Wireless

The Federal Communications Commission is shaking up the communications market with bold initiatives to overhaul the $7 billion Universal Service Fund to help pay for universal broadband and reallocate wireless spectrum for new wireless broadband services.

FCC Chairman Julius Genachowski presented plans for revising the USF program and reallocating spectrum during a speech on Tuesday in Washington, D.C., at The Innovation Economy Conference.

Julius Genachowski, FCC chairman

The Universal Service Fund is a $7 billion federal subsidy program that is funded by fees added to consumer phone bills. The USF was originally designed to provide subsidies to pay for phone service in rural communities and to low-income residents. But the FCC believes that the fund should also be used to help pay for universal broadband, a policy priority for President Obama's administration.

Revamping the fund has been controversial, as some rural phone companies have resisted any attempts at expanding the scope of the program. Genachowski acknowledged that making changes wouldn't be easy, according to a transcript of his prepared speech.

"This is a thorny issue, with no shortage of practical and statutory challenges," he said. "(But) we need to wring savings out of the system, protect consumers, avoid flash cuts, while ultimately moving USF in the direction it needs to go to support our 21st century platform for innovation."

Genachowski emphasized that reallocating some of these funds to help build broadband infrastructure in rural areas is important for spurring innovation.

"USF is a multibillion-dollar annual fund that continues to support yesterday's communications infrastructure," he said. "The goal of universality is as important as ever--and to meet our country's innovation goals, we need to reorient the fund to support broadband communications."

Genachowski also reiterated the importance of auctioning off more wireless spectrum to be used for mobile broadband services. He called wireless spectrum the "lifeblood of our wireless networks." And he said they are a critical part of innovation and infrastructure.

The FCC has already increased the amount of spectrum available to wireless companies threefold in the past few years, Genachowski, noting that experts believe that there will be a 30-fold increase in traffic on these networks. And without more spectrum, these networks will be congested and will stifle innovation.

"Given that spectrum can take many years to reallocate and build out, if we don't start the process now, we'll pay a steep price in innovation down the road," he said.

As part of his proposal, he says the FCC will encourage more efficient use of spectrum and devices through innovative spectrum policies. He noted that the FCC will also look at increasing spectrum flexibility and opening secondary markets for licensed spectrum use. And he said the agency will look into allowing more use of unlicensed spectrum, such as the "white space" spectrum that sits between broadcast channels.

But the most controversial proposal he has put forth involves taking away spectrum from current spectrum license holders, such as TV broadcasters, and reallocating those licenses to broadband wireless providers through another auction process.

"In order to support the full flowering of innovation, and to keep the U.S. globally competitive, we will need to find ways to free up new spectrum to mobile broadband," he said, according to the transcript of his speech. "This will require examining old allocation decisions--often decades-old--and evaluating them against current technologies and consumer demand."

TV broadcasters have vehemently resisted this proposal.

Broadcast airwaves are considered very valuable because they can travel long distances and penetrate walls. The most recent 700MHz spectrum auction, which auctioned off analog TV spectrum, is being used by operators such as Verizon Wireless to build 4G wireless broadband services. And Genachowski believes that more spectrum should be freed up to allow for more 4G wireless broadband services.

The Federal Communications Commission met Wednesday to discuss obstacles to enacting a national broadband policy that will provide high-speed Internet access to every American.

President Obama has made universal broadband access a key goal. Grants and loans for helping make universal broadband access a reality have already started being doled out as part of Congress' economic stimulus package.

In an effort to ensure that new programs and policies work toward achieving the same goal, the FCC has been tasked with developing a national broadband plan to help direct policy makers in getting affordable broadband to every American. A task force, headed by Blair Levin, who had been chief of staff for former FCC chairman Reed Hundt, is developing the plan that will be presented to Congress on February 17, 2010.

Levin and his staff appeared before the FCC Wednesday to present what they see as gaps or obstacles that must be overcome to develop clear recommendations and policy for universal broadband.

Levin said that commissioners and policy makers must consider the broadband ecosystem if they hope to achieve the president's goals. This means taking into account not only consumer needs but also considering the needs of the industry, which will likely fund the bulk of the $20 billion to $350 billion that will be needed to build new infrastructure and develop new programs for spreading broadband throughout the country.

