Rick Whitt of Google has come clean about its strategy in the 700MHz auction and confirmed what many suspected - that Google deliberately bid up the price of the C Block, even upping its own bid in the absence of a higher competing bid several times, in order to trigger the open access provisions.

Given that it must have been fairly clear early on that Verizon Wireless was the other bidder, and it’s already initiated its open access program, what did Google really gain by doing this, other than using its own cash to force Verizon to part with more of its money? One of three scenarios must hold true:

1. Google wasn’t sure Verizon was the other bidder and wanted to make sure any other bidder (AT&T) would be subject to open access too
2. Google merely wanted to force Verizon to pay more for the spectrum because there weren’t any other serious bidders for it
3. Google believes that the open access provisions attached to the C Block will require more of Verizon than it has already announced it will provide.

The most likely scenario is 3. But isn’t Google mistaken here? Is it assuming that the FCC’s open access rules go further than what Verizon Wireless had already agreed to do? The FCC’s rules (see page 89) are unfortunately vague, and it may be counting on a more favorable interpretation of them than Verizon is. But there are one or two areas where Verizon has not yet agreed to go as far as it will now be required to:

Scope of the requirement for open platforms for devices and applications. Wireless service providers subject to this requirement will not be allowed to disable features or functionality in handsets where such action is not related to reasonable network management and protection, or compliance with applicable regulatory requirements. For example, providers may not “lock” handsets to prevent their transfer from one system to another. We also prohibit standards that block Wi-Fi access, MP3 playback ringtone capability, or other services that compete with wireless service providers’ own offerings. Standards for third-party applications or devices that are more stringent than those used by the provider itself would likewise be prohibited. In addition, C Block licensees cannot exclude applications or devices solely on the basis that such applications or devices would unreasonably increase bandwidth demands. We anticipate that demand can be adequately managed through feasible facility improvements or technology-neutral capacity pricing that does not discriminate against subscribers using third-party devices or applications. In that regard, we emphasize that C Block licensees may not impose any additional discriminatory charges (one-time or recurring) or conditions on customers who seek to use devices or applications outside of those provided by the licensee. Finally, C Block licensees may not deny access to a customer’s device solely because that device makes use of other wireless spectrum bands, such as cellular or PCS spectrum. However, we also note that, in accepting a multi-band device for use on its network, a C Block licensee is not required to extend the requirement for open platforms for devices and applications to other spectrum bands on which the provider operates.

However, the FCC goes on to limit the scope of these rules:

We emphasize that we are not requiring wireless service providers to allow the unrestricted use of any devices or applications on their networks. In particular, we are mindful of the risks network operators face in protecting against harmful devices and malicious software. Wireless service providers may continue to use their own certification standards and processes to approve use of devices and applications on their networks so long as those standards are confined to reasonable network management. For example, providers are free to choose their air interface technology, and to deny service to devices or applications that cannot operate on the same technology, since such a restriction permits significant network efficiencies without significantly reducing consumer access to services and features. We also recognize that wireless providers have legitimate technical reasons to restrict particular non-carrier devices and applications on their networks, specifically to ensure the safety and integrity of their networks. In particular, we believe that it is reasonable for wireless service providers to maintain network control features that permit dynamic management of network operations, including the management of devices operating on the network, and to restrict use of the network to devices compatible with these network control features. Standards to ensure that network performance will not be significantly degraded would also be appropriate.

If I were Verizon, I would be pretty annoyed with Google at this point, whatever its rationale. It artificially bid up the price of the spectrum, triggering both a higher price paid by Verizon and the open access requirements, even though it apparently never had any plans to own the spectrum. I’m not sure it would have any legal grounds for taking action on this, but it certainly appears that Google abused the system for its own advantage and to Verizon’s disadvantage.

At any rate, Verizon is pressing ahead with its plans to use the 700MHz spectrum for its LTE network, as is AT&T with its 700MHz spectrum, and so far it isn’t complaining too hard about those open access rules. Since it has done an about face on the question of “openness” perhaps it is willing to embrace these additional conditions too. But I would guess that it will fight for the loosest possible interpretation of the remaining conditions when the time comes, while Google will probably put some high-paid lawyers on the other side.