of bidders that are exiting the sky-high prices of (another) block,” analysts at Stifel Nicolaus wrote in a research note.

The Federal Communications Commission’s highly anticipated 700-MHz spectrum auction kicked off last week, and after almost three days of bidding, the tally stands at just over $4.4 billion.

The hottest bidding action continues to be around the highly prized “C” block spectrum, which could be used to build a new national wireless broadband network. As of this writing, total potential winning bids for the C-block licenses stand at just over $2.15 billion. The FCC won’t say who placed those bids, though. It’s keeping bidder identities under wraps in order to “reduce the potential for anticompetitive bidding behavior.”

It’s a safe bet, however, that it was placed by a major player like AT&T, Verizon or Google, which analysts believe may be bidding not to win the spectrum, but to drive its selling price to $4.6 billion to ensure the FCC imposes open-network requirements on it.

The Federal Communications Commission’s “beachfront” spectrum auction in January will, for the most part, be a multibillion-dollar bidding war among the usual suspects. And one or two unusual ones as well.

Among the more than 260 applicants included on the bidder list released last night by the FCC (accepted applications; incomplete applications) are AT&T, Verizon Wireless, Cox Communications, Google (bidding as Google Airwaves Inc.), MetroPCS, Qualcomm, National Datacast (the for-profit subsidiary of the Public Broadcasting Service), Alltel, Towerstream, Chevron and Frontier Wireless (EchoStar).

And then there’s zillionaire investor Paul Allen–Microsoft’s other founder (pictured above). Applications from Vulcan Spectrum LLC and Bend Cable Communications LLC, both Allen-backed ventures, have been accepted by the FCC. Seems Allen fancies himself the Pied Piper of the Wired World, and the Wireless World as well. Perhaps someday we’ll have the Paul Allen Brain Atlas, the Paul Allen Telescope Array and the Paul Allen Advanced Wireless Services Spectrum.

With some $15.4 billion gathering dust in its bank accounts, Apple’s cash reserve is among the Fortune 500’s largest. Yet since 1999, it’s spent just $217 million to repurchase stock and it’s not yet declared a stock dividend.

What is the company planning to do with all that money? Certainly, CEO Steve Jobs must have an idea or three. Fortune’s Jon Fortt speculates that the company might use a portion of those funds to buy its way into a new niche market with some small acquisitions. It may finally go through with that long-rumored TiVo acquistion.

Or it could do something else entirely. Like join the Federal Communications Commission’s upcoming auction of the 700 MHz wireless spectrum, either as a partner of Google or alone.

Apple can’t be too happy with AT&T right now. First the carrier turned its iPhone activations into a nightmarish PR disaster, then its CEO pre-announced a 3G version of the device that will make its precursor obsolete right before the annual holiday consumer binge.

Were Apple to bid in the auction and win, it would provide a nice solution to problems like these. A viable 700-MHz network and an OS X-friendly VOIP client is all the company would need not just to dump AT&T, but also compete with it. “Apple is the most anti-carrier company there is,” a former Apple executive recently told BusinessWeek. “They’re probably already frustrated with AT&T. If they put a few billion behind this, they could build a kick-ass network.”

Note: John Paczkowski is on vacation and won’t be writing or posting videos until he returns on Monday.

To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. Our Tech 10 appears below.

1. Auction Action: Confirming the expected, Google announced today that it would indeed apply to bid for wireless spectrum in the Federal Communications Commission auction in January, writes Kevin J. Delaney in The Wall Street Journal, adding that if the search giant grabs a wireless license, it could become a provider of mobile phone and Internet services, among other things.
2. Facebook Gets a $60 Million Infusion… Hong Kong mogul Li Ka-shing has invested $60 million in Facebook, reports BoomTown’s Kara Swisher, who notes that the billionaire businessman has the right to invest another $60 million.
3. … And Pulls Back on Privacy: The social-networking site, under siege from Move.On and its own members, as well as from “Landmark Partner” Coca-Cola (which, says Louise Story of the New York Times, is holding off on participating in the social-advertising feature) has announced changes to its new Beacon ad system. Observes Om Malik: “Facebook finally backed down, more or less acquiescing to the demands of those concerned about its seemingly blatant abuse of privacy of its fast-growing user base.”
4. Rise and Fall of Motorola Magnate: Ed Zander, CEO of the electronics manufacturer whose mojo with the Razr cellphone brought the company big gains, is resigning in the face of equally disappointing declines to rival Nokia over the last year, The Wall Street Journal reports. Greg Brown, the company’s president and chief operating officer, will succeed Zander.
5. Sprint Rejects a Suitor: Sprint Nextel has turned down a $5 billion investment offer from Providence Equity Partners and SK Telecom of South Korea in exchange for sacking its management, according to the New York Times.
6. Big Brother Online: Government agencies worldwide are increasingly using the Internet to spy on and conduct cyber attacks on their enemies, according to an annual virtual criminology report by McAfee, writes Jon Brodkin of Network World, noting that the U.S. joins China as one of the biggest employers of Internet espionage.
7. Kiwi Teen in Botnet Probe: New Zealand police have held for questioning a teenager suspected of leading an international cyber-crime group, according to the BBC, which adds that the group allegedly hacked a million computers to steal millions from people’s bank accounts.
8. Publishers Want Web Respect: Launching an effort to bring them more power to say what content search companies may make available, publishers have developed a framework to inform online search engines that certain pages, directories or sites must not be indexed, reports eWeek, noting that supporters of the measure to respect copyright include the Associated Press, Reuters and the Association of American Publishers.
9. Sony Hears On-Demand Demands: Starting early next year, users of Sony’s PlayStation 3 will be able to download high-definition video to their devices, according to Variety, which adds that each download will cost about $1.85.
10. Exploding Cellphone Death Greatly Exaggerated:The Korean quarry worker whose death was blamed on an exploding cellphone was actually killed by a co-worker, who admitted he concocted the story after accidentally hitting his colleague with a drilling vehicle, the Associated Press reports.

Posted by Associate Editor John Sullivan.

Google should put up or shut up–they can bid and enter the wireless market with any business model they prefer, then let consumers decide which model they like best.”
–Jim Cicconi, AT&T Senior Executive Vice President, External and Legislative Affairs, July 20

Bad news for AT&T and any other incumbent telecom planning to participate in the 700 MHz spectrum auction in January, because it’s looking more and more like Google would rather “put up” than “shut up.” The company is preparing a bid of $4.6 billion for the open-access “C block” of the spectrum–and what’s more, it apparently intends to make the bid with its own cash and possibly some borrowed money.

With the help of “game-theory specialists,” the company is plotting its auction strategy, and at its headquarters in Mountain View, Calif., engineers are testing an advanced wireless network that might be used if it wins the spectrum auction. It would seem, then, that Google has virtually committed itself to bidding in the auction, though a Google spokesman said the company won’t reveal its plans until the Dec. 3 Federal Communications Commission deadline for declaring an intent to bid. “In the meantime, we are making all the necessary preparations to become an applicant to bid,” the spokesman said. “Our goal is to make sure that American consumers have more choices in an open and competitive wireless world.”

An admirable goal, indeed. And one that extends well beyond Google’s core competencies. But as the company’s founders said in their 2004 “Owners Manual For Google Shareholders,” Google will not hesitate to place major bets on promising new opportunities:

We will not shy away from high-risk, high-reward projects because of short-term earnings pressure. Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long-term success, we will continue to seek them out. For example, we would fund projects that have a 10% chance of earning a billion dollars over the long term. Do not be surprised if we place smaller bets in areas that seem very speculative or even strange. As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small.”