In considering these needs, Levin said it is important to identify and come up with ways to overcome some hurdles that stand in the way for achieving the ultimate goal of providing broadband to every American.

Obstacles to universal broadband access
One major issue has to do with the Universal Service Fund, a program funded through extra charges on consumers' phone bills. The USF was originally designed to provide subsidies to pay for phone service in rural communities. But the task force believes that more of the $7 billion that is allocated each year from the fund should also be used to help subsidize the cost of deploying broadband in rural areas.

Today, most of these funds are used for voice services and not broadband, the task force reported. And of the money that is used to subsidize broadband, the group noted it is often used inefficiently so that gaps in broadband deployment are still not filled.

The task force also reported that there is still a high level of disparity in income levels between people who subscribe to broadband service and those who do not. Nearly 90 percent of families with incomes of $100,000 or more subscribe to broadband services, compared to 35 percent with incomes of $20,000 or less. Rural households are less likely to subscribe to broadband service than urban households. About 65 percent of white households subscribe to broadband, while only 40 percent of Hispanic households subscribe to broadband and 46 percent of African-American households have broadband.

Another issue that was brought up by the task force during the meeting is the fact that broadband service providers tend to favor higher-income regions in more populated areas over low-income areas.

The data suggests that many low-income people in these parts of the country are offered only one broadband service option. The data also suggests that these consumers who have only one option tend to pay higher prices for service.

What this means is that lower-income people, who have less disposable income, are often the ones forced to pay higher prices, while people who have more money pay lower prices for service.

Deployments in rural areas are often affected by the high cost of building infrastructure and providing service. The task force noted that "middle mile" costs are almost three times higher than general network operations costs. This high cost is often a serious barrier to rural broadband deployments, the group said.

Blair Levin, head of the task force developing a national broadband policy for the FCC.

This "middle mile" infrastructure consists of equipment and fiber that connects local cable head-ends or telephone company central offices with bigger points of presence that connect those networks to nationwide networks. The task force said there was a lack of efficient coordination when carriers or other utility providers dig trenches for fiber infrastructure. The group also noted that these deployment gaps don't only affect rural consumers, but many residential neighborhoods and small business marketplaces as well.

As the Internet and television markets converge, the task force also noted that a lack of innovation exists in the TV set-top box market. Specifically, the majority of consumers today use set-top boxes provided through their subscription TV providers. And only a very small number of devices are even available to purchase at retail. By comparison, there are hundreds of devices available in the mobile phone market. Due to a lack of competition, innovation has been stifled. And the task force recommends the FCC adopt policies to encourage a retail market for such devices.

That said, the FCC has tried to encourage the consumer electronics industry to develop set-top boxes that could be bought separately from cable services, but so far the efforts have largely failed.

More spectrum needed
On the wireless side, the key barrier is a lack of spectrum, the task force said. The problem is simple, as demand for mobile broadband increases, there is a need for more spectrum to support these services. Demand for these services comes from the rapidly growing market for smartphone wireless devices and Netbooks. By 2011, smartphone sales are expected to overtake standard mobile phones.

The task force said it is critical for the FCC to identify and reallocate available spectrum as soon as possible. The group said the nation could face a spectrum shortage as soon as 2013 or 2015, if nothing is done today.

The wireless trade group CTIA and the Consumer Electronics Association support this claim. And the groups sent a letter to FCC chairman Julius Genachowski on Tuesday urging him to investigate using broadcast TV spectrum for mobile Internet use.

The measure is opposed by the broadcast TV industry. But the FCC task force noted that as the need for wireless broadband spectrum increases, the need for broadcast TV spectrum is actually decreasing. Specifically, smartphone subscriptions have increased by 690 percent since 1998, while over-the-air TV viewership decreased by 56 percent. This proposal is already generating criticism from lawmakers supporting the TV broadcast industry.

Levin and his staff acknowledged there are many other barriers that exist in providing affordable broadband access to every person in the U.S. Levin said his staff is on track to meet its February deadline, but he said the process will remain open throughout the remaining 90 days that are left to incorporate new ideas. He also emphasized the fact that the ultimate success or failure of the national broadband plan will be in the hands of Congress and policy makers who must remain committed to implementing the plan.

