News

Merger Mum on Google

6/20/2008 8:00 PM Eastern

Clearwire's merger application filed at the Federal Communications Commission runs more than 300 pages, but the beefy document is silent on whether Google's $500 million strategic investment is consistent with network-neutrality principles.

Clearwire is a mobile broadband venture that is promising to make high-speed wireless Internet access available to more than 140 million Americans within 30 months of FCC approval. Sprint Nextel will have 51% control over a $14.5 billion company in which Intel, Comcast, Time Warner Cable and Bright House Networks have also taken minority stakes totaling $3.2 billion.

According to published reports, Google has invested $500 million to secure its place as Clearwire's default Internet search engine — which probably means Clearwire users will automatically rely on Google unless they know how to manipulate their handheld device's software to select another search application.

The FCC has a 3-year-old principle in which “consumers are entitled to competition among network providers, applications and service providers, and content providers.” In its FCC application, Clearwire does not explain how Google's investment to obtain default status would secure competition among “application providers.”

Bills supported by Google that have been pending on Capitol Hill since 2006 include provisions that would call into question Google's Clearwire investment. Sen. Byron Dorgan's (D-N.D.) bill (S-215) would require broadband network providers to offer content and applications in a nondiscriminatory manner.

Google's Clearwire deal is somewhat akin to an old one between SBC Communications (now AT&T) and Yahoo. But that alliance was about the marketing and co-branding of digital subscriber line service, and Yahoo did not take an equity stake in SBC.

FCC chairman Kevin Martin, who is investigating Comcast's broadband network-management practices, said he didn't mention the Clearwire investment in a recent private meeting with Google co-founder and president Larry Page.

On its face, it would appear that Google's involvement in Clearwire represents a shift in strategy. The investment means Google is vertically integrated with a broadband network-access provider that has a financial incentive to promote Google's various products — search, e-mail and mapping — over those of its rivals.

“The Google-Sprint-cable deal shows that the free market Internet works, because market forces have encouraged Google to invest in broadband and Google negotiated to be the default search engine,” said telecommunications analyst Scott Cleland, an outspoken critic of Google.

Google's investment in Clearwire also suggests the company is no longer clinging to purist notions of net neutrality.

“Google's words and deeds don't match,” Cleland said.

Like Clearwire, Google isn't saying much about its investment. On the company's public policy blog, Google product manager Larry Alder didn't mention how many hurdles Clearwire users would need to clear in order to escape the system's pre-cooked Google defaults.

“We believe that the new network will provide wireless consumers with real choices for the software applications, content and handsets that they desire,” Alder wrote.

Adam Kovacevich, Google's senior manager of global communications and public affairs, did not return a reporter's calls last week.

Clearwire is rolling out a so-called 4G network relying on WiMAX (Worldwide Interoperability for Microwave Access) technology. Top network speeds will reach up to “6 Mbps across the country,” Clearwire told the FCC in its June 6 filing.

“All ISPs have a default search engine that you go to when you do your Web page. Google just happens to be the one for it with this venture, because they're willing to put in $500 million,” said Terri Natoli, Clearwire's vice president of regulatory affairs and public policy.

Natoli explained that Google's Clearwire stake “doesn't mean any consumer can't get any search engine that they want immediately just like you go to any other Web page after your default Web page. You change your preference. [Google] just happens to be the default right when you sign on. Really, that's it.”

The FCC needs to approve numerous license transfer applications before Clearwire can build out its network. At some point, the FCC will seek public comment on Clearwire's plans and Google's involvement with the company.

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