Media Giants Armed For Wireless War?

Reporter’s Notebook: When Yahoo  last week quietly appointed Maggie Wilderotter to the company’s board of directors, the high-tech space hardly blinked.

In addition to her new duty as an influential member of the one of the largest online portals, Wilderotter currently serves as chairman and CEO of Citizens Communications Company, a communications provider and a major local exchange telephone company.

What would Yahoo, which makes millions providing advertising space for companies on the Web, want with someone like Wilderotter, who, said new CEO Jerry Yang in a statement, lays claim to “more than 25 years of experience in telephone, wireless, cable television, computers and interactive media”?

The interactive media credit is the obvious boon for a search and ad player like Yahoo. Moreover, Wilderotter previously served as senior vice president of the worldwide public sector division at Microsoft , where she was responsible for strengthening customer and partner outreach in the government and education markets.

After all, nothing beats an insider’s knowledge of a competitor, and Microsoft and Yahoo are serious competitors in the online advertising space.

But Wilderotter has also held various posts at Wink Communications, AT&T Wireless and McCaw Celluar Communications, bringing us right back to that telco savoir faire. What, exactly, does that experience bring to Yahoo?

Answer: Insider knowledge of how the communications industry works. Yahoo, Google  and Microsoft are going to need it as they continue to encroach on the markets traditionally cornered and coveted by phone carriers and cable companies.

Do you think Google is the only online media company with an eye toward wireless spectrum? That company’s just been the bold, first one to acknowledge its interest in freeing up spectrum.

As I write this, the Federal Communications Commission is laying the ground rules for the forthcoming and pivotal allocation of the 700 MHz of spectrum it plans to free up in an auction in January.

This spectrum, which will come from the airwaves left behind by TV broadcasters in the switch to digital, is considered ideal to enable wireless broadband. That’s a whole new revenue stream for service providers.

The stakes are high: AT&T , Verizon  and Sprint  all want a piece of that action because it means big bucks for their businesses.

Google, playing the role of dark horse, pledged to commit a minimum of $4.6 billion to bid on spectrum in the auction.

But Google wants the FCC to approve rules allowing consumers to connect any legal devices and run any legal application on the network. Google also wants the FCC to license the spectrum for wholesale access and allow third parties, such as ISPs, to interconnect anywhere on the network.

Some phone and cable companies are not happy about the open-access aspect. It puts a crimp in their ability to control the markets their services play in.

Google’s motivations are simply all about adding another revenue stream to its broadening business.

Own some spectrum, and it will be much better positioned to drive its Google Apps collaboration software onto mobile devices at high speeds. Imagine the power of broadband on an iPhone or BlackBerry. E-mail, instant messaging, calendaring, gaming, music-sharing and video streaming on mobile gadgets would approach the usability of a connected PC.

I have no definitive evidence that Yahoo or Microsoft will follow Google into this wireless wilderness and bid on spectrum. But it could certainly propel some of their current plans to offer software services over mobile phones.

But at the same time I have no reason to expect that those companies will stop trying to match the search and advertising giant as it plots a wide-ranging course to diversify its revenue streams via the Internet.

Witness: Google landed on DoubleClick and Yahoo and Microsoft rushed forward to buy Right Media and aQuantive, respectively. Google’s actions are dictating those of others, with action yielding reaction.

Google needs Microsoft and Yahoo’s help. With Google blazing a trail into spectrum, it would have to compete with AT&T, Verizon and Sprint and can use the help of some like-minded Internet constituents. And, despite Google’s market capitalization of $161 billion, battling those three is no more fun than Harry Potter taking on Voldemort and all of his Death Eaters.

As my Washington, D.C. colleague, Roy Mark, suggested recently, perhaps it’s time for Google, Yahoo and Microsoft to set aside differences to unite against these service providers. It would be an alliance specifically designed to help each other out on the spectrum front.

But this can be tricky. The online software-plus-service providers all have rich partnerships with the major phone companies. It wouldn’t do to sabotage those pacts. What good would spectrum do when you don’t have the service providers’ support?

Whatever the case, if you’re Yahoo, hiring a telco veteran like Wilderotter is good preparation for a wireless war. She’ll know how the service providers like to play the game.

But before Yahoo even gets there, it needs to right its finances and start making the kind of aggressive moves analysts expect it to execute. Yahoo can ill afford to fall out of this three-horse race for online software services. Failure to right the ship will make spectrum pursuit a moot point.

Clint Boulton is managing editor of internetnews.com.