"This is exactly as we've said: Silicon Valley welfare," countered Joe Farren, spokesman for CTIA, whose members include AT&T, Sprint Nextel, T-Mobile and Verizon. "There's nothing to stop Google from coming to the auction and bidding like anybody else," he said, asserting that the rules are being "tailored" to satisfy a company with a $170 billion market capitalization.

But privately, another industry source conceded that incumbents appear to have dodged a bullet because Martin's proposal is unlikely to include many of the additional conditions sought by various parties to foster competition and protect consumers.

"This proposal [from Martin] would help American consumers benefit from innovation and all that wireless broadband has to offer," an FCC official maintained. He said the recommendations could pave the way for new wireless technologies.

"We're hearing through the proverbial grapevine that his proposal includes several of the open platform conditions we have recommended," wrote Richard Whitt, Google's Washington telecom and media counsel, in a blog posting. "If these reports are accurate, we are most encouraged by this favorable development."

But multiple observers noted that Martin appears to have met only two of the four conditions that Google cites in a letter dated Monday as prerequisites to -- in the company's words -- "seriously consider entering this space."

It also wants incumbents to provide third parties with wholesale access to their networks and interconnection with their infrastructure. "Simply put, large incumbents have significant built-in advantages that are very difficult to overcome," the missive warns.

Industry and government sources said the chairman is poised to begin circulating proposed auction rules any day.

The FCC may vote on final auction rules this month or in early August.

Martin is seeking to apply open platform restrictions to 22 megahertz of the 60 MHz to become available as a result of the transition by television broadcasters from analog to digital signals.

The bidding on the frequencies, viewed as a rare opportunity to foster competition to major telecom and cable providers of wireless high-speed Internet access, must begin by Jan. 28.

Meanwhile, Martin is drawing mixed reactions from consumer advocates, including Public Knowledge President Gigi Sohn, who argue that his plan falls short. "What the chairman has offered is a good start," she said, but emphasized that without wholesale availability of spectrum, true "open access" cannot be achieved.

Late Tuesday, the Wireless Founders Coalition for Innovation, whose members include several cellular entrepreneurs, criticized Martin's approach as favorable to dominant providers because it appears to lack other consumer safeguards.

Martin's proposal elicited an encouraging reaction from a key lawmaker: House Energy and Commerce Telecommunications and the Internet Subcommittee Chairman Edward Markey, D-Mass., whose panel oversees the agency.

"I commend Chairman Martin for his recent statements, which recognize that the wireless marketplace is insufficiently competitive and innovative today due to current market structures and practice," he said in a statement.