"In my experience and seeing what has worked in other countries, you can plan all you want, but there really needs to be a long-term commitment for such plans to succeed," he said.

Also as part of the meeting, the five-member FCC unanimously voted to impose a "shot clock" for wireless tower applications to speed up the time it takes for wireless operators to deploy new cell phone networks.

Chairman Genachowski promised last month at the CTIA tradeshow in San Diego that the Commission would do what it could to speed up this process. And the Commission's vote solidified that promise.

"Tower siting is a vital piece of our industry," CTIA president and CEO Steve Largent said in a statement. "It enables mobile services, including voice and broadband, for consumers, public safety, and businesses. Both Congress and the Supreme Court recognized the importance of taking concrete steps to ensure that the zoning process does not become a barrier to the reasonable deployment of, and competition among, diverse wireless networks."

Editors' note: This is a guest column. See Larry Downes' bio below.

I've managed to slog through the 107-page "Notice of Proposed Rulemaking" (PDF) issued late last week by the Federal Communications Commission.

Let me save you the trouble of reading the 185 numbered paragraphs, 310 footnotes, and three appendices, including separate statements from each of the five commissioners: there's nothing to see here, folks.

First, let's be clear about what has not happened. No new law was passed. No new federal regulations were enacted. No decisions were made.

Instead, the FCC proposed draft rules to codify the six Net neutrality principles Chairman Julius Genachowski outlined in his speech on September 21. Now begins the process of gathering comments and other testimony. Later, the FCC will vote on whether to adopt the rules or to amend them, or just call the whole thing off.

The basic thrust of the proposed rules, as nearly everyone knows by now, is to keep broadband Internet access providers from managing last-mile network traffic in ways that discriminate, pro or con, based on content, applications, or devices. Access providers would be banned from restricting or throttling services that the provider doesn't like, for example, perhaps because they compete with more expensive alternatives the provider or one of its business partner offers. The proposed rules would apply to all broadband access, including wireless.

The comment process, which runs until March 2010, is open to anyone. The FCC is clearly expecting lots of comment. The document itself asks more than 100 questions, including whether the new rules are necessary, whether the commission should enforce them without detailed regulations but instead on a "case by case" basis, and even whether the commission has the legal authority to enact new rules in the first place.

1. We don't need no stinking jurisdiction
The last question hints at one of many ticking time bombs. Although the FCC has for years published policy statements regarding open networks, the commission's authority to enforce those policies is far from clear. Under the 1996 Telecommunications Act--the last major rewrite of federal communications law--only traditional phone services delivered by traditional phone companies are regulated as common carriers.

If the FCC has any authority to regulate broadband access, it comes from what Genachowski calls the agency's "ancillary jurisdiction." But Comcast has already challenged that jurisdiction, in a lawsuit pending in a federal court of appeals. If the FCC loses that case, the proposed rules may come to a quick demise.

In arguing against ancillary jurisdiction, Comcast has found a surprising ally: the Electronic Frontier Foundation. The advocacy group--strong supporters of the principles of neutrality--believes that the commission has no authority to issue these rules without sweeping new authority from Congress. Regulating neutrality under ancillary jurisdiction, the EFF worries, is a cure far worse than the disease; a "power grab that would leave the Internet subject to the regulatory whims of the FCC long after Chairman Genachowski leaves his post."

Exactly.

What's the risk? For one thing, "ancillary" jurisdiction could also be applied, as the EFF points out, to the creation of new Internet decency standards. (Congress has tried repeatedly to regulate Internet content since 1996, only to be overturned by the courts.) The same FCC that now casts itself as savior of the open network, after all, has grown increasingly aggressive and prudish in policing content in its traditional job as regulator of over-the-air television. A federal court, for example, recently threw out the $550,000 fine levied in the Janet Jackson wardrobe malfunction case from the 2004 Super Bowl.

Speaking of power grabs, recall that the FCC has tried repeatedly, at the strong urging of media lobbyists, to force electronics and software manufacturers to implement the so-called broadcast flag. Responding to a signal embedded in programming, TVs, DVRs, and computers would be forced to limit the ability of consumers to time-shift programming, a capability we've enjoyed since the invention of the VCR.

Another federal court stopped that madness. Mandating the design of electronics and operating systems, the judges sneered, was no more in the FCC's power than "regulating washing machines." That rebuke hasn't stopped the FCC from trying again and again.

