Editor’s Note: This article is an excerpt from RCR Wireless News’ May Special Edition, “Enabling the Mobile Revolution: Mobile Chips, Devices and Accessories.” The 80-page special edition is available here.
The wireless industry has had a dynamic relationship with regulators since its inception nearly 30 years ago. First looked upon as a way to bring competition to the telecommunications space, and thus largely left unregulated for many years, the robust growth of the industry to its current status has come with increased mandates from federal, state and local governments.
Most of these regulations have been tied to the spectrum the federal government has funneled to the commercial wireless space, licenses that typically have had buildout requirements attached.
The most recent administration change also saw new leadership at the FCC and an ambitious agenda to reshape the telecommunications space. That ambition is being directed by current FCC Chairman Julius Genachowski, who has laid out an ambitious plan of reforming the current telecommunications landscape that is susceptible to change following any of the elections that keep this place hopping.
Broadband plans = spectrum
One of the most controversial initiatives undertaken by the FCC is the National Broadband Plan, which is looking to expand the availability of broadband services across the country. While many in the wireless industry were disappointed that the initial recommendations of the NBP did not include a greater emphasis on wireless services, the FCC’s audacious plan to unlock up to 300 megahertz of new spectrum over the next five years and 500 megahertz over the next 10 years has drawn considerable interest.
The plan recently received backing by President Barak Obama, who issued a memorandum to free up 500 megahertz of spectrum in the next 10 years, directing the National Telecommunications and Information Administration and the Federal Communications Commission to free up federal and nonfederal spectrum.
The president asked that NTIA and the FCC identify by Oct. 1 any spectrum that can be freed up within five years for exclusive or shared use and asked that the agencies create an inventory of spectrum to help identify what spectrum could be freed up, as well as create a timeline for such spectrum.
Along with freeing up 500 megahertz of spectrum, the president would like to change the rules so government and commercial spectrum holders can realize greater and earlier benefits from giving up their spectrum; value the spectrum the most, which means auctioning most of the spectrum, but setting some aside for unlicensed use and sharing spectrum when possible. Finally, the memorandum proposes using auction proceeds to aid public safety, reduce the federal deficit and create jobs in industries like smart grids.
Ruth Milkman, bureau chief for the FCC’s Wireless Telecommunications Bureau, agreed that the spectrum target is an ambitious one and that the commission likely will face challenges in freeing up much of that spectrum, which the commission hopes to wrestle from the hands of commercial television broadcasters. To do so, the FCC is looking at changes to the law that requires proceeds from spectrum auctions be deposited into the national treasury so that it may use some of the proceeds to reimburse broadcasters for giving up their precious spectrum assets.
“We have to have a goal and we know that the 300 megahertz goal is ambitious, but we think it’s achievable,” Milkman said.
Milkman added that the commission is comfortable with the current route in which spectrum is auctioned to interested telecom providers, a route that has seen nearly $35 billion in proceeds deposited into the national treasury during the past five years.
Spectrum freedom
Spectrum remains one of the hottest regulatory topics in the wireless industry and in Washington. The industry is always clamoring for more, and regulators are inclined to auction it, having received tens of billions of dollars for the U.S. Treasury. However, finding spectrum to sell to the wireless industry has started to become more challenging, with legislators increasingly looking at freeing up underused broadcast spectrum currently controlled by television giants.
There is also debate as to whether the FCC should move forward with unleashing more unlicensed spectrum for use by anyone with an antenna. This idea has been proffered by a number of electronic manufacturers and high-tech firms as a way to further bolster the FCC’s broadband initiatives.
Washington observers note the issue is contentious.
“Tensions could also arise between proponents of licensed spectrum and unlicensed wireless advocates (Google, Microsoft, Dell, HP, Intel), though it appears the administration (which could generate tens of billions of dollars by auctioning licensed spectrum) is firmly intent on directing most of prospective reclaimed spectrum to licensed wireless operators,” noted Jeffrey Silva, senior policy director for telecommunications, media and technology at Medley Global Advisors L.L.C. “Such a policy outcome would bode well for tower companies and wireless infrastructure companies.”
Broadband regulations
The FCC last month also voted 3-2 to proceed with the Notice of Inquiry to develop a framework for regulating broadband services. The Democratic majority voted in favor of the NOI. Initial comments are due July 15 and reply comments are due Aug. 12. The NOI asks for comments on whether the FCC should continue to regulate broadband under Title 1 regulations; whether the agency should pursue Title 2 authority; a light regulatory touch often referred to as the “third way”; or any other ideas of how to regulate the Internet.
The NOI comes as the result of the U.S. Court of Appeals’ ruling in April that the FCC lacked the authority to demand that Internet service providers like Comcast Corp., have to offer equal access to anyone who wants to connect to their network. The case dates back to 2007, when Comcast started blocking some peer-to-peer networking applications that it said consumed too much network bandwidth. Some opponents believed Comcast was degrading traffic from BitTorrent because it competed against Comcast’s on-demand video offering. Two net-neutrality proponents, Public Knowledge and Free Press, complained to the FCC that the ISP shouldn’t be able to decide which applications should run on the network. Comcast later complied with the FCC recommendations but pursued the case in court.
The wireless industry has been vocal in claiming the FCC should not get involved in regulating mobile broadband services, noting that the wireless industry has done a good job policing itself when it comes to network management.
Differences afoot between small, large operators
One change that does appear to be brewing is a possible crack in the traditionally strong regulatory front pursued by the industry’s nationwide operators and spearheaded by wireless trade association CTIA. A number of people interviewed for this article noted that the growing market share difference between the nation’s No. 1 and No. 2 operators, Verizon Wireless and AT&T Mobility, and the No. 3 and No. 4 operators, Sprint Nextel Corp. and T-Mobile USA Inc., has started to cause a rift among carriers.
One analyst noted that Sprint Nextel and T-Mobile USA have recently begun to side more with the interest of rural operators, which for years have struggled to compete against the industry’s nationwide operators.
“The wireless industry is still united on most issues,” explained Charles McKee, VP for state and federal regulatory issues at Sprint Nextel. “But, there are also some areas of tension that need to be acknowledged. … Trade associations have the difficult job of trying to
reconcile amongst its members, but our goal is to promote our agenda that is beneficial to the wireless industry and not to the ILEC industry.”
Nearly all agreed that while there is competition on the commercial side of the wireless industry, they questioned the same level of competition when it comes to the behind-the-scenes aspects, including special access and certain legacy government programs. Those targeted for having an advantage in these regards included both large companies like Verizon Communications Inc. and AT&T Inc., as well as regional and rural wireline players.
“When it comes to issues like special access we have to look hard to find competition in that space,” said Kathleen O’Brien Ham, VP of Federal Regulatory Affairs for T-Mobile USA.
Telecom Act redux?
One topic no one seemed willing to broach was the possibility of a rewrite of the 1996 Telecom Act, which has been mentioned by some lawmakers. While there was acknowledgement that the telecommunications, and more specifically the mobile industry, is vastly different today than it was 14 years ago, the thought of trying to revamp that overarching document would be a tall order.
Sprint Nextel’s McKee noted that any talk of a rewrite is fraught with peril, but acknowledged that the telecommunications industry today is vastly different from the one in 1996 when the act was passed.
“The Telecom Act did a lot to change the industry and in a very positive way,” McKee said. “But there is no way we could have predicted how much the industry has changed and where we are now. Rewriting the Telecom Act? Talk about a huge undertaking.”
RCR Wireless News Editor Tracy Ford contributed to this report.
