The Skype debate is playing out on two distinctly deliberate levels-one that plays to the nitty gritty of the law and another that plays to emotions.
The wonky public-policy crossfire pits cellular carriers that control cellular networks against consumer groups with an overarching net-neutrality agenda that want a wireline-cable Internet experience in the wireless world. This discourse attempts to get down to substance, policy precedents and the fundamental legal basis upon which a decision should or should not be made. There is also the issue of whether any decision can withstand a court challenge.
On another level, the debate centers on the wireless industry’s dire predictions of consequences if the Federal Communications Commission grants Skype’s request against those of consumer groups if the agency sends the Internet communications firm packing. This version of the debate goes for effect, designed to plant the seeds of fear and to appeal to a sense of fairness-enough so as to be capable of tipping the balance one way or the other.
That fighting factions are employing tried-and-true means of persuasion is not new, but the animated rhetoric tends to underscore the potentially huge stakes in Skype’s petition to require cellphone carriers to allow third-party Internet communications software and devices onto wireless networks. Indeed, the debate resurrects the FCC’s landmark Carterfone decision of 1968. The ruling permitted two-way mobile radios and other devices to connect directly to the old AT&T monopoly network, so long as no harm was caused to the telephone system. Skype, among other things, wants the FCC to launch a rulemaking to enforce the Carterfone mandate on the wireless industry.
Skype, which offers free Internet calling software, has been working for years to enter the wireless space. The firm has inked agreements with several overseas carriers. Internet auction company eBay Inc. purchased Skype in 2005 for $2.6 billion.
The Skype debate is typical of the kind of friction wrought by technological convergence and fights for shares of markets old and new.
Unintended consequences
“Skype’s request to apply Carterfone regulation to the wireless industry is completely misplaced,” cellphone association CTIA told the FCC. “Unlike the Bell System at the time of the Carterfone decision, the wireless industry is not dominated by a rate-regulated monopoly provider, wireless carriers do not manufacture the handsets they sell, and the market for mobile wireless handsets is both competitive and innovative without regulatory intervention.”
CTIA urged telecom regulators to reject as “short-sighted and dangerous” Skype’s call to regulate open access standards for handsets and applications. The trade group’s members, which have invested hundreds of billions of dollars on spectrum licenses and network construction in support of 230 million subscribers, said the Skype proposal overlooks the critical role handsets play in network management and it clashes with the FCC’s enhanced 911 and hearing-aid compatibility rules for wireless carriers and phones they sell.
Mobile-phone operators also cautioned the FCC to be on guard for unintended consequences.
“If granted, Skype’s petition would remove many of the practices carriers use to ensure that the handsets that operate on their networks are running software that protects the network and consumers’ information,” CTIA stated. “Skype is asking the commission to mandate application interfaces and to regulate carriers’ ability to prevent applications from being run on their network. Opening handsets to run any software potentially exposes wireless subscribers to a host of quality and security problems.”
New competitors needed, groups argue
Consumer groups disagree with the notion that wireless consumers have it good and therefore the FCC should keep hands off. Moreover, they said failure to approve Skype’s petition puts at risk a unique opportunity in the upcoming 700 MHz auction to create a new competitor to the telephone-cable TV broadband duopoly.
“The restrictive practices of the wireless carriers with regard to applications and devices create problems that extend beyond the platform and impact the broadband competition problem more generally,” stated a joint FCC filing. “As wireless networks begin offering Internet services, we must question whether the open architecture of the Internet or the ‘walled garden’ of proprietary cellular networks will be he dominant model. The prospects thus far are not encouraging. The current 3G offerings are not truly substitutable for wireless broadband access.”
The groups said that without a wireless open architecture rule, the promise of seeing a “third pipe” emerge from the 700 MHz auction will not be realized, given the likelihood wireless carriers will be top bidders.
Cost analysis needed
A study by The Phoenix Center for Advanced Legal & Economic Public Policy Studies concludes the Skype initiative is ill-advised on legal and practical grounds.
“It is one thing to get the law wrong, it is quite another thing to make a proposal that could radically restructure the nation’s wireless industry without a detailed showing of the purported costs and benefits,” said Thomas Koutsky, Phoenix Center resident scholar and co-author of the study. “The level of complexity involved in a regulator trying to micromanage the technical interface between hundreds of kinds of mobile devices and multiple wireless networks across the United States is unfathomable.”
