FCC Adopts 700 MHz Rules Requiring Some Open Access

Martin has consistently said that offering a large block of spectrum would entice a new entrant to offer wireless broadband. The 4G Coalition consisting of DBS and Silicon Valley players applauded the decision. “By combining a large 22 MHz spectrum block with the ability to aggregate a national footprint, today’s order paves the way for the possibility of facilities-based competition,” said the coalition.

The FCC’s action imposes “a meaningful, though not perfect, open access environment on a significant portion of the 700 MHz spectrum,” said FCC Commissioner Jonathan Adelstein.

The FCC’s meeting started nearly four hours late and once it began the commission first held an event resembling a hearing, with testimony from the police and fire chiefs from Arlington County, Va. on the importance of public safety interoperability and from a wireless entrepreneur about the difficulties wireless entrepreneurs face when dealing with mobile-phone carriers.

Open access advocates said the FCC rules are a start but don’t accomplish enough. The rules were about “political protection, not sound auction policy,” said Harold Feld, Media Access Project senior vice president. The open access requirement does nothing for the quarter billion cellphone subscribers, said Chris Murray, Consumers Union senior counsel. And reserve prices could scare off big bidders that don’t want conditions on the spectrum, Feld said. The FCC decision failed to promote broadband competition through creation of a third pipe, said Markham Erickson, Open Internet Coalition executive director. The FCC decision didn’t deal with the broadband duopoly of telcos and cable companies in broadband that is a reason the United States has fallen behind other countries in broadband deployment, said Ben Scott, Washington policy director of Free Press. “It’s a tremendous missed opportunity that will repercussions on the broadband market for years to come,” said Gigi Sohn, Public Knowledge president.

The decision may mark a turning point for Silicon Valley’s involvement in political matters, Sohn said. The support from Silicon Valley and others who filed comments shows that Americans “won’t stand for a lack of freedom to bring device from one network to another,” Feld said. Google looks forward to working with policy advocates, said Richard Whitt, Google’s Washington telecom and media counsel. Google was pleased with the FCC’s decision to adopt some Carterfone principles, he said.

The high-tech industry indicated it was pleased. “The Commission should be congratulated for taking this important step toward a grand compromise on spectrum access,” said ITAA President Phil Bond. “Now we have a chance to see what the innovative applications developers and device manufacturers can do with an open, competitive network.” he said.

A wholesale requirement would have ensured opportunities for “entrepreneurs who are not yet born and cannot participate in the upcoming auction,” said Jason Devitt, co- founder and CEO of SkyDeck, when he testified at the meeting. Devitt praised the “no lock no block” version of open access, which the commission did adopt. The walled-garden approach so prevalent in the wireless industry is the reason that, while in the wired world YouTube has gone from an idea to hosting a presidential debate in two years, the most significant innovation in wireless is ring tones, said Devitt. Google had pledged to bid $4.6 billion if the FCC imposed no lock, no block, wholesale and interconnection.

AT&T praised the FCC for not giving in on wholesale and interconnection, commending the FCC for adopting this approach “rather than stacking the deck in Google’s favor, which would limit competing bids, and effectively force wireless carriers to alter their competitive business models to Google’s liking.”

McDowell objected to the open-access provisions. I am disappointed that the majority didn’t try to work with industry to forge a consensus solution rather than rushing to regulate without thinking through possible unintended consequences,” he said. “Pinning our hopes on a single national ‘white knight’ to offer only one new pipe is risky at best.”

Commissioner Deborah Tate supported open access, but with reservations. Tate wanted the open access debate to occur at a different time and not as part of the 700 MHz debate she said. “I hope today’s item will not result in unexpected negative consequences, such as consumers seeing less of such innovations or losing access to the many packages of services they enjoy today,” she said.

The FCC set reserve prices on each of the blocks. These reserve prices are based on the winning bids in the Advanced Wireless Services auction, said Martin. McDowell didn’t like the reserve prices. “Reserve prices have the effect of skewing the auction and hindering the efficient allocation of spectrum,” he said. “The problem with setting reserve prices is that it puts the Commission, rather than the market, in the precarious position of identifying the right value for the spectrum.”

The reserve price for the open access C-block is $4.6 billion and $1.3 billion for the nationwide public-private partnership band, said Fred Campbell, chief of the FCC’s Wireless Bureau. If $4.6 billion is not bid for C-block where open access is being required, then that block will be reauctioned without the open access requirements. The reserve bid plus other reserve benchmarks on the other blocks is micromanagement that “virtually hands industry the pen to write the auction rules,” said Commissioner Michael Copps.

When the spectrum is auctioned early next year, the FCC will institute blind bidding so information about the auction will not be made available as it progresses. The FCC has used blind, or anonymous, bidding before, said Campbell, but he could not say when. In the AWS auction, the FCC set out a formula for determining whether blind bidding would be used but the threshold was not met. The Public Interest Spectrum Coalition said that due to the lack of blind bidding in the AWS auction “the major cable and wireless companies were able to drive off satellite TV providers and other new entrants. Anonymous bidding provides some hope for a new entrant despite the failure to adopt wholesale open access.”

The 700 MHz band is also being reconfigured to make 2 MHz more available for auction and to move the public safety band due to concerns of Canadian cross-border interference.

Public-Private Partnership

The FCC is creating a single 10 MHz license to be used by a public-private partnership along with 10 MHz of the spectrum designated for public safety to create a nationwide interoperable public safety network. Before the D-block winner gets its license, it will be required to enter into an FCC-approved network-sharing agreement with the designated public safety licensee, said Derek Poarch, chief of the FCC’s Public Safety and Homeland Security Bureau. Public safety’s technical requirement will be met, but the sector won’t have a veto over the network built by the commercial operator, Poarch said.

The commercial operator will be allowed to offer whatever services it wants in the D-block but must offer at least one handset to public safety with built-in satellite capability, Poarch said. During emergencies public safety will have priority access to the D-block, he said.

The intricacies of the public-private partnership will require “strong and ongoing oversight” by the FCC, Copps said. He has long called for the government to build a nationwide interoperable wireless broadband network for public safety, but he said he realizes that isn’t going to happen.

Calling the FCC vote a “historic” step for consumers, House Telecom Subcommittee Chairman Ed Markey, D-Mass., offered high praise. The proposed rules are a start toward untangling the “stranglehold wireless companies have exerted over a consumer’s ability to use any device and application,” Markey said. The rules will open the door to more competition, he said, and also “make progress toward achieving a nationwide, broadband-capable network for first responders.” But Markey was disappointed the commission didn’t impose a wholesaling requirement, and he urged the FCC to “seek additional opportunities for achieving this goal in the near term.”

The FCC vote also drew praise from House Commerce Committee Chairman John Dingell, D-Mich., who said the decision would give consumers more choices. “Let us not overlook the impact of the FCC’s actions on the DTV transition,” Dingell said. “The FCC, in issuing these rules in a timely fashion, has taken another small step in the right direction” of ensuring a smooth DTV transition,” he said.

Commerce Committee Ranking Member Joe Barton, R-Tex., praised FCC Commissioner Robert McDowell for “sticking to free-market principles and dissenting from Chairman Martin’s wireless network neutrality mandate.” Barton said “unencumbered auctions” have raised billions of dollars, but the FCC’s decision to “rig” the 700 MHz action will “rob taxpayers.” Barton drew on a phrase from Dingell to make his point that the auction didn’t need interference: “It is as necessary as ‘feathers on a fish.'”