THE WIRELESS INDUSTRY INCREASINGLY FINDS ITSELF on the defensive on policy fronts across the board, a situation with the potential to disrupt the deregulatory framework and the fundamental business model prevalent during the sector’s phenomenal success the past three decades.
A confluence of forces appears to be at work. Cellphone subscribers number nearly 244 million in the United States. Wireless handsets ceased being luxury items a long time ago, but now they are becoming the primary communications devices of consumers. With the ever-increasing multi-functionality of mobile phones, wirelessonly and wireline-wireless consumers alike have grown highly dependent on the devices for traditional communications as well as for business, entertainment and safety. As such, in a nation accustomed to the best landline telecom service on earth, consumers increasingly are demanding that mobile phones work at the same high quality, hassle-free level as wireline service. So perhaps it was only a matter of time until complaints about dropped calls, dead zones, early termination fees, handset locking, miscellaneous taxes and fees, 911 service and other byproducts of wireless service would collectively hit a critical mass.
The “Cellphone Consumer Empowerment Act of 2007,” sponsored by Senate Commerce Committee members Amy Klobuchar (D-Minn.) and Jay Rockefeller (DW. Va.) aims to address a laundry list of wireless consumer gripes, and may even foreshadow the kind on stepped-up scrutiny industry may face if Congress-controlling Democrats pad their majorities and snag the White House in the 2008 elections. The wireless consumer protection bill-which could have a companion in the House soon-goes the opposite direction from that pursued by a cellular industry anxious to secure expanded federal pre-emption of states, which retain limited oversight of mobile-phone operators. Getting Congress to sign off on a national regulatory framework-one with little or no role for states-has been industry’s top legislative priority in recent years. Suddenly, though, industry is faced with the threat of a different kind of national regulatory framework, one antithetical to wireless carriers but embraced by states and consumer advocates.
While the cellular industry rightly argues wireless complaints are declining at the Federal Communications Commission, consumer grievances continue to be aired to state agencies, the Better Business Bureau and other bodies. As a political matter, Klobuchar, a freshman senator displaying a keen, early interest in consumer issues, appears strongly committed to a bill co-sponsored by a seasoned lawmaker in Rockefeller.
California challenges
The cellular industry spent hundreds of thousands of dollars to upend California’s telecom consumer bill of rights a few years back. That was just a single state, albeit an important one insofar as size and trend-setting potential. The Klobuchar-Rockefeller measure is federal legislation, meaning the $120 billion industry could be forced to dig deeper into its wallet and enlist far more foot soldiers than were necessary to sidetrack California telecom consumer protection guidelines. Not just on Capitol Hill either. States could be encouraged-even emboldened-by the Klobuchar-Rockefeller bill such that they pursue me-too legislation that they otherwise might not have attempted out of respect for the well-heeled wireless industry. Already cash-strapped states have shown little hesitation about levying new taxes on wireless carriers and their customers, or legislating restrictions on drivers’ use of handheld cellphones, despite studies that show hands-free accessories do not reduce driver distraction Plaintiffs’ lawyers, a perennial thorn in industry’s side, can be counted on to step up litigation if they see they have political cover from lawmakers seeking to make a cellphone bill of rights the law of the land.
Administration input
The FCC, for its part, does not appear positioned to give industry the added federal pre-emption it seeks, in part due to a defeat in the 11th Circuit and the wireless consumer protection drum beat in Congress. Moreover, the FCC-in deference to the post-9/11 policy emphasis on homeland security-is looking to reshape the wireless enhanced 911 regime to improve location accuracy throughout the country and emergency calling capability generally in rural areas. The same national security-emergency response emphasis helps explain why the FCC decided to give public safety 10 megahertz of auction-bound 700 MHz spectrum in addition to the 24 megahertz already set aside in the band for first responders. It’s also why the Justice Department and FBI want the FCC to force wireless carriers to make additional wiretap capabilities available to law enforcement and intelligence agents.
FCC Chairman Kevin Martin is headstrong in his campaign to cap universal-service fund subsidies for wireless carriers serving rural America, and may decide to subject cellular carriers to even more requirements to protect the privacy of subscribers’ phone records. Congress remains very interested in passing legislation in the latter arena.
Data drivers
But the urge to regulate and tax is not just limited to the voice segment of the wireless business, which accounts for the lion’s share of industry revenues, but is shifting as data applications gain strength with consumers. There, too, the cellular industry faces an unenviable predicament roughly analogous to the backlash from consumers who believe wireless voice service should not be inferior to wireline voice service in any shape or form.
A nation of desktop and laptop Internet consumers have gotten a taste of wireless broadband service and a glimpse into the future. Consumers will want it all from the mobile Internet: the fast data speeds, service quality, flexibility, ease of use, content choices and other aspects of wired Internet access that have become a staple of their daily lives. Given that, Google Inc., consumer groups and others have had an easy time signing up recruits to back lobbying efforts to bring open-access and wholesale requirements to the wireless space.
“The iPhone has set the stage for the future of the mobile Internet-but bad policies allows companies like AT&T [Mobility] and Verizon [Wireless] to shackle great gadgets to their closed networks,” an Iowa City man told the FCC. “To free [the] wireless Internet, the FCC and Congress must use our public spectrum to create an open network that gives consumers the freedom to use whatever device we want on any network; the freedom to choose among many providers in a competitive wholesale marketplace and the freedom to access any content or services we want through our devices. These true open-access standards should apply to the entire wireless market.” There are tens of thousands of other comments just like it.
The FCC responded by attaching open-access conditions to one-third of the 700 MHz spectrum headed for the auction block in mid-January. The next fight will be to incorporate open access into the 2155-2175 MHz band. But the battle is unlikely to end there.
About the only bright spot for wireless carriers at the moment is Congress’ apparent intention to extend the Internet tax moratorium before it expires in November. Meantime, on other policy fronts as far as the eye can see, it looks like a whole new ball game for the mobile-phone industry.
