The Federal Communication Commission’s announcement yesterday that it was looking to reinforce existing network neutrality regulations that would include porting wireline requirements to wireless network providers drew mixed reactions from the wireless industry.
In part the new regulations would require wireless Internet service providers to adhere to the same open network and non-discriminatory ethos currently applied to their wireline cohorts. The FCC did leave some wiggle room with wording that allowed for network management if consumer usage degraded the performance of a network, but insisted that all management be transparent. These regulations had long been simmering below the surface during the previous administration, but have taken on new impetus with Democrats controlling both the Congress and White House.
“While we are waiting to read the contents of the Notice of Proposed Rulemaking, we welcome the chairman’s interest in wireless and his commitment to pose a series of detailed questions on how the Internet openness principles should apply to mobile broadband,” said Chris Guttman-McCabe, VP of regulatory affairs for wireless industry trade association CTIA. “As a justification for the adoption of rules, the chairman suggested that one reason for concern ‘has to do with limited competition among service providers.’ This is at the core of our concerns. Unlike the other platforms that would be subject to the rules, the wireless industry is extremely competitive, extremely innovative, and extremely personal.”
While agreeing in principal to the rules set out for wired services, AT&T Inc. also pointed to the competitive nature of the wireless industry as a reason for caution.
“We are concerned … that the FCC appears ready to extend the entire array of net neutrality requirements to what is perhaps the most competitive consumer market in America, wireless services. Today, American consumers enjoy the broadest array of innovative services and devices, the highest usage levels, the lowest prices, and the most competitive choices of any wireless market in the world. The evidence of intense competition in the wireless market is overwhelming—there are 10 carriers with 4 million or more customers, and 5 with 10 million or more,” AT&T, which owns the nation’s No. 2 wireless operator AT&T Mobility, said in a statement. “We have applauded this FCC for emphasizing that its regulatory decisions would be data-driven. We would thus be very disappointed if it has already drawn a conclusion to regulate wireless services despite the absence of any compelling evidence of problems or abuse that would warrant government intervention.”
Spectrum constraints
Many also touched on the spectrum concerns such regulations could impose on the wireless segment.
“Regarding spectrum investment, the commission need only look at the results of the 700 MHz auction to understand the impact on investment,” Guttman-McCabe said. “The C-Block rules, which included an open requirement, had only two bidders, and sold for significantly less. The other licenses, which sold for significantly more, were sold with the promise that the spectrum would not be subject to the open rules. Now the commission is considering changing the rules after the auction – impacting companies’ confidence in the auction process – just as carriers are facing a brewing spectrum crisis.”
AT&T warned against such an “experiment” when it comes to broadband.
“To paraphrase a recent analyst comment, net neutrality is rooted in an assumption that broadband networks are instantly expandable, to an infinite extent, at little or no cost,” added AT&T. “To base policy assumptions on such fallacies is to conduct a risky experiment with American broadband investment, nearly all of which is private investment on which our nation depends. This is especially so with U.S. wireless networks, which are facing incredible bandwidth strains, and which require continued private investment at very high levels, and pro-active network management, to ensure service quality for 270 million customers.”
AT&T Mobility has had its reputation raked over the coals in recent months by customer complaints that its 3G network was not robust enough to handle the increased traffic generated by more capable devices, including Apple Inc.’s iPhone. (Perhaps you have heard of it?) The carrier insisted it has taken steps to address those concerns including utilizing spectrum in the 850 MHz band once reserved for its analog and TDMA networks for its 3G network as well as the planned roll out of higher-speed HSPA 7.2 technology that promises to double current network download speeds.
Wait and see
Others took a more cautious approach.
“Sprint Nextel agrees with Chairman Genachowski that consumers are well served by an open Internet. … Put simply, Sprint wants customers to be able access the applications and the Internet sites they want, when they want to,” said the nation’s No. 3 operator. “We look forward to working with the chairman and the rest of the commissioners as they work to establish these new policies in a way that meets the expectations of consumers, recognizes the limits of wireless technology and preserves the obligations of carriers to operate networks in a reasonable and responsible manner.”
A similar, if not more aggressively positive tone was conveyed by Clearwire Corp., which is majority owned by Sprint Nextel.
“Clearwire applauds the chairman’s efforts to safeguard an open Internet and his desire to strike a balance between consumers’ need for open, rich access to the Internet and appropriate network management practices,” said Mike Sievert, chief commercial officer for the wireless broadband provider.
Clearwire, and to a lesser extent Sprint Nextel, are seen to be less impacted by spectral concerns as Clearwire has a relatively small customer base and claims to have more than 120 megahertz of spectrum in the 2.5 GHz in nearly all top markets to operate its WiMAX-based mobile broadband network. Sprint Nextel, which contributed its substantial 2.5 GHz spectrum holdings to Clearwire, is also better prepared to handle increased traffic as it has roughly one-third fewer customers than its larger rivals Verizon Wireless and AT&T Mobility and is currently banking its mobile broadband future on a mobile virtual network operator agreement with Clearwire.
Clarity needed
While carrier reaction was mixed, industry observers noted the FCC’s comments appeared to bring more questions than it answered.
“The debate could be most acute on whether to extend a bolstered net neutrality regulatory framework to a wireless industry led by Verizon Wireless, AT&T Mobility, Sprint Nextel [Corp.]and T-Mobile [USA Inc.], which – despite considerable consolidation in recent years – is more competitive than the broadband space occupied by leading cable and telephone broadband providers … ,” noted Jeffrey Silva, senior policy director of telecommunications media and technology at Medley Global Advisors L.L.C. “There is also the question of bandwidth with respect to wireless carriers, which are urging policymakers to identify additional spectrum to transfer to the private sector to accommodate growing demand for wireless data/multimedia applications.
Silva added that while the FCC appeared to be clearing the way for broader access of third-party devices and applications to wireless networks, the agency had still yet to rule on a 20
07 petition from Skype Ltd. that linked its Voice over Internet Protocol service to the FCC’s 1968 Carterfone ruling that required AT&T to allow third-party devices onto its network as long as they did not interfere with the operation of the network. Skype’s service, which can run over virtually any data network including wireless, is seen by many as a competing offer to traditional voice services.
