It’s the $4.6 billion question: does Google really want to build and run its own mobile internet network?

The search-engine giant has offered to meet the reserve price set in an auction for a prime slice of America’s airwaves. The portion of the spectrum that it has offered to buy has the potential to become, alongside cable and telephone lines, a wireless “third broadband pipe”.

This could have implications for Britain, where Ofcom, the communications regulator, is preparing to auction three key pieces of the UK airwaves that will be left vacant after television’s digital switchover. At least two of those could be used for wireless broadband.

The $4.6 billion (£2.3 billion) offer for the licence for part of America’s 700MHz spectrum, made last week by Eric Schmidt, Google’s chief executive, comes with big conditions.

Any eventual winner would have to allow any device or software application access to the spectrum. More contentiously, Google’s bid only stands if the winner’s rivals are allowed to access the network at any realistic physical point and can buy chunks of capacity at wholesale rates. Google’s demands could turn the existing mobile model – where, say, only an AT&T-sanctioned phone works on AT&T's network – on its head.

However, the company that reinvented internet search could have other ideas up its sleeve. It may, for instance, enable end users to cut their wireless bills by choosing to be exposed to advertising before, say, making a call or accessing a website from a handheld device (a proprietary Gphone?) using the Google spectrum.

Or Google could use its expertise in running auctions – the method it uses to sell search terms to advertisers – to set up a spot market in spectrum bandwidth. Websites, even the tiniest, could buy capacity on Google’s network to carry content to consumers.

Such a move could pander to the “network neutrality” movement, which argues that if left unchecked, America’s wireless behemoths, AT&T and Verizon, will strive to build a two-tier system whereby websites that cannot afford to pay premium rates could be consigned to an internet slow lane, leaving an online autobahn for companies that can pay to have their content pumped out to consumers.

Such gestures fit Google’s stated reason for bidding for the licence: to make web access as widely available as possible. However few observers believe that Google’s motivations are entirely benign. Although the company argues that its envisaged open system will promote competition, it could actually kill off America’s telecom giants.

However AT&T and Verizon, which largely control US wireless access, hold a potential upper hand on it. In 2005, Ed Whitacre, then chairman of AT&T, described the barrel that Google finds itself over when he said that “for a Google or a Yahoo or a Vonage or anybody to expect to use these pipes for free is nuts”.

Google has already shown interest in communications infrastructure. It has invested billions of dollars in vast server farms that store its users’ information but which could form a building block for a wireless internet network. It has also bought unused fibre optics lines to be used to stop outages on mobile networks.

However, analysts doubt that Google would want to commit itself to building a wireless platform. “It would have to build the equivalent of whole new cellular network,” says Charles Golvin, of Gartner. “It has the cash, yes. But would pumping it into the telecoms business, a sector with much smaller margins than online advertising, make the best use of it? It’s an awful lot easier to add a new advertiser to a Google platform than to add a city to a wireless network.”

Instead, he says, Google might prefer to create a whole new tier of spectrum licensees which would be prepared to roll out costly infrastructure on Google’s terms.

First, however, the Federal Communications Commission, the regulator running the US spectrum auction, will have to agree Google conditions, measures that the company has freely acknowledged will make the licence less attractive to other bidders.

Online might

$158bn
Google’s market capitalisation

$3.87bn
Second-quarter revenue, up 58 per cent on the same period in 2006

$925m
Second-quarter profits, up 28 per cent on 2006

$16bn
Estimated worth of Sergey Brin, above, co-founder of Google #

13,786
Employees as at June 30, up by 74 per cent over a year

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