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.

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?"

Microsoft researchers may have taken a step closer to finally turning unused analog TV spectrum, known as "white spaces," into unlicensed spectrum that can be used to deliver new wireless broadband services.

Researchers from the software giant, along with academics from Harvard University, have developed a protocol that the company claims could be the foundation for products that meet Federal Communications Commission requirements for avoiding interference when using unlicensed "white space" spectrum. The researchers presented their ideas this week at the ACM SIGCOMM 2009, a communications conference held in Barcelona, Spain, according to an article published on MIT's Technology Review Web site.

"White space" spectrum is unused wireless spectrum that sits between analog TV channels. Because much of this spectrum operates at lower frequencies, it can travel longer distances, much longer distances than the unlicensed frequencies used for Wi-Fi devices. Most Wi-Fi devices operate at 2.4 GHz, whereas, white space spectrum between analog TV channels 21 and 51 operate in the 512 megahertz and 698 megahertz range. (Signals transmitted over lower frequencies tend to travel longer distances at slower speeds, while signals transmitted at higher frequencies tend to be faster over shorter distances.)

Technology companies, such as Google, Motorola, Microsoft, and Dell, have been lobbying the FCC for years to open this spectrum for unlicensed use. The hope is that the spectrum could be used to augment existing wireless services or eventually be used to create new wireless broadband services.

But TV broadcasters and wireless microphone companies have long opposed the use of this spectrum, saying it will interfere with their services.

After a series of prototype tests, the FCC in November finally agreed to open up unused broadcast TV spectrum for unlicensed use. But the commission put together a set of strict guidelines designed to ensure that devices using the unlicensed spectrum would not interfere with existing TV broadcasters or other devices using the same unlicensed spectrum, such as wireless microphones.

Faced with a whopping $1.7 trillion deficit, President Obama is proposing tacking on a spectrum license fee to wireless operators to help generate revenue for the government.

The Obama administration's proposal was loosely outlined in the new budget plan for 2009 and 2010 submitted Thursday. In that plan, the administration proposes adding a new fee to be paid by wireless carriers that license wireless spectrum from the government.

These annual fees would start at $50 million in 2009 and jump to $200 million in 2010, Reuters reported. The fees will gradually increase over the next 10 years to $550 million per user per year, generating an estimated total of $4.8 billion over the next decade.

The proposed fees are in addition to license fees that operators have already paid the federal government as part of its wireless auctions. The Federal Communications Commission has been auctioning off wireless spectrum to phone companies and other entities since the 1990s. These auctions grant license holders exclusive rights to the spectrum in exchange for cash.

Over the years, these auctions have generated billions of dollars for the federal government. The most recent auction, which ended in March 2008, was for the 700 MHz block of spectrum that is being vacated by television broadcasters after the mandated digital TV transition. This valuable spectrum generated a record $19.6 billion.

But wireless spectrum is a limited resource. And the government is running out of airwaves to auction. In fact, the Obama administration predicts that it will only be able to generate about $4.8 billion in revenue from wireless auctions over the next 10 years.

Even though the additional fees could help the government halve the deficit by 2013 as well as help it fund several new spending initiatives, it's likely to be met with a great deal of resistance from mobile operators.

So far, none of the big four wireless carriers in the U.S.--AT&T, Sprint Nextel, T-Mobile USA and Verizon Wireless--has been willing to comment on the proposal. And the CTIA wireless-industry association said it's still looking into the matter.

"We are currently reviewing the details of the proposal and look forward to participating in the next stages of this issue," CTIA said in a statement.

Previous spectrum fee proposals have been strongly opposed by the wireless industry, and there's little reason to suggest that the industry would support them now. The big difference this time around is that a Democrat-controlled Congress could be more willing to support President Obama's plans.

More details about the proposal are expected later this spring when the administration releases a more detailed budget package. But any changes to the fee structure would require legislation. And my guess is that the wireless industry would fight hard against it.

The Federal Communications Commission has canceled a meeting scheduled at which it planned to vote on a controversial free Internet plan.

The group has been considering whether it should auction off 25 megahertz of wireless spectrum in the 2155MHz to 2180MHz band. In exchange for using the spectrum, the FCC would require license holders to offer some free wireless broadband service, as a way to provide free Internet access to millions of Americans who either can't afford or don't want to pay for high-speed Internet access. That Web service would have been filtered for pornography and material deemed not suitable for children. People 18 and over would have the option to opt out of the filtered service.

The FCC was set to vote on the plan at a meeting on Thursday, December 18. But the plan has been met with opposition from several top officials, wireless providers, and even civil rights groups.

In a letter sent to FCC Chairman Kevin Martin on Wednesday, U.S. Commerce Secretary Carlos Gutierrez expressed the Bush administration's opposition to the idea of imposing requirements on spectrum buyers.

"The administration believes that the (airwaves) should be auctioned without price or product mandate," Gutierrez wrote, according to The Wall Street Journal. "The history of FCC spectrum auctions has shown that the potential for problems increases in instances where licensing is overly prescriptive or designed around unproven business models."

The element of Web filtering worried at least one privacy group. "It's very troubling," Marc Rotenberg, executive director of the Electronic Privacy Information Center, told the Los Angeles Times. "A government-mandated filter at the network level means the government can block anything it finds objectionable."

Existing wireless providers objected to the plan for entirely different issues. T-Mobile USA, which spent $4.2 billion in 2006 to acquire spectrum in an adjacent band, said that opening up this spectrum would cause interference and disrupt service, a claim the FCC says it disproved in October.

And other logistical questions--such as exactly how the service would be filtered for inappropriate content and how the age of people who opted out of the filtered service would be verified--remained unanswered.

The FCC has other problems as well. Earlier this week, the House Committee on Energy and Commerce released a report accusing Martin of ignoring his responsibilities and abusing his power as FCC chairman. A detailed report released on Tuesday and stemming from a bipartisan investigation in January claims Martin manipulated and withheld information from Congress and other FCC commissioners, and ignored evidence that certain national communications programs were being grossly mismanaged. The report describes a "climate of fear" that pervades the FCC and kept some people from testifying publicly.

Sen. John Rockefeller (D-W.Va.) and Rep. Henry Waxman, (D-Calif.) on Friday sent a letter to Martin asking him to not to take action on any controversial policy proposals, according to the Journal. And on Friday night, the FCC reported it would, in fact, cancel the upcoming meeting.

A Federal Communications Commission engineering report released late Friday essentially backs a plan to create a free wireless Internet service by dismissing concerns about interference for existing providers.

The FCC has been considering auctioning 25 megahertz of spectrum in the 2155MHz to 2180MHz band. As part of the rules for using the spectrum, the FCC plans to require license holders to offer some free wireless broadband service.

The FCC sees the plan, which is based on a proposal submitted to the FCC by M2Z Networks in 2006, as a way to provide broadband Internet service to millions of Americans who either can't afford or don't want to pay for high-speed Internet access.

But existing providers like T-Mobile USA, which spent $4.2 billion in 2006 acquiring spectrum in an adjacent band, say that opening up this spectrum would cause interference and disrupt service.

Friday's report, however, concludes that spectrum could be used as planned "without a significant risk of harmful interference."

Click here for a PDF of the full FCC report.

It should be noted that this free Internet plan is separate from a proposal to use so called unused TV spectrum, also known as "white space" for wireless broadband services.