July 31, 2007 4:56 PM PDT

FCC approves some open wireless requirements

WASHINGTON--The Federal Communications Commission ruled Tuesday that a valuable chunk of wireless spectrum will be open to whatever mobile devices Americans want to use, amounting to a political setback for traditional telephone companies and a partial win for Google.

As was hinted in recent weeks, the Federal Communications Commission approved that requirement as part of broader rules for auctioning licenses in the coveted 700MHz analog television band. The vote was technically 5-0, although one commissioner delivered a blistering critique of the so-called "open access" requirement.

Congress has mandated the airwaves in the 700MHz band be vacated in February 2009, forcing analog TV broadcasters off those channels as part of a long-anticipated switch to all-digital television. Current and would-be wireless broadband operators are eager to get their hands on the spectrum because of its inherent physical properties, which allow signals to travel farther and more easily penetrate walls.

FCC Chairman Kevin Martin said Tuesday's action indicates the agency's commitment "to ensuring that the fruits of wireless innovation swiftly pass into the hands of consumers."

"While I recognize the rules we are adopting today may not be the garment any one company wants, the public interest is not what any one company wants, it's about serving the people," Martin added.

But companies such as Google, along with several consumer activist groups, see the current rules as only a partial victory. While they praised the commission for taking a first step in offering consumers more choice in terms of devices and applications they will use on these new networks, they also criticized the commission for not going far enough.

They argue that without a comprehensive set of "open access" rules that also requires license winners to wholesale network capacity at affordable prices, there's no guarantee that well-entrenched wireless operators won't restrict consumer choices on the new spectrum.

Richard Whitt, Google's Washington telecommunications and media counsel, also said that without these provisions, it would be very difficult for a new entrant to go up against an incumbent to bid on the spectrum.

"Because (an incumbent) already has a nationwide network and a customer base with an active revenue stream they can go to almost any limit and bid above fair market value to protect their business," he said.

Google had said previously it would bid at least $4.6 billion in the auction if the FCC adopted rules based on four open-access principles, which included open access for devices and applications, as well as rules, for open wholesaling. Whitt clarified the company "didn't state we wouldn't bid if these conditions weren't met." But he said Google will need some time to study the FCC's rules before it can make a decision about participating in the auction.

Still, Whitt said Google is pleased that the rules for open device and application access also come with stronger enforcement provisions for dealing with license holders who don't comply with the rule, something he said Martin's original proposal did not include.

"Based on where we thought we were, we are in somewhat better shape," he said. "We are encouraged that the agency adopted something that is tougher in terms of enforcement, but it's too early to make a judgment about all the details of the rules."

The two Democratic commissioners--Michael Copps and Jonathan Adelstein--echoed Google's sentiments with gripes that the rules did not go farther.

"A wholesale requirement would have leveled the playing field for companies that want to get into the network business but cannot break through the defenses erected by the massive incumbents who dominate the industry," Copps said. "It is not hard to see why companies with extensive networks and millions of customers are generally able to outbid new entrants, even deep-pocketed ones."

A number of other companies, including Cisco Systems, eBay's Skype and Nokia, were quick to call the vote a positive development. Their representatives said in separate statements that the FCC's rules would help pave the way to more choices for consumers.

Dissenting views
Not everyone took such a rosy view of the rules. Republican Commissioner Robert McDowell stopped short of a complete endorsement of the rules, accusing his colleagues of "rushing headlong to regulate...without a sincere effort to broker a private sector solution to any perceived imperfections."

"In an effort to favor a specific business plan, the agency has fashioned a highly tailored garment that may fit no one," McDowell said just before the vote. He even went so far as to warn that "commission has received no assurances that any company is actually interested in bidding in incumbent spectrum."

His position drew support from Rep. Joe Barton (R-Texas), the ranking member of the House of Representatives Energy and Commerce Committee, who assailed what he called "the FCC's decision to rig the 700MHz auction at the suggestion of companies such as Google" as harmful to the wireless industry.

"Google and others are free to use the spectrum under their proposed business models if they pay fair market value in an honest auction," Barton said in a statement released after the vote. "Google alone has a market cap of approximately $160 billion, almost $40 billion more than Verizon."

The wireless industry's trade association, CTIA, also criticized the commission's rules on open device access.

"We are disappointed that a significant portion of this valuable spectrum will be encumbered with mandates that could significantly reduce the number of interested bidders," CTIA President and CEO Steve Largent said in a statement. "We remain committed to the principle that wireless consumers and American taxpayers are best served when such a valuable commodity is auctioned in a fair and competitive manner with no strings attached."