Maybe that's why the EFF isn't the only surprising voice calling for caution. Microsoft and Yahoo, leading application providers, have both pulled out of a coalition formed to advance Net neutrality, with Microsoft issuing a statement last year that "Network neutrality is a policy avenue the company is no longer pursuing."

2. Swallowing the rules
Even if the FCC has the power to issue new rules, there are enough exceptions to render them toothless. All the rules are subject to "reasonable network management" by broadband providers, a sensible limitation that is mentioned (though not yet defined) 66 times in the document.

As drafted, the new rules also allow access providers to prioritize performance-sensitive content, including voice and video, and to offer higher-price access options. This falls under the category of what the proposal calls "specialized" or "managed" services. That's nothing new. Harvard professor and open-network supporter Lawrence Lessig, who told the press that he was "thrilled" with the FCC proposal, has always believed that "broadband providers should be free...to price consumer access to the Internet differently--setting a higher price, for example, for faster or greater access."

The new rules, moreover, say nothing about discrimination by applications and Internet services. Even though access providers would not be permitted to block voice over Internet Protocol, or VoIP, telephone access from Skype and Vonage, in other words, the proposed rules would do nothing to stop Skype and Vonage from blocking calls to certain area codes, offering priority service to paying customers, or limiting the devices (e.g., cell phones) through which users can access their service.

There's no need to regulate applications, according to pro-neutrality groups like the Center for Democracy and Technology, because applications "do not suffer from the same bottleneck problem that the underlying broadband service inherently has." In other words, if Google searches prioritize Google content, and you don't value that kind of discrimination, you can use a different search engine. But today, in many parts of the United States, consumers effectively have only one or two choices for broadband access--their phone company and their cable company.

3. Avoiding the real problem
That, of course, is the real reason everyone, including me, worries about non-neutral behavior. In the absence of real competition, monopolies and duopolies have strong incentives to discriminate in ways that can severely burden some classes of users--whether consumers or service providers or both.

Despite a few isolated incidents of clumsy interference, however, no one really believes that the lack of competition has created true market failures. At least not the kind of failure severe enough to justify the intensive federal regulation visited, with mixed results, on U.S. railroads a century ago or of the telephone monopoly from 1913 until 1982. Pro-regulation advocates, including Chairman Genachowski and Google Vice President Vint Cerf, speak in the conditional tense. The word "could" appears 55 times in the FCC proposal.

Regulating ahead of a market failure makes little sense when, as everyone acknowledges, the underlying technology for access is evolving rapidly and models for making money in Internet provisioning are still in the early stages of development. The risk of non-neutral behavior is significant, but the cost of regulation and the potential for unintended consequences may be higher. "Have we correctly identified the costs and benefits of the alternative approaches?" the commission asks. The answer is that it hasn't even begun to identify either, correctly or otherwise.

And if the real problem today is broadband bottlenecks, why is so little being done to encourage competition? Municipal wireless Internet projects have largely shut down, in large part because state governments and their lobbyist friends maintain that the law allows them to prohibit cities from competing with private-sector communications companies, a view supported by the FCC in 2001.

Offering broadband over power lines, another promising option, has been stymied, with the FCC receiving still more abuse from the federal courts in 2008, for their failure to adequately support the development of the technology.

Net neutrality advocates may be celebrating the start of a process they have argued for since 2005, but here, as with all technology regulation, it's wise to be careful what you wish for. For now, the proposed rules look to be dead on arrival--and of multiple causes.

That's one more reason to wonder why, if there is a problem to be solved sometime in the future, anyone thinks the FCC is the organization best-suited to solve it.

Say what you will about the wireless phone companies, but in a crunch their managed 3G cellular networks get the job done when Wi-Fi connections fail.

I was in Chicago at a telecom trade show this week and had to cover a Federal Communications Commission's meeting via Webcast. Ironically, the meeting was focused on the FCC's proposal to draft new regulations to keep the Internet "open" and "free."

The video for the Webcast, which I was watching over an unprotected Wi-Fi connection, started out fine. But after only a few minutes, the picture began to break up, the buffering wheel on the media player churned wildly, and the audio stopped and started so often that I only could make sense of two or three words at a time. Sometimes the audio would start up where it had left off, but then quickly jump ahead to the live stream, cutting out entire sentences and paragraphs.

