Big things tend to start out small, or so the saying goes.
So it was that Voice over Internet Protocol provider Skype Ltd. came out of nowhere in February to petition the Federal Communications Commission to extend to the mobile-phone industry a landmark third-party connectivity mandate fittingly instigated decades earlier by a two-way radio dealer anxious to hook into the wireline telephone network.
Skype dusted off the FCC’s 1968 Carterfone decision-allowing unaffiliated devices to attach to the public landline telephone system so long as they do no harm to the network-and asked why not in the U.S. wireless space, too. Timothy Wu, a Columbia University law professor, asked the same question and made the case for allowing wireless Carterfone at a roundtable at the Federal Trade Commission early this year. Wu was at once applauded and attacked for his academic paper on the subject.
The FCC has yet to rule on the Skype petition. No matter; the revolution has begun.
Five months after the fact-aided by a blockbuster bandwagon effect that attracted support from Google Inc., Frontline Wireless L.L.C., consumer advocates, public-interest groups, thousands of citizens and Democrats hoping to add the White House to a power base that already includes the House and Senate-open access has become the rallying cry for loosening the iron-clad grip of wireless networks that cellular carriers have had the past 25 years.
Before the $120 billion cellular industry knew it, the ripple effect of the Skype petition had become a tsunami whose force was so great the Republican-controlled FCC-otherwise hoping for a clean, straightforward 700 MHz auction capable of ringing up $15 billion for the U.S. Treasury-acquiesced to attaching open-access requirements to one-third of the spectrum to be bid on early next year.
Perhaps the most telling aspect of the revolution in its early stages was the reaction to the FCC’s 700 MHz ruling by Skype, Google, Frontline and the many others disgruntled with what they see today as a walled wireless garden. They weren’t jumping for joy. The open-access crowd-having catapulted net neutrality to high priority in Congress, but unsuccessful at securing legislation-knew they had started something big in the wireless space at the FCC. They want more: a wholesale mandate, an end to handset-locking, fairer early-termination fees and more.
Already Skype and various groups have begun to lay the groundwork for pursuing open-access and wholesale conditions in the 2155 MHz-2175 MHz spectrum band unsuccessfully sought by M2Z Networks Inc. and others. The open-access surge, begun with the still-pending Skype petition and bolstered by AT&T Inc.’s turnabout support for open access at 700 MHz-is not apt to abate anytime soon, if ever. Every spectrum rulemaking going forward may well become a potential battle ground for open access and wholesale. There appears no turning back.
“I really did have a growing sense that after we explained our position . they came to understand what was at stake,” said Christopher Libertelli, senior director of government and regulatory affairs for Skype. “They came to understand how reasonable the [wireless Carterfone] position was and that it was pro-consumer . I wasn’t surprised.”
Beyond 700 MHz
Libertelli was senior legal adviser to former FCC chairman Michael Powell from July 2001 through March 2005, managing the agency’s broadband and competition policy agendas during that period. Libertelli said he believes the Skype petition rings true at the FCC because policymakers are generally interested in fostering competition and innovation. He said that regulatory philosophy has implications beyond the 700 MHz band.
“What it [the Skype petition] did was focus the commissioner’s attention not only on the 700 MHz band,” Libertelli stated. “The rationale for Carterfone in that band is equally applicable to the broad wireless industry. So as we describe the benefits at 700 MHz, I think you’re starting to see a growing recognition that, if it’s good for 700 MHz, it’s good for consumers in the broader market.”
While Democrats in Congress and at the FCC have been the strongest advocates of open access, wholesale and net neutrality generally, Libertelli said it likely will require bipartisan support to have those principles applied on a large scale to wireless spectrum as opposed to a slice of spectrum here and there.
Skype, bought by eBay Inc. in 2005 for $2.6 billion, has made inroads in Europe and Asia, regions that it said are accommodating to third-party applications and devices on wireless networks and unlocked handsets. Skype underscored that point in its petition to the FCC.
Not so fast But Verizon Wireless-referring to a pair of studies-replied it is a mistake to conclude European wireless service is superior to that available to consumers in the United States.
“Verizon Wireless submits that attempting to impose Carterfone requirements on U.S. commercial mobile-phone services based on what is available to consumers in Europe would be factually unsupportable and legally unsustainable, and would ignore the tremendous benefits that innovation in the U.S. wireless market has brought to wireless consumers,” Verizon Wireless told the FCC, referring to an internal study by Mark Lowenstein and a report by The American Consumer Institute.
Cellphone carriers want control over their networks, having to make business decisions on how to best allocate spectrum among voice, Internet access, video, music, texting and other services that occupy their ever-valuable bandwidth portfolios.
That is why the recent Skype worm may worry mobile operators. Skype was recently the target of a virus attack that used the company’s software to trick users into downloading the virus onto their computer. The virus did not appear to impact Skype’s service, but did impact users’ computers.
The open-access campaign begun by Skype could represent the start of a broader assault not only on networks that carriers have spent billions of dollars to build and operate, but also on the wireless business model itself.
Skype and the others see it differently. Indeed, they argue carriers are self-inflicted victims of mobile myopia, a narrow mindset that refuses to appreciate the monetary benefits of increasing traffic on cellular systems. Policymakers, fond of expounding the benefits of innovation, competition in the telecom industry, suddenly find themselves put on the spot as to whether they really mean what they say.
