It’s official: Google has declared its intent to take part in next January’s auction of the 700 Mhz frequency spectrum. The company also plans to make a go of it alone and without a partner in mobile industry despite the $4.6 billion USD starting bid. Google will use the new spectrum for the recently introduced Android platform, which could make telephone calls and surfing free (well, almost free) with Google’s earnings coming from mobile services and sponsored links. What this boils down to is a new business model that will make life truly miserable for established operators such as AT&T, Verizon and T-Mobile.

CNET news reporter Marguerite Reardon entitled her latest blog, “Don't expect Google to take on AT&T,” justifying the statement with the argument that running a network isn’t Google’s main strength. There could be some truth to this, but we can’t forget that operators frequently outsource network operations. This is a commodity – service, products and customers are the factors that prove decisive in the end, which Google and Apple, the second mobile newcomer, both have enough of. For a while, Apple was rumored to be interested in the frequency spectrum itself, but since the network has to be open to all standards, the auction just doesn’t fit into Apple’s strategy plan.

The question remains: what will Apple’s strategy look like in the future? When the exclusive contracts with the operators are up, will exclusivity and royalties cease to exist, or will we see the development of a completely new business model? Personally, my bet’s on the latter. Consider the following arguments:

1. Winning the bid will cost well over $5 billion USD, excluding the expense of building an efficient network – so total costs will well exceed $10 billion USD. Somehow, I highly doubt that Google really wants to shoulder this hefty of a sum itself (even if it could!). Apple would be the perfect partner, which brings us to our next point…
2. Apple’s pockets currently contain more than $15 billion USD in cash. This is money simply waiting to be invested somewhere.
3. Eric Schmidt, Google’s CEO, is a member of Apple’s board of directors and good friends with Steve Jobs.
4. Both Apple and Google are outstanding brands and offer services and products far out of the league of anything other operators have.

Although Google and Apple come to the table with different mobile operating systems and business models, they’ll definitely remain allies well into the future – especially since their competition consists of operators that would do anything to prevent third-party services on their networks. Verizon’s announcement to completely open its networks is likely nothing more than a cry for help!

Our next blog will feature Gion and I discussing Google’s and Apple’s mobile technology and strategies in greater detail.

Next blog: Heading into the mobile future with different business models