Wireless

WASHINGTON--The wireless and TV broadcasting industries faced off for the first time at a congressional subcommittee meeting on the Hill on Tuesday, setting in motion what could be a long drawn out battle over whether wireless spectrum should be reallocated and where the government will get this new spectrum.

Steve Largent, president and CEO of CTIA, the wireless industry group, and Gordon Smith of the National Association of Broadcasters, were among the witnesses gathered before the House Energy and Commerce Committee's Subcommittee on Communications, Technology and the Internet to discuss what the CTIA and the Federal Communications Commission have called a looming spectrum crisis.

CTIA and FCC Chairman Julius Genachowski have said that finding new spectrum as well as new ways to use existing spectrum more efficiently are top priorities that need to be addressed to keep up with growing demand for new wireless broadband services.

"Spectrum is our industry's backbone and it is what allows us to continue to innovate and create new apps, products, and services," Largent said in a statement. "Without this additional spectrum, our industry will cease to provide U.S. consumers with the most innovative and most competitive wireless offerings in the world."

The hearing comes just weeks after the CTIA ruffled broadcasters' feathers when it filed comments with the FCC suggesting that some of the additional spectrum it seeks for wireless broadband could come from unused TV broadcast spectrum. Broadcasters oppose giving up their spectrum. And some representatives for broadcasters say they don't believe that there is a spectrum crisis.

"There is no shortage of wireless spectrum in this country," said John Hane, counsel in the communications practice group of Pillsbury Winthrop Shaw Pittman, which represents the TV broadcast industry. "There is a lot of spectrum already available that could be used more efficiently. That is why we need these bills to take an inventory of what is currently being used."

Indeed, NAB and CTIA both said they support the passage of the Radio Spectrum Inventory Act, which would require the FCC and the U.S. National Telecommunications and Information Administration (NTIA) to inventory the wireless spectrum available in the U.S. It would also require those organization issue a public report on the government and private uses of the spectrum.

Smith of NAB also said during his testimony that it's important for Congress to look at all spectrum holders to ensure they are using their spectrum efficiently rather than singling out the broadcast industry.

"NAB believes that any inventory of spectrum should be comprehensive," he said in his prepared testimony. "Let's look at all bands and all services, including federal government bands. And let's view how each service is using its existing spectrum."

The NAB also said it supports another bill in the House, called the Spectrum Relocation Improvement Act, which would streamline the process for federal agencies to turn over unused spectrum so it can be auctioned to bidders in the private sector.

It's clear that the CTIA and FCC are taking on a big fight with calls for spectrum reallocation. And Jim Cicconi, senior executive vice president of external and legislative affairs for AT&T, said in an interview Tuesday that he admires the FCC for taking on such a battle.

"We certainly think that there is looming spectrum crisis," he said. "And I give the FCC chairman a great deal of credit for being courageous enough to lay out the problem and to seek what is best for consumers."

But he added that he also believes that the government needs to look at all sources of spectrum in solving this problem.

"That's why we agree there should be a spectrum inventory done," he said.

But skeptics, such as Hane, believe that a full inventory will actually show that no spectrum crisis exists. He argues that Congress may realize once it evaluates the data that there is no real crisis and that the current allocation of spectrum is sufficient to handle future growth.

Specifically, he says that wireless operators could be doing more with Wi-Fi and femto cell technology, which boosts radio signals indoors and then uses a wired broadband connection to send calls and data across a carriers network. He thinks this could help solve some of the efficiency problems that exist today instead of forcing TV broadcasters or government agencies to give up their spectrum.

But the CTIA argues that Wi-Fi and Femto cells are not enough to solve the spectrum shortage. Largent said additional spectrum is necessary to keep the U.S. competitive in the wireless market. And carriers such as AT&T, which is currently facing capacity issues due to heavy use of data services on devices like the iPhone, agree that freeing up more spectrum could help alleviate the problems the company currently faces.

Using a report from the International Telecommunications Union, CTIA calculates that by 2015 the U.S. and other developed nations will need about 1300 MHz spectrum to keep up with growing wireless broadband demand. Largent said in his testimony that the U.S. is lagging other nations in making additional spectrum available. Today, the U.S. has a little less than 500 MHz of spectrum that is commercially available. The trade group is asking the FCC to identify 800 MHz of additional spectrum that can be reallocated for wireless broadband use.

Largent pointed out that countries much smaller than the U.S. have much more spectrum available to them. For example, Germany, which has about 107 million wireless subscribers, will soon have about 645 MHz of spectrum available commercially. And the United Kingdom, which has only about 77 million subscribers will soon have 707 MHz of spectrum available for commercial purposes.

