Wireless

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?"

The wireless industry is gearing up to fight new Net neutrality rules that the Federal Communications Commission is formulating to keep the Internet open.

On Monday, FCC Chairman Julius Genachowski gave a speech at the Brookings Institute in Washington, D.C., outlining plans to turn the agency's principles for open Internet access into official regulation.

In addition to making sure that network operators cannot prevent users from accessing lawful Internet content, applications, and services of their choice, or attaching unharmful devices to the network, Genachowski wants to add two more rules.

The first would prevent Internet access providers from discriminating against particular Internet content or applications, while allowing for reasonable network management. The second principle would ensure that Internet access providers are transparent about the network management practices they implement.

Broadband providers such as AT&T, Comcast, and Verizon Communications have opposed regulation or new laws that would dictate how they could run their networks. Up until this point, the Internet has been free of any regulation. And these companies would like to keep it that way.

That said, the nation's two biggest phone companies, AT&T and Verizon, have accepted the principles outlined by the FCC, when it comes to their wired broadband networks. Even though they don't think additional regulation is needed, they have agreed in principle with keeping their broadband networks open.

But the regulation that Genachowski is proposing will not apply to just wireline broadband networks, such as DSL and cable modem service. It will also apply to wireless services. And this is where the major phone companies will likely focus their opposition to the FCC's plans for new regulation.

Julius Genachowski

(Credit: LaunchBox Digital)

Verizon and AT&T, which operate the nation's largest and second-largest cell phone networks, respectively, say the rules should not apply to wireless Internet access.

"AT&T has long supported the principle of an open Internet and has conducted its business accordingly," Jim Cicconi, AT&T's senior vice president of external and legislative affairs, said in a statement. "We were also early supporters of the FCC's current four broadband principles and their case-by-case application to wired networks."

But Cicconi went on to say that the principles and new legislation should not apply to the wireless market.

"We are concerned, however, that the FCC appears ready to extend the entire array of Net neutrality requirements to what is perhaps the most competitive consumer market in America: wireless services," he said.

He argues that wireless networks differ from wireline broadband networks because bandwidth is more limited on a wireless network. And he said that imposing new rules on how carriers operate their wireless networks would stifle investment.

This is a sentiment echoed by the CTIA, the wireless industry's trade association. The group argues that the open network provision in the 700 MHz spectrum auction caused many operators to stay away from the auction. In the end, only two companies bid for the C Block licenses: Google and Verizon. And the group notes that these licenses "sold for significantly less" than other licenses in the auction.

Verizon, which ended up winning the C Block auction in that auction, also believes that regulation is unnecessary. The company's vice president of regulatory affairs, David Young, said in a panel after Genachowski's speech that these rules will be difficult to implement in the wireless market because of the capacity constraints on wireless networks.

"On a wireline broadband network, you know where your customer is," he said. "So you can build capacity to handle the peak demands. But on a wireless network, you have a crowd converge on a site that suddenly has 10 times or 100 times the users competing for the same resources. "

Young said Verizon is committed to providing open access on its wireline broadband network, as well as its wireless network. He pointed to the fact that Verizon is now building a new 4G wireless network using the C Block spectrum it acquired in the 700 MHz auction. And as required by the FCC, it will allow users to attach any device and access any application on this new network. In effort to show Verizon's commitment to open access, Young also highlighted Verizon's efforts to open its 3G cellular network through its open development initiative.

"Our customers want an open experience," he said. "They want more choices, which is why we allow third-party developers and are providing developers complete access to our network. But our concern is that these new regulations, which apply regulation to the Internet for the first time, could have unintended consequences."

During his speech, Genachowski addressed this issue.

"I recognize that if we were to create unduly detailed rules that attempted to address every possible assault on openness, such rules would become outdated quickly," he said. "But saying nothing--and doing nothing--would impose its own form of unacceptable cost."

While it is true that Verizon has made its 3G network more open, it still requires device manufacturers to "certify" their products for the network, which means that Verizon still has the ability to accept or deny devices that run on its network. As for new applications, Verizon is still in the practice of disabling some features, such as Wi-Fi, on certain phones that operate on its nonopen traditional 3G wireless network.

Still, consumer advocates applaud Verizon's attempts at openness. But they point out that other wireless providers have not taken similar steps.

" I'd like to give credit to Verizon," Ben Scott, policy director for the consumer group Free Press, said during the panel discussion at the Brookings Institute event. "They have made a lot of positive steps toward openness. But that is not universally true of all carriers. Skype (and other applications) are still blocked on other carrier networks."

