In The Crosshairs
With a wideranging inquiry under way, the FCC is examining competition, business practices and proposed new net neutrality rules, all of which signal changes ahead.
After just six months on the job, FCC Chairman Julius Genachowski has taken the wireless industry to task on everything from VoIP apps to early termination fees. His first inquiry came less than a month and a half into his tenure when he asked Apple to explain why it rejected the Google Voice app. Since then, he’s taken a decidedly hands-on approach, much to the chagrin of the industry at large.
“I would now characterize the relationship between the FCC chairman and the wireless industry as adversarial,” says analyst Mike Jude of Frost & Sullivan’s Stratecast division.
He argues that the ever-increasing speeds and growing consumer adoption of wireless broadband have made the service look more like wireline broadband in the eyes of regulators. Wireline broadband, often provided by near-monopolies, has historically been more heavily regulated than wireless broadband.
Together with the installment of the Obama administration, which views broadband access as an essential economic driver, the stage was set to bring wireless before the FCC. “All this came together for the wireless carriers and set them on a path that took them in the crosshairs of the current administration,” Jude says.
Perhaps the largest source of the industry’s angst is the FCC’s worryingly proactive approach to net neutrality. The FCC’s proposed rules could force carriers to run bandwidth-intensive applications that could take down their networks. The FCC’s promise that it would permit service providers “to engage in reasonable network management” seems to have done little to assuage the industry’s concerns.
Although CTIA doesn’t admit any bad blood between itself and the FCC, plenty in the industry see Genachowski’s meddling in net neutrality as unwanted and intrusive. One of the more vocal critics of the effort is Andrew Seybold, a well-known consultant on the wireless industry and long-time contributor to Wireless Week. Seybold doesn’t mince words when it comes to Genachowski’s net neutrality push.
WIRED VS. WIRELESS
“He’s listening more to the Internet community than the wireless community. There’s a belief among some of the commissioners that they are the same and need to be treated the same, and many in the wireless industry totally disagree with that,” he says. “I think the biggest problem we have right now is that they do not understand the real differences between the wired world and the wireless world.”
Furthermore, Seybold says he is not reassured by Genachowski’s repeated promises to include “reasonable network management” in any potential net neutrality legislation. “Operators need to have the ability to manage their networks,” he says. “If you don’t have the ability to manage your bandwidth, then the data hogs win. In wireless, that could be a disaster.”
Seybold and other industry professionals predict that carriers will begin launching tiered pricing plans in response to net neutrality legislation. Though such pricing plans could help carriers minimize the impact of net neutrality legislation, a good deal of concern remains over the impact of bandwidth-hogging apps.
“I think the FCC just doesn’t get the fact that there will always be capacity restrains in wireless no matter how much spectrum there is,” Seybold says. “Genachowski says we need more spectrum, on the other hand, net neutrality – the two things don’t jive with each other. We need to manage the spectrum we have as well.”
For its part, the FCC argues that the Internet evolved with standards of openness and needs to stay that way for the benefit of consumers. “It was conceived as a tool whose user manual would be free and available to all. But new network management practices and technologies challenge this original understanding,” said Genachowski in a Sept. 21 speech before the Brookings Institute. “Today, broadband providers have the technical ability to change how the Internet works for millions of users – with profound consequences for those users and content, application and service providers around the world.”
It’s safe to say that the wireless industry is concerned about keeping its networks from crashing. But some form of net neutrality regulation is no doubt inevitable given the Notice of Proposed Rulemaking (NPRM) the commission adopted in October, kicking off a public comment period.
Republican Commissioner Robert McDowell only agreed in part to the proposed rules. “I do not share the majority’s view that the Internet is showing breaks and cracks, nor do I believe that the government is the best tool to fix it,” he said.
McDowell also said he didn’t think the FCC had the legal authority to regulate Internet network management as proposed under the draft rules, and called the Internet the “greatest deregulatory success story of all time.”
Commissioner Meredith Attwell Baker, the five-member commission’s other Republican, also disagreed with some parts of the draft rules. Like McDowell, Baker suggested the commission was going after a problem that wasn’t there. “…as a threshold matter, I am not convinced that there is a sufficient record to establish that a problem exists that should be addressed by commission rules,” she said.
The FCC seems determined to press ahead with net neutrality regulation and shows no signs of relenting on its scrutiny of the wireless industry, so at this point, the most CTIA can hope to accomplish is getting its message across.
CTIA President and CEO Steve Largent said the industry group would “continue to talk to policymakers about benefits of regulatory restraint in this area.” Largent declined to compare Genachowski to his predecessors and voiced some optimism about the chairman’s vow to run a fact-based commission and understanding “that the U.S. must remain the global leader in wireless broadband.”
“On particular policy issues, we have taken the chairman at his word – and so far, he’s stuck by it,” he said. For instance, Genachowski pulled through on a promise to impose time limits on the approval process for tower siting permits.
While the limits were more expansive than CTIA had petitioned for, they still established timeframes of 90 days for collocations and 150 days for all other tower siting applications reviewed by state and local governments. CTIA had petitioned the FCC to establish a timeframe of 45 days for collocation and 75 days for other facilities.
Largent said CTIA was “grateful” for the commission’s focus on freeing up spectrum. “We are thankful for the focus on this issue from the chairman, commissioners and the broadband team led by Blair Levin,” he said. “Spectrum is our industry’s backbone and we have to get more so we can continue to feed the ‘virtual cycle.’”