Whether the open-access rules will truly transform the mobile industry as a whole is harder to predict. For one thing, they have no direct bearing on wireless spectrum already in use by consumers today.

What's more, the rules apply only to the 22MHz of spectrum that is being auctioned off. So, for example, if Verizon Wireless won these licenses, it would likely use this spectrum to augment its existing nationwide network. In theory, subscribers could bring their own phone to the new network, but the phone or third-party application that they've downloaded would work only in regions where Verizon has won and built out its network using the 700MHz licenses.

CONTINUED: Devil in the details…
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8 comments

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Oops, they did it again...
"His position drew support from Rep. Joe Barton (R-Texas), the ranking member of the House of Representatives Energy and Commerce Committee..."

I vaguely recall the Democrats retaking Congress, so the ranking member of any House Committee would be a Democrat. Joe Barton and his party were thrown out by voters because they are corrupt and incompetent: they're not the ranking members on any committees right now.

Of course, this is a "news" organization that employees Declan "Da Liah" McCullagh. Given that I guess accuracy isn't a criteria in news gathering. Rather they're just hoping Joe Barton exclaims something akin to "Al Gore says he invented the Internet" (which, of course, he didn't say) so they can broadcast the misquote widely and gain...? OK: I have no idea what they hope to gain.
Posted by michaelo1966 (159 comments )
Reply Link Flag
criticizing the criticism
The term ?ranking member? is often used refer to the senior member from either party. Technically it should have been ?ranking minority member? but its well understood either way. See <a class="jive-link-external" href="http://en.wikipedia.org/wiki/Ranking_member" target="_newWindow">http://en.wikipedia.org/wiki/Ranking_member</a> for more information on this topic.

This was a well written, balanced article. Your criticism of Declan and company seem to be a bit ?off balanced?. Consider centering-exercising or deep breathing. Aroma therapy might help as well.
Posted by p.shearer (60 comments )
Link Flag
Rep. Joe Barton
According to the Republican Web site for the House Energy and Commerce Committee, Rep. Barton is designated the ranking member. Please see the committee's Web site for more information: <a class="jive-link-external" href="http://republicans.energycommerce.house.gov" target="_newWindow">http://republicans.energycommerce.house.gov</a>.
Posted by Zoe Slocum (42 comments )
Link Flag
Air waves belong to the public
This is only 22 MHz of spectrum. No serious threat to the imcumbent can be launched in such a small block. Besides all the airwaves are owned by the American public, and the public should have access to a small part for innovation and open source applications. The imcumbents will only provide apps that ensure their continued dominance.
Posted by kenwilli (7 comments )
Reply Link Flag
FCC should measure ROI, not just short-term auction proceeds!
You are absolutely right. This Business Week article describes what happened when France unbundled its access to ensure that France Telecom (the incumbent) couldn?t lock out other vendors from wholesaling offerings.

<a class="jive-link-external" href="http://www.businessweek.com/globalbiz/content/jul2007/gb20070718_387052.htm?chan=rss_topStories_ssi_5" target="_newWindow">http://www.businessweek.com/globalbiz/content/jul2007/gb20070718_387052.htm?chan=rss_topStories_ssi_5</a>

The result? An unprecedented wave of innovation that has touched off deployment of new fiber (unsubsidized by taxpayers, by the way) and amazing new services.

Rather than evaluate the short-term gains from the auction, the FCC should have been concerned with long-term ROI (return-on-investment) to the American economy. That only comes about by preventing the telcos, their lawyers and lobbyists from hamstringing competition.

Instead, we get more of the same, with a couple of giant telcos protecting their turf. The result is that America will become a technological backwater for mobile development.

Thanks, FCC!
Posted by directorblue (148 comments )
Reply Link Flag
Not Open Enough
It's clear that the FCC should support the MOST open access possible. Full open access provisions are appropriate because there is no public benefit from allowing exclusive and restrictive use of the public airwaves; but there are great benefits from open access.
The decision not to support more open access is inappropriate and could even suggest undue influence. The lack of open access will stifle choice, competition, innovation and growth. Congress should intervene by passing legislation requiring open access (including open wholesale access) in new allocations of the public airwaves. Hopefully someone like Google will win a good chunk of these licenses and provide access in an open wholesale manner. This auction is a very important allocation of prime radio spectrum which belongs to everyone; allowing exclusive and restrictive use of it might increase the perceived value of the licenses, but is a disservice to the public.
Posted by Dale Sundstrom (21 comments )
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michaelo1966
Ranking member is the congressman with the most seniority on the commitee that is a member of the minority party
Posted by jeffro5 (1 comment )
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