Indeed, services such as Skype, which allows users to make free and low-cost phone calls over an Internet connection, and Google Voice, which allows users to use to a single phone that follows them, regardless of which voice network they use, have been blocked by certain carriers. The FCC is already investigating why Google's voice service was rejected by Apple for the popular iPhone.

But Net neutrality supporters say it is critical for the new regulation to apply to wireless, as well as to wireline, services because in the future, most people will access the Internet via wireless devices. And as wireless operators launch new 4G networks that increase capacity and network download speeds, even more mobile devices will become Internet-enabled.

While incumbent wireless providers may oppose regulation on wireless Internet access, newer players support it. Clearwire, which is building a nationwide 4G wireless network, using spectrum from Sprint Nextel, and investment from Comcast, Time Warner Cable, Google, and Intel, fully supports the FCC's efforts.

"Clearwire applauds the chairman's efforts to safeguard an open Internet and his desire to strike a balance between consumers' need for open, rich access to the Internet and appropriate network management practices," Mike Sievert, chief commercial officer for Clearwire, said in a statement. Clearwire's 4G WiMax technology, business model, and operations embody openness for access, applications and devices."

At the end of the day, Net neutrality supporters say regulation is needed to keep the Internet open because there is simply not enough competition in the market to ensure that service providers play fair.

"If consumers had a wide choice of broadband service providers, preserving an open Internet might not be such a critical issue," Vint Cerf, Google's chief Internet evangelist, wrote in a blog post he published Monday. "Unfortunately, the vast majority of Americans have few (if any) choices in selecting a provider. As a result, these providers are in a position to influence whether and how consumers and producers can use the on-ramps to the Internet--and we've already seen several examples of discriminatory actions or threats that impair openness."

While many would agree that more competition is needed in the wireline broadband market, where most consumers have access to at most two broadband service options, many would disagree that competition does not exist in the wireless industry.

"Unlike the other platforms that would be subject to the rules, the wireless industry is extremely competitive, extremely innovative, and extremely personal," Chris Guttman-McCabe, vice president of regulatory affairs for CTIA, the wireless industry's trade association, said in a statement.

But the FCC is already investigating the state of competition in the wireless market. Even though there are four major nationwide carriers--AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile USA--the majority of the market is controlled by two carriers. And their dominance is increasing.

In the second quarter of 2009, AT&T added 1.4 million new wireless subscribers, for a total of 79.6 million subscribers. Verizon Wireless also added 1.1 million new subscribers during the second quarter, for a total of 87.7 million subscribers. Meanwhile, smaller competitors such as Sprint Nextel lost subscribers.

"If your definition of a competitive market is based on what we see in the wireline market, where there are two competitors, then yes, wireless is a competitive market," Scott said. "But if you look at the wireless market comprehensively, and you aren't just counting providers, then you'll see the market power is very concentrated."

As expected, Federal Communications Commission Chairman Julius Genachowski on Monday outlined a plan to keep the Internet open.

In a speech given at the Brookings Institute, Genachowski proposed that the FCC turn its four principles of network openness official into regulation. And he suggested that the FCC add two more "principles" as part of these new rules.

The existing principles can be summarized this way: Network operators cannot prevent users from accessing lawful Internet content, applications, and services of their choice, nor can they prohibit users from attaching non-harmful devices to the network.

Now Genachowski is proposing two new principles. The first would prevent Internet access providers from discriminating against particular Internet content or applications, while allowing for reasonable network management. The second principle would ensure that Internet access providers are transparent about the network management practices they implement.

Genachowski tried to alleviate fears that the FCC will overstep its bounds and create rules that hamper innovation.

"I am convinced that there are few goals more essential in the communications landscape than preserving and maintaining an open and robust Internet," he said. "I also know that achieving this goal will take an approach that is smart about technology, smart about markets, smart about law and policy, and smart about the lessons of history."

The debate over so-called Net neutrality began heating up about three years ago, when congressional leaders first held hearings on potential laws to ensure that Internet service providers couldn't monkey with traffic. There is no clear definition of the term "Net neutrality," but in general it refers to the concept that Internet users should have unfettered access to content and services. In other words, service providers should not be allowed to either impede or favor access to particular sites or applications.

The discovery that the nation's largest cable operator, Comcast, had slowed down certain kinds of peer-to-peer traffic on its network fanned the flames and sparked public outrage over such practices.