When I couldn't take it any longer, I shut down my computer, rebooted, and plugged in my Sprint 3G air card.

Almost immediately after launching the video, Chairman Julius Genachowski's face popped up on the screen clearly. But the best part was that I could hear everything he was saying. I didn't experience one hiccup, not one pause. There was no little circle turning round and round as the video buffered. It was working perfectly.

The problems I experienced were likely due to congestion on the unsecured Wi-Fi network. Even though I didn't see a lot of people connecting to the network, there was still likely a lot of traffic. Meanwhile, Sprint's 3G wireless network is more tightly managed, because the licensed spectrum is a limited resource that must be used efficiently. So even if there had been congestion, I might not have even noticed.

Sprint, which owns spectrum licenses, has more control of the traffic that is on its network than the trade show folks who put up the Wi-Fi network, which uses unlicensed spectrum. In theory, the Wi-Fi network should be at least three times faster than the cellular network. But when there is a lot of traffic on the Wi-Fi network, Web pages load slower and video gets warped and choppy.

How Net neutrality fits in
One of the issues that has been hotly debated among Net neutrality supporters and detractors is how to prevent network operators from favoring some traffic at the expense of services, while also allowing the operators to manage their networks to ensure their customers have good experiences.

As I sat watching the choppy FCC Webcast, trying to piece together what was being said, I experienced firsthand how an unmanaged, congested Wi-Fi connection, simply doesn't work, especially when it comes to video.

And if we are to believe companies, such as Cisco Systems, which makes most of the routers powering the Internet, the Net is about to become a whole lot more congested. In June, the company said that Internet traffic worldwide would grow to five times its current size between 2008 and 2013. And much of this growth will come from video. Not only is video traffic very time sensitive, but it also eats up a lot of bandwidth. The result is a double whammy for network operators.

With a recent survey of more than 20 service providers around the world, Cisco predicts that by 2013, 90 percent of all consumer IP traffic will be video. Today throughout the world, the average broadband connection, generates about 11.4GB of Internet traffic per month. Of this 11.4GB of data crossing Net monthly, 4.3GB of it is video or some other type of visual application, such as social networking or collaboration services.

What this means for network operators is that a tsunami of data traffic is coming. And even though network operators continue to add capacity to prevent congestion, they also need to better manage their networks.

Network design becoming more critical
At the Supercomm 2009 trade show this week, AT&T Chief Technology Officer John Donavan said that there must be changes in how networks are designed and managed to keep up with demand.

"The capacity we carried in 2008 will be a rounding error five years," he said. "We need to fundamentally rethink how we're carrying traffic in our networks. We have to rethink how we interoperate, how networks are constructed, how routing is done. How we move content in off-hours."

He warned that there will be consequences if operators don't act soon. "We'll end up in a dire situation a few years out if we don't collectively step up as an industry and throw Moore's Law out the window," he said.

So with more traffic on the network, operators say now is not the time to change regulation that could inhibit the way they manage their networks.

"If you have to treat all bits the same, it's hard to manage and protect the network," Tom Tauke, Verizon's chief lobbyist said. "When you're trying to make the network flow, you can't have lawyers looking over engineers' shoulders telling them what they can and can't do."

It seems that the FCC has gotten the message. In the nondiscrimination principle that was presented at its meeting this week, the document spells out that network operators cannot discriminate against particular Internet content or applications, but it allows for traffic discrimination when allowing for reasonable network management.

Of course, the FCC is only in the beginning stages of drafting the new Net regulations. And no one knows what the final wording will be. But I hope that when the official regulations are adopted, that network management is preserved unscathed. Because if it's not, we're all in trouble.

Google and the wireless industry have been at each other's throats all year over Net neutrality, but the search giant found room for compromise with new friend Verizon Wireless Wednesday.

Two weeks after announcing joint plans to release a series of phones and devices running Google's Android software on Verizon Wireless' network, the companies have authored a joint position piece on Net neutrality, highlighting their agreement in several broad areas.