Largent said it is important for Congress to begin the spectrum reallocation process now because it takes years to identify and auction off new spectrum. The past two major FCC spectrum auctions each took more than 10 years to complete from start to finish.

NAB's Smith cautioned congressional leaders to not act hastily in reallocating spectrum. Not only could it hurt free over the air TV, but he said it could stifle innovation in improving digital TV. The U.S. just spent several years and billions of dollars converting to digital TV service, which uses spectrum more efficiently and often provides better service to consumers.

"Our national priorities should recognize the value that free over-the-air broadcasting brings to every American," Smith said in his testimony. "Broadcasting and broadband are not 'either/or' propositions as some have suggested; that's a false choice."

The bills before Congress are just the first step in what is likely to be a long battle for the wireless industry, government agencies and TV broadcasters.

"This is the first round in a 128-round match up," Hane said. "This is just getting started. So it's premature for the CTIA to begin talking about reallocating spectrum when we don't even have a full inventory of the spectrum that's currently being used."

WASHINGTON, D.C.--The Federal Communications Commission got a slap on the wrist Thursday from federal auditors for not doing enough to protect wireless subscribers.

The Government Accountability Office issued a report Thursday that said the FCC needs to improve oversight of the wireless industry to protect consumers. The agency said the FCC needs to do a better job enforcing consumer protection rules and educating the public about how they can submit complaints when they have experienced problems with their carriers.

The report was requested by Rep. Edward Markey (D-Mass.) when he was chairman of the House Subcommittee on Telecommunications and the Internet.

The survey of more than 1,100 cell phone users found that the vast majority of wireless subscribers, 84 percent to be exact, are satisfied with their mobile phone service, which is good news for the industry. But for the millions of wireless consumers who are dissatisfied, the report determined that the FCC is not doing enough to help them resolve their problems or protect their interests.

One of the biggest issues uncovered in the report is the fact that carrier early termination fees are preventing dissatisfied consumers from switching carriers. The report found that among consumers who wanted to switch carriers but did not, about 42 percent said they didn't switch because of the early termination fees that carriers charge customers when they end their contracts early. These fees apply to consumers who sign up for carrier contracts and buy a subsidized device. The fees can cost anywhere between $150 and $350.

The industry argues that the fees are set so that carriers can cover the cost of subsidizing the phones. Congress and the FCC have questioned this practice and now all four major U.S. wireless carriers prorate their early termination fees.

The GAO report also found that the FCC is not providing enough oversight in how carriers resolve complaints. The FCC receives about 20,000 complaints from consumers per year, and it forwards these complaints to carriers. But the GAO said the agency does not provide enough oversight to make sure those issues are resolved.

"FCC also lacks goals and measures that clearly identify the intended outcomes of its complaint processing efforts," the report said. "Consequently, FCC cannot demonstrate the effectiveness of its efforts to process complaints."

Other issues cited in the report include billing problems. According to the report, about 34 percent of mobile-phone customers received unexpected charges on their bills. And roughly 31 percent had difficulty understanding their bill.

CTIA, the trade group that represents the mobile phone industry, pointed to the positive aspects of the report that found that 84 percent of customers were satisfied with their service.

"In this fiercely competitive industry, our members work very hard for each customer to provide them with the best products and services," Steve Largent, CTIA's president and CEO, said in a statement.

The GAO report suggests the FCC develop goals for handling consumer complaints. And it recommends that the agency analyze the complaints to identify trends and to see if carriers are actually complying with existing rules. The report also suggests the FCC come up with better ways to communicate with state officials to address some of these problems.

"The FCC can--and must--do more to make sure consumer concerns are resolved by wireless carriers and oversee the wireless industry with a greater focus on consumer protection," Senate Commerce Committee Chairman John Jay Rockefeller (D-W. Va.), said in a statement. "It is time for the agency to take real action to better protect wireless consumers."

At the telecommunications and policy summit here on Thursday, Ruth Milkman, chief of the wireless telecommunications bureau at the FCC, said the agency is already addressing some of these issues. Last week it opened an inquiry into Verizon's recent early termination fee hike. Verizon Wireless raised the fee for terminating a contract for a smartphone to $350 from $175.

In a formal response to the GAO report, the FCC said it has already launched three proceedings examining mobile-phone practices. And the FCC also noted that it's developing a new system for tracking complaints.

The Federal Communications Commission opened a formal proceeding Wednesday to get feedback on whether it should reclaim some spectrum licenses held by TV broadcasters and auction them off to wireless broadband providers.

The public comment notice issued by the FCC is the first step in a process that could pit TV broadcasters against the FCC and the wireless industry.

FCC Chairman Julius Genachowski said in a speech earlier in the week that he is interested in taking back some of these airwaves to re-auction them for use in building new wireless broadband services.

