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In a SEC filing, Google acknowledged that it might come out on the losing side of its $1 billion investment in AOL.

Based on our review, we believe our investment in AOL may be impaired… We will continue to review this investment for impairment in the future. There can be no assurance that impairment charges will not be required in the future, and any such amounts may be material to our Consolidated Statements of Income.

Back in April, I had pointed out that Google’s investment in AOL was worth $500 million, mostly because there were rumors that AOL was being valued at $10 billion as it was being prepped for a sale.  At the time Google made an investment in AOL, its estimated value (as per deal terms) was $20 billion. Some people believe that AOL is worth less than $10 billion these days.

Apparently buying Bebo for an outrageous sum hasn’t helped prop-up the company valuation, as Time Warner gets set to bust it up. Maybe they need to hire Brett Favre as a spokesperson to get people jazzed up! As for Google - too bad they have to take the lumps. Live by the sword, die by the sword.

Back in December 2005, Google paid $1 billion to buy 5 percent of AOL from Time Warner, valuing AOL at a whopping $20 billion. Fast-forward to April 2008. According to The Wall Street Journal, AOL and Yahoo are in talks to combine the two companies. AOL is being valued at $10 billion for the sake of this new proposed deal.

Under the terms being discussed between Yahoo and Time Warner, the latter would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, people familiar with the situation said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion.

What that tells us:

• No way AOL’s loser dial-up business is worth $10 billion.
• In the last 25 months, AOL lost half its value.
• And Google took a bath. Their $1 billion investment (5 percent) is now worth exactly half: $500 million.

Of course, AOL has been selling off its parts for the past few years and has raised close to around $3 billion, including the $1 billion it got from Google.

The 700MHz auction kicks off today, and like kids waiting for Santa Claus, the technology and business publications are tense with anticipation. But FCC chairman Kevin Martin is keeping a lid on this auction, rather than post periodic updates as was done in the AWS auction in 2006.

While you wait to learn who gets the goods who gets a lump of coal, here’s a quick list of everything you need to know about the upcoming auction and why it matters. Check out all the links, because the bidding doesn’t conclude until March 24 and down payments aren’t due until April 11. You’ve got time.

• Setting the rules for this auction took a lot of time — and lobbying.
• There are a lot of bidders: Out of the 214 of them, the big ones to watch are AT&T, Verizon and Google. Interesting no shows are Sprint Nextel and Time Warner.
• It costs a lot to bid: Reserves are set high at $10 billion, but several people think that the current economic crisis might make it hard for those reserves to be met. Heck even Google has seen $16.15 billion lopped of its market cap so far this week.
• Already some have failed. Both Frontline Wireless and Cyren Call, both of which were going after the “D” block of spectrum and its heavy load of public safety requirements, have already bailed.
• Google is bidding, but may not be playing to win against the carriers.
• The winners have to create an open network. The dream of having a network that would allow any device onto it is still alive.
• Or maybe not. Om would like to see the spectrum become unlicensed and treated much like Wi-Fi is today for it to be truly open.

And like childhood obesity, short attention spans and the general decline of Western Civilization, you can blame all of this controversy on television — the shift from analog to digital TV signals, to be exact.