Google has been dealt a setback in the 700MHz spectrum auction in America following the FCC's publishing of the rules of what the service can be used for.

The auction, which is selling off the old analogue television signals as broadcasters move to a digital offering in the US, could have meant the creation of a free wireless service to all homes across America powered by Google.

Similar to the 3G spectrum auction in the UK, telecoms and interested parties like Google have been lobbying government as to the rules of play once the spectrum goes on sale early next year in January.

Google had been lobbying that winning parties, must make the spectrum open to all parties, rather than following the traditional route currently employed in the US whereby networks are restricted by the operator.

However, while the FCC said that it will allow customers to use whatever phone and software they want on about one-third of the spectrum to be auctioned, it fell short of forcing winners to allow customers the same benefits on all the spectrum.

"I am committed to ensuring that the fruits of wireless innovation swiftly pass into the hands of consumers", chairman of the Federal Communications Commission Kevin Martin said.

The move means that Google, who had said it would stump up the $4.6 billion needed to bid if access was granted to the all the licences available, is unlikely to continue further.

The auction is expected to earn the government around $15 billion dollars.

Nokia however has announced that it is pleased with the outcome and announcement; "Nokia believes that the Commission's rules are an important step towards meeting consumer demand and driving further innovation as mobility
and the Internet converge", said Nokia CEO Olli-Pekka Kallasvuo. "We commend the FCC and Chairman Martin for taking the initiative to promote even greater competition and innovation in the US wireless industry."

We will keep you posted.