Broadcasters oppose a plan under which they'd give up any spectrum licenses, saying that it would harm some Americans' access to free over-the-air TV programming. But some FCC officials, such as Blair Levin, who is in charge of drafting a policy plan for national broadband, argue that some of this spectrum is not being used efficiently or effectively. The idea is that the spectrum could be better used for providing 4G wireless services.

Spectrum that is used by broadcasters is considered ideal because it transmits signals over long distances and can penetrate through walls. Using it to build wireless broadband services would mean that service providers do not have to put radios on as many towers, which saves money when building networks and increases the reach of a network.

The most recent spectrum auction sold licenses for the 700MHz band of spectrum, which had been used to transmit analog TV signals. The FCC re-auctioned this spectrum after Congress mandated that all major TV broadcasters shift to broadcasting digital signals rather analog signals. Verizon Communications was one of the major winners in the 700MHz auction. And its wireless division, Verizon Wireless, is using the spectrum to build its 4G next-generation wireless network, which is expected to go live in some markets starting in 2010.

As more Americans use Internet-connected wireless devices, such as smartphones, and ultra portable devices, such as e-readers and Netbooks, the current allocation for wireless services is becoming saturated. Chairman Genachowski warned in his speech that without more spectrum dedicated to wireless broadband services, the nation faces a crisis that could stifle innovation.

The FCC will accept public comment on this issue until December 21.

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."

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.

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.

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?"

Bringing universal broadband to all Americans is not going to be cheap.

The Federal Communications Commission said Tuesday it could cost more than $350 billion to wire the United States with high-speed Internet access.

The FCC has been given the responsibility of coming up with a national broadband policy to ensure every American has access to broadband. And on Tuesday a task force at the FCC led by Blair Levin, former chief of staff to onetime FCC Chairman Reed Hundt, issued its initial report on forming this plan. The final report is due to Congress in February.

The FCC task force has been hosting workshops and hearings. And it will continue to do so over the next few months. But what it has concluded at this early stage is that bringing true broadband to all Americans is going to cost a lot.

While it would only take about $20 billion to blanket the country with broadband service with speeds between 768Kbps to 3Mbps service, the FCC has questioned whether those speeds will be enough. Instead, it is recommending more aggressive network build-outs that would increase the speed of these networks to about 100Mbps or faster. This will likely push the price tag of the entire network expansion to more than $350 billion. And if all consumers are given a choice of broadband provider, these cost estimates would be even higher.

There are a lot of factors that make building universal broadband expensive. It's much more expensive to build infrastructure in rural areas. Not only are capital expenditures more expensive in rural areas, but the operating expenses are higher, driven by transport and transit. Universal Service Fund recipients have made progress bringing broadband to rural America, but the fund faces systemic and structural problems.

So who is going to pay for this expensive infrastructure? The government will pay for some of it. Congress has already allocated $7 billion as part of the economic stimulus package. And more tax payer money is likely to be used in the future. Exactly, how much is uncertain.

But the bulk of the money used to build these networks will likely come from private industry, Levin said at the meeting held Tuesday in Washington, The Wall Street Journal reported (subscription required).

"Most of that ecosystem is funded by the private sector," Levin said. "We expect that to continue. Where can the government play a role in ensuring and improving the role of that ecosystem?"

The FCC believes these faster networks are necessary because broadband users are expected to use more bandwidth-intensive applications in the future than they use today. For example, the average consumer today uses the Internet for Web browsing, e-mail and instant messaging, and entertainment, but in the future uses will include streaming video, video teleconferencing, and electronic medical monitoring. These services and applications will require significantly more bandwidth.

If the FCC establishes regulation and policy to encourage these faster speed connections, the agency will have to figure out how to measure the quality of these connections. Today no such quality assurance is in place. And the FCC said in its report that actual broadband speeds lag advertised speeds by at least 50 percent, which means people are often paying for speeds that they do not get.

Another issue that must be dealt with is how the FCC will encourage more competition to give consumers choice, especially when it comes to these higher-speed services. At least half of Americans today only have access to one provider that can offer Internet speeds for video streaming and two-way video conferencing.

While wired broadband is critical, the FCC also noted in its report that wireless broadband access is also becoming increasingly important. By 2011, smartphones, which are more like mini-computers than phones, will overtake sales of traditional cell phones. Smartphone users generally use a lot more wireless data services, which means that carriers will have to keep beefing up their networks to provide more capacity.

While some of the biggest carriers, such as Verizon Wireless and Sprint Nextel are already building the next generation of wireless networks, which increase speeds and network capacity, the FCC noted that there is still a need to make more wireless spectrum available.

The CTIA, the trade association for the wireless industry, sent a letter to the FCC this week saying the government needs to identify more airwaves that can be used for commercial use.