July 31, 2007 4:56 PM PDT
FCC approves some open wireless requirements
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If these subscribers wanted to make calls or use a non-Verizon application on the rest of Verizon's nationwide network, they'd still need to use a Verizon-certified phone. Why? Verizon is not required to adhere to the open device and application access rule for any other spectrum licenses that have been used to build its existing network.
"The rules adopted today do nothing for the 250 million current cell phone subscribers," said Ben Scott, Washington policy director for the advocacy group Free Press. "In 2010, when these networks get built, the incumbents could freeze consumers out of their no-locking and blocking rights. We have a long way to go to truly realize these principles."
Devil in the details
As is typical, the text of FCC rules was not released at the meeting, which started nearly four hours later than its originally scheduled time due to last-minute negotiations among commissioners. But a press release (PDF) distributed afterward outlines the main provisions.
The order establishes that, of the spectrum being auctioned, 62MHz will be up for grabs by commercial operators. About one-third of those airwaves will be subject to the open-access rules and would allow bidders to purchase a single, regional license covering a large geographic footprint. The remaining portion, which will not be forced to comply with the unfettered devices mandate, will be divided into licenses of various sizes covering small and midsize geographic markets.
Another primary motive for the spectrum auction is improving communications among public safety workers. The adopted order sets aside 24MHz of spectrum to be dedicated to that purpose and licensed to a single noncommercial, nonprofit group that represents the public safety community.
It also sets up a framework for a public-private partnership to build a nationwide, interoperable public safety broadband network on a shared 10MHz of the spectrum. It would be up to the commercial licensee to build out the network for use by emergency workers, and the public safety licensees would also have priority access to the commercial spectrum in times of emergency.
The public-private partnership concept has been championed by a company called Frontline Wireless, headed by former FCC Chairman Reed Hundt. But in its proposal to the FCC, Frontline also wanted a wholesale provision added to the rules to help promote competition in the market, and it wanted the open device and application rules also added to this sliver of spectrum licenses.
But the public safety community, which is worried about network security and other issues, did not like the idea of an open network or allowing any type of device to connect to the network. The FCC also did not accept Frontline's request to offer discounted pricing to encourage smaller new entrants.
"The policy debate has come a long way in a short period toward open networks and a public-private partnership, and we commend the FCC for advancing these important public interests," Frontline Chairman Janice Obuchowski said in a statement. "But in areas where the commission did not go far enough, such as including wholesale in open-access requirements and in the scope of the designated entity definition, we will be reviewing the FCC's decision closely and considering petitioning for reconsideration."
The FCC also agreed to employ "anonymous" bidding procedures, which means the agency will withhold information about specific applicants' license selections and bidding activity until the auction ends.
Some commissioners also expressed misgivings about a decision in the rules to set "reserve" prices for each block up for sale in the auction. The idea behind that move, Martin said, is to "ensure that a fair price is paid." The projected $10 billion to $15 billion raised by the auction, according to Congressional Budget Office estimates, is scheduled to be deposited into the federal treasury to pay down the deficit.
McDowell said he believed the prices are best left to market forces, arguing that "reserve prices have the effect of skewing the auction and hindering the efficient allocation of spectrum."
Consumer advocacy groups were also troubled by the reserve pricing provision. Harold Feld, senior vice president of the Media Access Project, argued that reserve pricing could scare off new entrants from bidding. He said it could also encourage incumbent phone companies to hold back early in the auction and force the spectrum to be reauctioned without the rules.
No particular start date for the auction was set on Tuesday, but by congressional mandate, it must begin no later than January 28, 2008.
Speaking to reporters after the meeting, Martin predicted the auction would not occur until December or January so that potential bidders can have time to secure the capital to participate.
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