Genachowski has suggested that a portion of television broadcasters’ airwaves be reallocated to the wireless industry, a strategy met with a less-than-enthusiastic response from the broadcasting industry. His proposal came just weeks after he promised to address an imminent spectrum crisis in a keynote address at the October CTIA Wireless IT & Entertainment show in San Diego.
Largent admits that CTIA has been kept busy by the commission’s various inquiries into the wireless industry. In-Stat analyst Allen Nogee expects that the association will continue to answer persistent questioning from the FCC for some time to come, but argues the trend is both a function of the wireless industry’s growing role in people’s everyday lives as it is a reflection of the current administration’s political leanings.
“As [wireless adoption] grew and people rely more on it, sometimes regulation is needed to keep things fair,” he says. “Still, Genachowski is more of a watchdog for the consumer than other chairmen would have been.”
So far, no actual net neutrality regulations have been announced. And for all the FCC’s inquiries into the wireless industry’s business practices, no actual consequences have resulted yet. Still, with at least three more years ahead for Genachowski’s reign, there’s little doubt that major changes are in store for the way the wireless industry does business.
|2009: A BUSY YEAR FOR THE FCC|
March 3, 2009: President Barack Obama formally nominates technology executive Julius Genachowski to head the FCC after months of speculation on his appointment. Genachowski had been chief counsel to former FCC Chairman Reed Hundt, who headed the commission from 1993 to 1997.
June 19, 2009: The FCC appears to be stepping up its scrutiny of the wireless industry even before the appointment of Genachowski. Acting FCC Chairman Michael Copps launches a probe into handset exclusivity contracts between carriers and manufacturers, such as AT&T’s exclusive deal with Apple to carry the iPhone.
June 25, 2009: Genachowski’s nomination is confirmed by the Senate. Acting Chairman Copps said he looked forward to working with Genachowski “in tenacious pursuit of a communications policy that truly puts the public interest first.”
July 2009: Genachowski gets down to business, appointing his personal staff and advisors over the month of July as well as naming chief personnel for the FCC’s Wireless Telecommunications Bureau. Toward the end of the month, he took steps to work on the country’s national broadband plan with a public list of topics slated for discussion at commission workshops.
Aug. 1, 2009: The FCC launches an inquiry into Apple’s supposed rejection of the Google Voice app for its iPhone. Apple later claims it did not ban the application, but had merely not approved it yet. Google later claims that assertion was false. By October, AT&T reverses its stance on VoIP apps like Skype over its 3G network “in response to customer request
Aug. 27, 2009: The FCC opens a wideranging inquiry into the state of competition in the wireless industry which examines a bevy of business practices from early termination fees (ETFs) to handset exclusivity deals. In a statement, Genachowski said the notice of inquiry was “an important step in the process of laying a solid foundation for predictable, factbased competition policy in the wireless sector…”
Sept. 10, 2009: FCC extends comment deadline for inquiry into wireless competition to Sept. 30 and the reply comment deadline to Oct. 15 to “help ensure development of a more complete record.”
Sept. 21, 2009: Genachowski lays out his plans for net neutrality in a speech before the Brookings Institute, prompting a good deal of alarm in the wireless industry. Most concerning was his proposal to stop Internet access providers from discriminating against particular Internet content or applications while allowing for “reasonable” network management. Wireless operators feared this sort of regulation could affect their ability to stop datahogging applications from overloading their networks.
Oct. 7, 2009: In a keynote address at the CTIA Wireless IT & Entertainment show in San Diego, Genachowski promises to address the looming spectrum crisis and streamline the tower siting process. He does not back down from his commitment to preserving an “open Internet” through net neutrality regulations.
Oct. 9, 2009: The FCC launches a probe into Google Voice’s practice of restricting outbound calls to some phone numbers such as adult chat services and conference calls. Blocking such calls helps lower the cost of the free service, which Google argues was outside the purview of common-carrier telephone rules.
Oct. 13, 2009: Comments are due for the FCC’s notice of inquiry into monthly service bills. BillShrink.com filed comments reporting that the average consumer overspends about $300 dollars on wireless service every year.
Oct. 22, 2009: The FCC asks for public input on draft net neutrality rules that would prevent Internet providers from blocking content. Though the vote on the Notice of Proposed Rulemaking was unanimous, Commissioners Robert McDowell and Meredith Baker dissented in part on concerns that potential regulation could stifle innovation and put unnecessary restrictions on wireless networks. Comments are due Jan. 14.
Nov. 18, 2009: Genachowski makes good on his earlier promise to impose time limits on the approval process for tower siting permits. The FCC established timeframes of 90 days for collocations and 150 days for all other tower siting applications reviewed by state and local governments. CTIA had petitioned the FCC to establish a timeframe of 45 days for collocation and 75 days for other facilities.
Dec. 2, 2009: Genachowski says he’ll make more spectrum available to the wireless industry and calls for reform of the Universal Service Fund (USF). He suggests that the FCC was preparing to shake up legacy spectrum allocations and acknowledges that skyrocketing data use was placing “unsustainable strains” on operators’ wireless networks. Genachowski also said reform of the $7 billion USF was necessary to expand broadband into rural and underserved mark
Dec. 4, 2009: The FCC asks Verizon Wireless to explain why it doubled its early termination fees to $350 and address reports that the carrier was charging for minimal, inadvertent use of Verizon’s mobile Web service. Verizon later defended its ETFs, saying the fees are tied to higher costs associated with advanced devices. The carrier also said it does not charge users when the browser is launched and opens to the Mobile Web home page.