House Democrats Urge Open Access Rules for 700 MHz
House Democratic lawmakers strongly endorsed a unreleased plan at the Federal Communications Commission (FCC) urging open access rules for the impending 700 MHz auction. Two hours into a heated and sometimes technical debate Wednesday in the House Telecom Subcommittee, Commerce Committee Chairman John Dingell, D-Mich., asked if he could use his new Apple iPhone on networks other than AT&T. “Why not allow this choice for consumers?” Dingell asked.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
That could be done, technically speaking, but the policy changes implicit in allowing that option would play havoc with the industry business model, officials said. “It is a mistake to intervene in the produce and service design of an industry that is workably competitive,” said Philip Verveer, a Willkie Farr & Gallagher partner who worked on the AT&T divestiture. The industry, thriving and competitive, needs no intervention, unlike the phone monopoly at hand when the 1968 Carterfone decision came, he said. That ruling opened the way for consumers to attach their own phones to networks.
Senate Republicans dislike FCC Chairman Kevin Martin’s proposal, too, said several Hill sources. The rule change could cut into auction revenue for the U.S. Treasury, they said. Verizon Wireless General Counsel Steve Zipperstein would not comment on his company’s bidding strategy, but said some analysts already project that factors such as open access “could depress the price” of spectrum. He condemned Martin’s plan as an attempt to “rig” the auction, which he said won’t help consumers and poses a big risk to the market.
Verveer’s claims that the wireless industry is competitive seemed not to persuade Dingell or Telecom Subcommittee Chairman Ed Markey of Massachusetts. “It has become increasingly clear, however, that wireless carriers are exerting far too much control over the features, functions and applications that wireless gadget makers” can offer, Markey said, noting that, like Dingell, he owns an iPhone: “I believe this is stultifying innovation and unquestionably diminishes consumer choice.”
Markey has met several times with Martin; the staffs met again Wednesday post-hearing to discuss the proposed rules, according to Hill sources. Markey still hopes to get Martin to draft rules to make auction winners serve as wholesalers, which would allow other providers access, an idea abhorrent to incumbents. According to sources, Martin does not buy the idea, but does back an open-access approach enabling new applications on networks.
The Martin band plan is an April proposal that failed to win majority commission support due to a split over how to divide the band. The band plan would create two 11 MHz blocks in the upper 700 MHz band to be auctioned on a regional basis. Those blocks could be combined into a nationwide system. The chairman put forth his band plan and his open-access idea to strengthen his chance for large geographic licenses and a high-capacity spectrum block, said Paul Gallant in a Stanford Group research note.
In response to rural carriers’ concerns, Democratic FCC Commissioners Michael Copps and Jonathan Adelstein and GOP Commissioner Robert McDowell urged when debating the rules that the license territories be sliced smaller. Though Martin disagreed, the plan he is circulating is much the same. The plan under discussion posits a nationwide 10 MHz E-block license, with the winning bidder required to work with public safety on an interoperable public safety network.
Several House Republicans said the proposed FCC plan would thwart competition, pressing Martin to spurn such a rule. The iPhone will set a new industry standard and its “early success is an indication that the wireless market is working,” said Telecom Subcommittee Ranking Member Fred Upton of Michigan. Imposing Carterfone-like rules or other “unnecessary” controls would “punish” consumers by depriving them of benefits flowing from new services and devices, he said. “We have to tread carefully here.”
Markey doesn’t want to “dictate” what business does but rather create for carriers and consumers both to win, he said. Noting that the subcommittee worked with the FCC in the past to craft rules opening up the wireless market, Markey called the current moment “historic.” Now the FCC has another chance to improve the market by tailoring the 700 MHz auction to require carriers to let customers move phones from one network to another and to mandate open networks for applications.
The wireless “network neutrality” policy divided mainly along party lines, with Republicans warning that regulatory interference could cut the spectrum’s value. Rep. Chip Pickering, R-Miss., said open access isn’t the same as net neutrality. He endorsed the principle, adding that the same thing has been done in the energy industry with success.
A defensive wireless industry told lawmakers that open access could harm consumers by eliminating the convention of handset subsidies. Widespread proliferation of applications could drain batteries, introduce viruses and imperil consumer privacy, officials said. “Hard-wiring a business plan in advance is not a sensible approach,” Zipperstein said in an oblique reference to Frontline’s business plan, which includes open access and a public-private partnership with public safety.