Google CEO Eric Schmidt and Verizon Wireless CEO Lowell McAdam attached their names to the piece, which was posted on their respective public-policy blogs Wednesday evening:

Verizon and Google might seem unlikely bedfellows in the current debate around network neutrality, or an open Internet. And while it's true we do disagree quite strongly about certain aspects of government policy in this area--such as whether mobile networks should even be part of the discussion--there are many issues on which we agree.

For starters, we both think it's essential that the Internet remains an unrestricted and open platform--where people can access any content (so long as it's legal), as well as the services and applications of their choice.

On Thursday, the Federal Communications Commission plans to consider a proposal to add two new "principles" of support for Net neutrality concepts and make all six principles held by the agency into regulations. In the run-up to the debate, broadband providers like AT&T and Verizon Communications (together with Vodafone, a parent of Verizon Wireless) have argued loudly against such rules, with Verizon Communications CEO Ivan Siedenberg slamming Net neutrality supporters--singling out Google--just hours before the joint Verizon Wireless-Google statement was released.

Net neutrality supporters want the government to develop regulations guaranteeing access to services and applications delivered over the Internet, reducing the ability of wireless carriers and broadband providers to pick and choose preferred services for their networks.

Opponents such as AT&T and Verizon Communications concede that some rules are likely to pass, given the strong level of support among FCC commissioners, but they want to limit the scope of those rules as much as possible.

Despite a historical reputation as the most heavy-handed carrier regarding the applications that run across its network, Verizon Wireless has recently shown signs of loosening up its policies. It has already said it will allow Google Voice to run on the Android handsets slated for its network, an application that has been at the center of much controversy between Google, Apple, and AT&T this year over its exclusion from the iPhone. That's the gist of Verizon's stance in its open letter: self-regulation is better than government regulation.

For its part, Google said it doesn't mind "light-touch regulation"--a phrase it might revisit down the road, as the government takes a closer look at its dominant position in the search market--but the search giant feels "that that safeguards are needed to combat the incentives for carriers to pick winners and losers online."

Advocacy groups say AT&T has gone too far in its lobbying efforts to oppose the Federal Communications Commission's new proposed Net neutrality regulations.

This week AT&T's top lobbyist Jim Cicconi sent a memo to managers urging them to encourage their families and friends "to join the voices telling the FCC not to regulate the Internet."

Over the past few weeks, the battle over Net neutrality has heated up as the FCC is set to start the ball rolling on a process that will make the agency's existing open Internet principles official regulation.

AT&T has been one of the biggest opponents of the new regulation, along with Verizon Communications and cable company Comcast. On the other side of the debate are consumer advocacy groups and large Web-based technology companies, such as Google and Amazon.

The phone companies have rallied support among some congressional leaders, both Democrat and Republican, who have sent letters to the FCC opposing new regulation. And the advocacy groups and big Internet companies have done the same.

But many advocacy groups say that AT&T has crossed the line by suggesting to its employees that they use their personal e-mail addresses to post comments opposing Net neutrality regulation. These groups believe that AT&T is deliberately trying to create the appearance that average citizens oppose the Net neutrality regulations.

"AT&T is practiced in spending money on so-called astroturf groups to give the appearance there is widespread support for their agenda," said Timothy Karr, campaign director for the advocacy group Free Press.

AT&T defended its actions by saying that it is merely rallying support for its cause.

"We were providing important information to our employees," said Michael Balmoris, a company spokesman. "And it was up to them to respond personally. If they use their company e-mail that is fine, too. It was not a mandatory business request."

Balmoris argued that groups such as Free Press and Public Knowledge also mobilize people on the Web. They send e-mails to thousands and provide talking points and even form letters that they can send to congressional leaders or post as comments.

This is true. But Karr argues the main difference is that Free Press and other advocacy organizations do not pay the people who post those comments and send those letters. What's more, their Web campaigns are built around people who have specifically asked for information on the subject and are generally already in support of Free Press' positions.

"Our activists aren't on our payroll," he said. "And they come to us looking for information. When a letter like this is sent to every manager from one of the company's most senior executives, it's hard to imagine AT&T employees thinking the memo was merely a suggestion."

Art Brodsky, a spokesman for Public Knowledge, another advocacy group supporting Net neutrality, also took issue with AT&T's letter to its employees. Brodsky said that not only are the talking points AT&T uses in its memo questionable and debatable at best, but he said that AT&T is subtly threatening employees by describing the FCC as "poised to regulate the Internet in a manner that would drive up consumer prices, and burden companies like ours while exempting companies like Google."

