Open Airwaves

The FCC veered from its recent pro-bigbusiness course in July when it approved rules that will, in part, foster innovation and bring new players to the broadband wireless market.

At their monthly meeting, commissioners laid out the requirements for the upcoming 700MHz spectrum auction. The bandwidth will open up in early 2009 as TV broadcasters move from analog to digital signals, although services wont be available until 2010 at the earliest. Companies including Google Inc., Verizon Communications Inc. and AT&T Inc. all want the 700MHz band for its 4G possibilities. And it could, says Ovum analyst Jan Dawson, be especially useful to business customers because the signals penetrate thick buildings and go for long distances.

This could be the first step toward getting out some really good mobile broadband services that would be of value to business customers, and therefore, provide new opportunity for distributors and resellers, he says.

To date, the net neutrality issue has hovered around the Internet. But now, as high-bandwidth applications move beyond the computer and onto mobile devices, the net neutrality debate also is moving, and it has gained a hitchhiker in open device access the idea that subscribers can use any device on any network.

While no one, from commissioners to industry leaders, was completely pleased with the rules, the agency seemed to strike a balance between industry and consumer interests.

For example, the FCC voted to apply open access obligations on a third of the 700MHz spectrum. This was a big deal for Google. Commissioners said companies licensing the upper 700MHz band C Block of spectrum must let consumers use any legal device and application. The provision emulates the Carterfone decision of the late 1960s, when the government freed consumers from having to rent phones from Ma Bell.

Content provider Google campaigned to have net neutrality and open device access rules imposed on at least part of the spectrum. On July 20, the company even offered the FCC $4.6 billion guaranteeing that it, Google, would pick up certain spectrum if other bidders were put off by rules governing net neutrality and open access. Some associations including CTIA attacked the move as a bribe.

Theres inherent frustration on behalf of customers who dont have the flexibility of picking a device and a carrier independently. Ovum analyst Jan Dawson

AT&T and Verizon conceded to limited Carterfone constraints only after Google made its financial pledge.

Googles involvement in the spectrum auction shows that the company is positioning itself to add network provider to its résumé. This could result in two ends, Dawson says. First, if Google becomes a supplier, the channel likely will have a new set of products and services to distribute. Second, if the FCC requires that any mobile device be able to connect to some of the 700MHz band, resellers, agents and dealers can give their customers the devices they want without ties to an exclusive carrier.

There are a number of unanswered questions surrounding such a proposal, though. For example, is it possible, or relatively simple, to get devices built on different protocols to talk to the same airwaves? Would carriers have to do expensive build outs to accommodate other protocols? To whom would customers send their monthly bills?

Still, the idea of open access is appealing, Ovums Dawson says. Theres inherent frustration on behalf of customers who dont have the flexibility of picking a device and a carrier independently, he notes.

Dawsons take also is that open device access would mean lower prices and more options. The problem, says Dawson, is that its really not clear at all what plans Google has for the spectrum, if it wins it, other than making it a very open access type model. A lot of this is still pretty fuzzy.

The open device access topic arose earlier this year when Skype and Columbia law professor Timothy Wu said Carterfone regulations or the ability to attach any device to a network should apply to the wireless world. He says wireless subscribers should be able to use dual-mode phones, for example, to access VoIP services. Mobile services providers, of course, hate that idea because users on unlimited data plans would be able to bypass cellular services. Some industry pundits further see the proposal as life support for pure-play VoIP providers, which are struggling to compete and have, à la Sunrocket Inc., gone under. But Wu says carrier control over devices inhibits innovation, like the AT&T of the 1950s.

Other FCC auction rules include the construction of a nationwide, interoperable network for public safety use and a use it or lose it requirement.

Both Democratic and republican commissioners praised the public safety initiative. A nonprofit organization will administer and oversee the spectrum, which will create the interoperability public safety agencies and lawmakers have clamored for since the Sept. 11, 2001, terrorist attacks and Hurricane katrina in 2005. Democrat Michael Copps wants publicly funded spectrum set aside for first responders, but, he acknowledges, such an undertaking would have been too expensive. The public-private model is the next best thing, he says.

If the first responder network works, and thats a big if, the American people will be appreciably safer, Copps adds.

The FCC further says commercial spectrum operators must abide by some buildout regulations or risk losing the licenses they win. Some licenses stipulate that holders cover at least 40 percent of the population of the applicable area within four years, and 75 percent of the population by the time the license ends. If that doesnt happen, the FCC can reduce the license terms or even pull the licenses and make them available to other providers.

There also are some notable omissions in the order.

Even though the agency bucked its trend of catering to powerful companies, it didnt wholly capitulate to other interests. To Googles and others chagrin, commissioners excluded a wholesale provider clause. Democrats say that leaves less room for a wireless competitor without wireline ties to enter the market. Jonathan Adelstein also says small providers feel let down because a wholesale model would have made it easier for them to compete.

Additionally, the agency states that if spectrum doesnt sell the first time its hawked, the bandwidth will go back up for bid without Carterfone requirements.

Despite the different viewpoints, commissioners agree the rules they passed will, at some point, lead to new devices and applications for consumers.

The entrepreneur or innovator who will make this happen is probably starting the eighth grade right now, comments republican Deborah Tate.

The July 31 vote comes after months of speculation over how the FCC would handle the spectrum auction.

Wireless association CTIA, which has been talking with the FCC about the spectrum rules, was happy with some of the results and remains concerned about others; it didnt specify those areas. The organization said the FCC was right not to impose wholesale rules or require geographic buildouts on all of the licenses. CTIA represents companies including Alltel, Verizon, and U.S. Cellular.

Meanwhile, device maker Nokia CEO Olli-Pekka kallasvuo praises the open access rule as a step towards meeting consumer demand and driving further innovation as mobility and the Internet converge.

And Scott Cleland, founder and president of telecom/tech consultancy Precursor LLC, says the open access model is untested and unproven. Even Google is unlikely to bid on it as it offers little opportunity to earn a return on the roughly $10 billion it would take to build and operate such a national network, Cleland notes.

He adds that Googles $4.6 billion promise now is moot since the search engine giant didnt get the wholesale and unbundling mandates it requested.

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Going Once, Going Twice…
The FCCs rules for the 700MHz spectrum auction were released at the end of July. For updates and more information on the orders provisions, visit PHONE+ online at www.phoneplusmag.com.

Special Access Update
Congress has asked the FCC to revive the debate about regulatory issues and special access. Read more about it at www.phoneplusmag.com.