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Verizon Wireless 'Open' Move May Signal 700-MHz Plans

11/29/2007 6:07 AM

In a research note Thursday, Sanford Bernstein analyst Craig Moffett says that Verizon Wireless’ move to allow devices and applications it does not control onto its network is a signal it’s planning to bid in January’s 700-MHz spectrum FCC auction – while the carrier has downplayed that notion.

"In the very short run, the announcement suggests that Verizon is likely to bid on (and likely win) the C-Block spectrum in the upcoming 700-MHz auction," he wrote.

Verizon Wireless president and CEO Lowell McAdam, on a conference call with reporters Tuesday, maintained the "any apps, any device" announcement is unrelated to the upcoming auction. "What goes on on Capitol Hill and with the 700-MHz rules doesn’t really play into this," he said.

Sure seems related, though. Under the FCC’s rules for auctioning off that spectrum, which is being made available by the February 2009 digital transition for broadcast TV stations, winners of the 22-MHz C-Block of spectrum must allow consumers to use any handset and download any application.
 
Moffett noted that Bernstein Internet analyst Jeff Lindsay wrote yesterday that, in light of Verizon’s announcement, Google — which is supposedly considering a $4.6 billion-plus bid — is now unlikely to enter successive rounds of bidding for the C-Block. But Moffett suggested that Verizon Wireless’ announcement leaves open the possibility that Google and Verizon Wireless might ultimately partner up.

"Indeed, Verizon’s ‘open access’ announcement may be viewed as a form of pre-auction ’signaling,’ both to Google (’we’ll play ball, so you don’t have to bid’) and other potential bidders (’don’t bother to bid against us… you won’t win’)," Moffett wrote.

Moffett also noted that Verizon Wireless won’t announce pricing for "open access" until the first quarter of 2008. Nevertheless, by allowing third-party software to run on its network, Verizon Wireless runs an increased risk of "VoIP disintermediation – downloading a VoIP client onto your wireless device and using a data plan to make phone calls." And that, he said, will be an important consideration for the carrier as it develops pricing for the new service model.

"The new approach, in theory at least, creates a real problem for usage-based pricing on an ‘any application’ service model.  Voice is not a bandwidth-intensive application – but it is highly valued…. In an ‘any application’ model, pricing data in such a way as to ‘compensate’ for potentially lost voice usage would make other data services prohibitively expensive," Moffett said.

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