"When you send a letter to employees and say that our business will suffer if you don't do this, it's very misleading especially in this economic environment," he said. "People are afraid of losing their jobs. But the fact of the matter is that AT&T has already laid off 20,000 employees , and it's had nothing to do with Net neutrality."

The FCC is expected to begin the process of creating rules for Net neutrality regulation at its monthly meeting on Thursday. The FCC has extended the period for receiving comments until Thursday.

AT&T has taken off the boxing gloves in its fight against the Google Voice service and proposed changes to Net neutrality rules.

In a letter sent to the FCC (PDF) on Wednesday, AT&T went on the attack to portray Google as a powerful company that's trying to fool the FCC into believing that the rules shouldn't apply to it.

In the letter, AT&T is trying to cover all of its bases. This means that, at times, it's hard to follow which arguments it's trying to make--the one about Google Voice or the one about Net neutrality. And it doesn't help that AT&T stoops a little low by referencing a convent of Benedictine nuns in a list of those hurt by having calls to their numbers blocked to and from Google Voice numbers.

Read more of "AT&T to FCC: Close loopholes and write rules that apply to Google, too" on ZDNet's Between the Lines.

Should Google Voice have to follow the same rules as AT&T?

(Credit: Screenshot by Tom Krazit/CNET)

The Federal Communications Commission is looking into how Google Voice treats calls to certain rural areas that landline phone companies are required to connect.

AT&T placed this complaint before the FCC, accusing Google of failing to live up to the Net neutrality rules it has long supported before the U.S. government. On Thursday, several members of Congress implored the FCC to look into the matter, and their concerns have been heard, according to a report from the Associated Press that Google has confirmed.

The dispute is over Google's practice of blocking calls to certain rural phone networks that are allowed to charge a disproportionately high rate for calls connected to those networks. Some rural carriers, in a practice known as traffic pumping about which AT&T has long complained, partner with companies that draw a high volume of network traffic, such as phone sex operators and conference-calling firms, charge a much higher connection rate, then split the revenue with them.

AT&T is required to connect such calls because it is considered a "common carrier" that is required to ensure open access to networks that were created with public money. "By openly flaunting the call-blocking prohibition that applies to its competitors, Google is acting in a manner inconsistent with the spirit, if not the letter, of the FCC's fourth principle contained in its Internet Policy Statement," Robert Quinn, AT&T's senior vice president focusing on federal regulation, said in a statement last month when it filed its original complaint with the FCC.

Google argues that it is not subject to the same laws because it's a software company and because Google Voice doesn't replace phone service; it still requires phone service to work properly. It addressed the inquiry in a blog post Friday.

"AT&T apparently now wants Web applications--from Skype to Google Voice--to be treated the same way as traditional phone services," wrote Richard Whitt, Google's Washington media and telecom counsel. "Their approach is what a former FCC chairman has called "regulatory capitalism," the practice of using regulation to block or slow down innovation. And despite AT&T's lobbying efforts, this issue has nothing to do with network neutrality or rural America. This is about outdated carrier compensation rules that are fundamentally broken and in need of repair by the FCC."

So now it appears that the FCC will attempt to referee the matter. Google's no stranger to federal authorities at the moment, with just about everything it does falling under the watchful eye of an administration that seems determined to examine dominant companies in the tech industry.

SAN DIEGO--In his first major address to the wireless industry, the new Federal Communications Commission chairman, Julius Genachowski, offered some good news for wireless operators at the industry's biannual gathering here Wednesday. But he reiterated the FCC's plans to apply new Net neutrality rules to wireless, a plan that has met resistance among the industry's major players.

FCC Chairman Julius Genachowski speaking at the CTIA 2009 fall show.

(Credit: Marguerite Reardon/CNET)

As part of his speech, Genachowski announced a new initiative to add more spectrum for high-speed Internet access, and he offered assurances that the FCC will help speed up 4G wireless roll-outs by cutting through red tape for new tower deployments.

