Wireless Net Neutrality Debate Gains Steam at FCC, on Hill

Wu argues that despite competition in wireless carriers are “aggressively controlling product design and innovation in the equipment and application markets, to the detriment of consumers.” Controls go beyond anything in the wireline world, Wu said: “In the wired world, their policies would, in some cases, be considered simply misguided, and in other cases be considered outrageous and perhaps illegal.” Wireless carriers should have to live under the same net neutrality rules as telecom carriers offering DSL cable companies with broadband offerings, he said.

“Wireless net neutrality issues have been lurking in the background for months and the Wu paper helps to crystallize some of that debate in a way that I think may not previously have happened,” a regulatory attorney said: “The net neutrality debate has been driven by concerns of anticompetitive behavior by cable and wireline because they have dominant positions in the marketplace. Wireless has always been a competitive market. There has always been concern about being swept into an anti-dominant player regulatory regime when the wireless market is fully competitive.”

“There are worries” among carriers, a 2nd attorney said: “At the same time there’s something floating around the 8th floor on broadband wireless [reclassification]. There may be fears that that kind of separation could push [wireless broadband] into being covered by net neutrality or other principles… Anything new or different has the potential to be threatening.”

In his paper, Wu focuses on carriers’ tight controls over devices allowed to operate on networks, controls he likens to “the AT&T of the 1950s.” Wu wants a wireless version of the 1968 FCC Carterfone decree, letting users connect their own gear to the public phone system. “The basic and highly successful Carterfone rules in the wired world allow any consumer to attach any safe device to his or her phone line through a standardized jack,” Wu said: “The same rule for wireless networks would liberate device innovation in the wireless world, stimulate the development of new applications and free equipment designers to make the best phones possible.”

Wireless carriers use their controls to limit product design and decide which features will be available on wireless networks, Wu said: “By controlling entry, carriers are in a position to exercise strong control over the design of mobile equipment. They have used that power to force equipment developers to omit or cripple many consumer-friendly features. Carriers have also forced manufacturers to include technologies, like ‘walled garden’ Internet access, that neither equipment developers nor consumers want.” In the past, carriers have blocked everything from call timers on cellphones to Wi-Fi and Bluetooth technology, he said.

CTIA Gen. Counsel Michael Altschul said carriers see little new in the Wu arguments. “There are so many flaws in Wu’s analysis that by raising the issue it demonstrates why there’s no need or purpose for having net neutrality rules for wireless,” he told us: “Everything in his paper is premised on the industry being an oligopoly. There’s nothing that you would expect to find in an oligopoly market that characterizes wireless,” he said.

Wireless markets are highly competitive, Altschul said. “We have new entries,” he said. “We have the cable venture buying spectrum and building out new national networks. We have Leap and MetroPCS buying spectrum and expanding their markets… We have rapid technological innovation, all the new alphabet soup of wireless services and technologies that are being deployed. We have a lot of investment… And of course you have falling prices, consumers putting more and more minutes on wireless networks.”

Progress & Freedom Foundation’s Scott Wallsten took issue with Wu, too. “Wu writes as if this were a new issue,” he said: “Just like the broader debate over network neutrality, in reality this is another version of an extensively debated topic: when should a network operator be forced to allow users particular types of access to its network? Wu ignores the history of this type of regulation.”

Wallsten called wireless overwhelmingly competitive. He also said some of Wu’s assumptions are faulty. For example, Wu asks why a consumer can’t just buy a phone and use it on any network. “Part of the answer is that ‘You can,'” Wallsten said: “As he notes, GSM networks (T-Mobile and AT&T in the U.S.) will accept any GSM-compatible phone that is built to operate on the correct frequency. Amazon has a page explaining how to use unlocked GSM phones and seems to offer 163 different phones for this purpose.”

Wireless net neutrality has gotten more attention since the AT&T-BellSouth merger order was approved by the FCC late last year. As one merger condition, AT&T agreed to extend net neutrality protections to fixed WiMAX (CD Jan 2 p1), which some sources said opens the door to protections for other varieties of wireless.