What Google Wants

Confused about what Google really wants in the mobility space, and in particular what it wants from the 700 MHz spectrum auctions? The simple answer is that Google is for mobile what the Internet was to telecom service providers: an alternate communications medium whose value does not hinge on access, but on applications.

Wireless service providers will fight Google without quarter for the same reason they learned to loathe the Internet: it is difficult for them to extract revenue when value lies in applications not dependent on recurring payments for access.

That doesn't mean Verizon and at&t, in particular, won't try to make a business out of it. After all, despite the margins, despite the gross revenue implications, both are fierce competitors in the broadband access business. But the tack will be to stop it if possible, slow it where possible, but adapt if necessary.

But Google is not the only force pushing against the old order. iPhone, for example, seems to be the first of any number of approaches to thinking about what a mobile handset is, what an operating system is, what a platform is and where value can be extracted in the ecosystem.

As Skype and UK cellphone operator 3 reportedly are working on a new mobile handset that promises to "make Internet calls mobile," rumors continue to swirl about a possible Gphone or Google phone. Nokia is rolling out N95 series devices that also raise the question of where the leverage lies: operating system, user interface, handset, application or extended application ecosystem.

It’s an important question. Remember back when people seriously thought the browser would somehow translate into “ownership” of the user? That largely proved incorrect.

But operating system ownership has proven a more durable lock on value and customer ownership. Facebook might be showing the power of the platform. But the iPhone seems to suggest the power of the device itself. In short, getting the answer right might confer genuinely significant leverage in the mobile business.

Much of the impetus for thinking about such things comes on the heels of rumors about a Google phone, Google mobile operating system or mobile platform. While the thrusts are not mutually exclusive, the strategic approach Google takes conceivably could redefine much of the existing mobile business.

The difficulty of pinning down the likely thrust is difficult, as Google has to be working on a number of aspects, all at the same time. It must create a mobile interface to the Internet while supporting voice services not significantly inferior to those handsets offer today.

That means Google has to convert the Internet experience for the phone and create or enable a suite of related applications and applets that all work smoothly together and share data.

Then it has to create awareness of some mobile features users didn’t know they wanted, such as location-aware services and features.

All of that means an Internet-connected device supporting voice, instant messaging, Web browsing, search, document storage, retrieval and creation, email, storing and playing entertainment. The applications must blend “knowing you are available” to “knowing where you are.”

Google has to do all that and also make the PC and mobile experiences similar and intuitive. And after all that is done, has to create a business process for supporting all of that with an advertising revenue model.

Of course, Nokia, Apple, Microsoft and Samsung—among others—will try to do the same thing, at some point. Unless it can be done, Microsoft will have a tough time making 25 per cent of its revenues, or about $14 billion, from advertising in the relatively near future, as it says it will.

The issue, perhaps, is how many of these sorts of things have to be handled by the handset. How “skinny” can the device be and still provide a reasonable user experience?

And how much does an actual handset matter, if a widely-distributed reference model can be propagated? Still, as Apple has proved time and again, a tightly-coupled hardware and software approach can yield outsized results in the user experience area.

Many argue that Google will want to avoid getting entangled in the consumer electronics business. True enough. Others make the same argument about any possible plans to bid for its own spectrum.

But Google executives have said mobile offers Google the biggest possible opportunities. If that is true, stretching into unfamiliar areas might be the best way to dominate the new business.

It’s just an opinion, but an “operating system” approach offers the least risk but the least reward. Devices and the ecosystem are much more risky, but offer greater reward. And since Google is sure to encounter resistance from the established wireless carriers, owning its own network might be the only way to get rapid adoption.

So that’s what Google is up to: creating a mobile broadband version of the open Internet.