The industry has applauded these new initiatives. The CTIA, which is the trade organization for the wireless industry, recently sent a letter to the FCC asking it to consider opening up more spectrum for auction to help spur growth. And it has also been urging the FCC to speed up the process for building new towers.

Specifically, Genachowski said that the agency's main priority will be to make more spectrum available to wireless operators. And he said the FCC will impose a "shot clock" timetable for companies seeking permission to build cellular towers in local communities.

But Genachowski also said that he plans to keep the wireless Internet open. And he emphasized that the agency's Net neutrality principles, which will soon become official regulation, will also apply to wireless networks. While this latest bit of his agenda hasn't been popular with wireless operators, Genachowski said the agency's hope is to work closely with the industry.

"When we say that we haven't determined what we are going to do with handset exclusivity and we want your input, we mean it," he said. "The same applies to an open Internet. We want you to be engaged. We need you to be engaged. I am committed to running an expert agency that works for all Americans, that pursues high principles while recognizing the danger of dogma and the power of pragmatism."

Ralph de la Vega, CEO of AT&T Mobility and Consumer Markets, said during his keynote address Wednesday that he is happy to work with the FCC. He applauded the agency's efforts to open up more spectrum and to speed up the bureaucratic process for building and expanding wireless networks.

"We welcome the call for a fact-based approach to these issues," he said. "And we are pleased, (Genachowski) wants to listen to us. But in a competitive market, consumers will assess the value of our service. And they will pick the winners and losers. And that is the way it should be."

Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets

(Credit: Marguerite Reardon/CNET)

De la Vega pointed out the company's latest effort to keep its network open by allowing voice over IP services such as Skype to run on the iPhone. AT&T has the exclusive deal in the U.S. to carry the popular Apple smartphone on its network.

Genachowski said he appreciates AT&T's announcement. And he said this was good news for consumers.

But he said more work needs to be done. And even though Net neutrality is a priority at the agency, he said that allocating more spectrum and adding capacity to the wireless network is the No. 1 concern at the agency. He said that mobile data usage is exploding. And by 2013 U.S. consumers will use nearly 400 petabytes per month of wireless data compared with 6 petabytes per month in 2008.

"You don't have to know what a petabyte is to know that that's a game-changing trajectory," he said. "Spectrum is the oxygen of our mobile networks. While the short-term outlook for 4G spectrum availability is adequate, the longer-term picture is very different. I believe that that the biggest threat to the future of mobile in America is the looming spectrum crisis."

He proposed that the FCC will look at secondary markets to add more spectrum and will look to make its spectrum policies more flexible to encourage the use of unlicensed spectrum. He also said the FCC will encourage the use of smart antennas and femtocells.

But most importantly, Genachowski said that the FCC must reallocate spectrum currently being used for other purposes. He said that carriers have told the FCC that they need anywhere from 40MHz to 150MHz each to bring wireless broadband to consumers.

"It takes years to reallocate spectrum and put it to use," he said. "But we have no choice. We must identify spectrum that can best be reinvested in mobile broadband."

Genachowski also said that the FCC has heard the industry's call to help it work with local communities to get new cell phone towers approved much more quickly to help them build their next-generation wireless networks.

"We at the FCC understand the many challenges operators face in (building) networks," he said. "We are ready to help you cut through red tape and overcome these hurdles."

While the industry was happy to hear the good news that the FCC is willing to help it address some of its most pressing issues, leaders such as de la Vega resisted the agency's plans to extend Net neutrality principles to the wireless market.

Genachowski said it was imperative that the agency keep wireless broadband networks open to encourage more innovation. And he tried to allay fears that the FCC would impose arcane rules that would stifle innovation and investment.

"The goal of the proceeding will be to develop sensible rules of the road," he said. "Rules clear enough to provide predictability and certainty, and flexible enough to anticipate and welcome ongoing technological evolution."

But AT&T's de la Vega argued that imposing the same policy rules on wireless networks as it applies to wired networks is not a good idea. And he said that it is unfair for the FCC to impose any rules on wireless operators who have already spent billions of dollars buying licenses for wireless spectrum.

"The rules should not change after the auction," he said. "How can you expect companies to invest billions of dollars if you change the rules? The rules were clear in the 700MHZ auction for the next generation of wireless services. And these rules should not change now after the money has been spent. What would that say about the integrity of the 700MHz auction?"