Google Invests in 3G Startup

The femtocell market is hot. Following weeks of major carrier RFP news and vendor product and partnership announcements, the 3G home base station market stepped up another gear today as Google (Nasdaq: GOOG) emerged as an investor in British startup Ubiquisys Ltd. (See Femtocell Startup Pockets $25M.)

UbiquiSys says it can't say anything about Google's involvement, other than that it has joined the femtocell vendor's original investors -- Accel Partners , Atlas Venture , and Advent Ventures -- in the $25 million B round. UbiquiSys has now raised $37 million in total since its inception in 2004. (See UbiquiSys Gets $12M.)

So why has Google invested in Ubiquisys? Well, it's one of the leading players in the emerging femtocell market. A femtocell is a home base station, a low-cost, low-power 3G cellular radio system that sits in the home or office, feeding calls and data sessions back to mobile operators' core networks via broadband connections. (See 3G Base Stations Hit Home.)

And these small devices are going to be pivotal in the strategies of mobile operators that want to boost their 3G coverage inside buildings, where signals can become quite weak. Major carriers such as France Telecom SA (NYSE: FTE) and Vodafone Group plc (NYSE: VOD) are engaging with femtocell vendors, with Vodafone's CEO Arun Sarin commenting on the technology's importance during his company's second-quarter update Thursday. (See Vodafone CEO Seeks Cheap Femtos, Vodafone RFP Fuels Femtocells, FT Preps Femtocell RFP, Is AT&T Putting Out Femto Feelers?, and Softbank Trials Femtocell.)

Once installed, a femtocell, which will provide a strong short-range 3G signal that can be used by up to six simultaneous users that have standard 3G devices (phones, data cards), will become one of the ways in which broadband connectivity is enhanced within a user's home. It will be supplied as a standalone product not dissimilar to a home WiFi router, or integrated in a home gateway. (See Femto Players Gun for Gateways.)

Google says it's that broadband-enhancing capability that has attracted its dollars. In an email response to questions, a representative stated that Google is "committed to promoting alternative platforms for users to access the Internet. Meraki Networks Inc. , FON Wireless Ltd. , and Current Communications Group LLC are examples of companies in which we have invested previously with alternative access in mind." (See Google Invests in Indoor Mesh, More About Meraki, Google, Skype Back WiFi Startup, and Google Backs Powerline Carrier.)

And there's no doubt that Google's backing and association with the technology will attract even greater attention to the femtocell market.

But is that Google's only interest? Investing in a 3G home base station startup gives Google insight into, and influence over, the development of home base station technology, and provides the Web services giant with ready access to the required end-user products, should it ever need them.

And why would it need them? Because Google is thinking of bidding in the upcoming 700MHz wireless spectrum auction in the U.S.

Google, in its public policy blog, has stated its interest in bidding for the spectrum, due to be auctioned later this year. And even if it doesn't bid -- which it admits is likely, due to the cost of building the network infrastructure needed to make best use of the airwaves -- Google wants the Federal Communications Commission (FCC) to impose conditions that would give non license-holders access to the spectrum on a wholesale basis.

Not surprisingly, such conditions are being vehemently opposed by the likes of Verizon Wireless and the wireless industry body, CTIA .

Google isn't commenting directly on its prospective wireless service plans, either as a spectrum owner or wholesale customer. "We don't comment on what we might or might not to do in the future," says a spokesperson.

It also declines to comment on: how much it has invested in Ubiquisys (though one industry source suggests its involvement is significant rather than piecemeal); the size of its stake in the startup; whether it gets a seat on the Ubiquisys board; or whether it plans any further investments in home networking companies.

— Ray Le Maistre, International News Editor, Light Reading