But the fight to create new laws or regulation to protect Net neutrality languished after the FCC publicly admonished Comcast for violating its open Internet principles. These principles aren't regulation and the FCC is somewhat powerless in imposing any real punishment for violating the rules. Still, the slap on the wrist coupled with public outcry was enough to get Comcast to change its practices.

Getting to "greater transparency"
Genachowski reasoned that the principles now need to be actual regulation, and that broadband providers need to know the rules of the road and need to know that they must adhere to rules to ensure open access for everyone.

"We cannot afford to rely on happenstance for consumers, businesses, and policymakers to learn about changes to the basic functioning of the Internet," he said. "Greater transparency will give consumers the confidence of knowing that they're getting the service they've paid for, enable innovators to make their offerings work effectively over the Internet, and allow policymakers to ensure that broadband providers are preserving the Internet as a level playing field."

But large broadband providers such as AT&T, Verizon Communications, and Comcast have opposed new regulation or laws protecting Net neutrality. They argue that imposing new rules would prevent them from managing their networks. And they also argue it would prevent them from introducing tiered pricing to their service line-up.

Genachowski addressed these issues in his speech as well. He assured service providers that the FCC would examine violations of these Net neutrality rules case by case. He also said that the rules are not intended to prevent network operators from handling congestion on their networks. And he specifically said that broadband providers would be able to manage networks when they are congested. He also said that service providers could introduce new tiered services, so long as there is enough Internet capacity to allow for open access to the rest of the Internet.

"I recognize that if we were to create unduly detailed rules that attempted to address every possible assault on openness, such rules would become outdated quickly," he said. "But saying nothing--and doing nothing--would impose its own form of unacceptable cost."

Genachowski also made it clear that the Net neutrality rules he plans to make regulation will be applied to wireless provider, too.

"It is essential that the Internet itself remain open, however users reach it," he said. "The principles I've been speaking about apply to the Internet however accessed."

Genachowski said that the FCC would issue a Notice of Proposed Rulemaking at the its October meeting. And he said the Commission will be seeking input and feedback from anyone interested in contributing to the process of making the rules. For example, he said, the FCC would be looking for input on how to determine whether network management practices are reasonable, what information broadband providers should disclose about their network management practices and how the rules apply to differing platforms, including mobile Internet access services.

As part of the announcement, the FCC launched a new Web site to encourage public participation.

The new head of the Federal Communications Commission wants affordable broadband access for all Americans, according to an article in Monday's Wall Street Journal.

Julius Genachowski sat down with the Journal for one of his first interviews since being sworn in as FCC chairman in late June and said that making affordable high-speed Internet available throughout the nation could be the "most successful driver of economic growth" in the nation.

FCC Chairman Julius Genachowski

(Credit: FCC)

Exactly, how he plans to do this is something that broadband providers, such as AT&T, Verizon Communications, and Comcast, are watching carefully. The new chairman has not been vocal yet about how he stands on many issues that will affect these companies.

Some issues that are currently under discussion at the FCC include new rules that dictate how broadband providers manage their networks. Comcast got into trouble last year for slowing down its customers' peer-to-peer Bit Torrent traffic without providing sufficient notice. Consumer groups have been advocating for stronger rules or regulation that prohibit such types of changes.

There are also discussions before the FCC about rules requiring companies to lease network space to competitors. Broadband providers have argued that imposing strict, new rules could stifle innovation and investment.

The FCC has also been looking at exclusivity deals that wireless phone providers have been striking with mobile handset makers. These deals include AT&T's exclusive contract with Apple to offer the iPhone on its network, and Sprint Nextel's exclusive arrangement to carry the Palm Pre. Some lawmakers and consumer groups say it is unfair for carriers to strike these deals because it keeps cutting-edge products out of the hands of consumers who do not live in regions where these services are offered.

In an effort to fend off criticism, Verizon Wireless, the largest wireless carrier in the U.S., said last week it will allow smaller, regional carriers to get access to its exclusive phones after six months.

There are also a slew of other issues that the FCC must deal with soon, including whether to overhaul the Universal Service Fund, which subsidizes phone service for rural Americans. Phone companies have complained for years that the system is broken. And others have urged the FCC to reallocate some of the funds collected for USF for subsidizing broadband services.

It will be interesting to see which side Genachowski will take on these issues. Generally speaking, many people perceived former chairman Kevin Martin as often siding with the phone companies, while having a more contentious relationship with cable companies. Specifically, the former chairman's campaign to force cable companies to offer a la carte pricing for cable TV put him squarely at odds with that industry.