Verizon Wireless' appeal of the FCC's 700 MHz spectrum auction rules has an interesting history, of greater scope and complexity than one might perceive.
The year began with a number of calls for the FCC to review the US wireless industry's practice of subsidizing handsets through exclusive contracts and early termination fees, and the disabling of features on certain phones - that may be available elsewhere or at a certain level of service.
First, we saw a net neutrality paper from a respected academic. This was followed later in February by a petition filed with the FCC for declaratory ruling to change wireless industry practices, and to allow, among other things, the proliferation of unlocked devices - which could work on multiple carrier networks, or run any software applications (such as Skype's VoIP) so long as it didn't harm the network.
The FCC adopted its open access rules in the 700 MHz spectrum auction in late July.
Incidentally related to all this, some long time Apple fans have passed on the iPhone, which currently only operates on AT&T's network. The phone is one of the few in the industry that is not subsidized, although whether its introduction was subsidized by early adopters is an open question, and which hue and cry following a steep price cut swiftly produced an offer of refund by the company.
This is called the Early Owner Credit and could be considered the inverse of the Early Termination Fee (ETF). At the very least, it looks as if Apple made it easy to qualify and obtain (by typing in a message from one's phone).
Many prospective customers may have various reasons for not abandoning their current carrier of choice for AT&T, such as ETFs incurred for switching carriers, although consumers have spotted loopholes in navigating around such obstacles, such as trading the fees with others. Still others have explored the challenge of hacking the device.
Some customers might have several other phones or other services with a particular carrier or may simply not want to switch from their current provider - the list of reasons is probably endless, and so be it.
Several carriers that compete with AT&T have introduced new handsets with multi-network functionality, such as Sprint's introduction of a device that enhances wireless cell phone performance within buildings, which works only with Sprint phones.
The linked article (about Sprint) observes that T-Mobile recently introduced a pair of handsets that allow customers to toggle back and forth between cell and Wi-Fi networks; a number of other handsets have this ability.
Here's where things get interesting. The September 21, 2007 print edition of The Week looks at "top-of-the-line media players, and these include the new iPod touch, Microsoft's Zune - called "the most hyped 'iPod killer' to date," as well as SanDisk's Sansa Connect, which, like the other media players, allows the user to surf Wi-Fi networks.
Here is a link to the Sandisk site for device, and some information about the service.
Recall that when Apple cut the prices of its iPhone, and introduced the iPod touch, there was much criticism and comment ("that's technology"), along with observations that the phone business is a very different business from others, which business Apple was in the process of learning, quickly.
How that business may be defined, though, is up for grabs, literally, as the ordinary lines of distinction between customer equipment (phone, media player, wireless router, DVR, etc.) and network demarcation(cellular network, Wi-Fi network, municipal broadband, wireline, Wi-Max) the layers become very blurry indeed.
Apple's introduction of the iPod touch - the iPhone initially was viewed as having the potential to cannibalize iPod sales - may be less about what the company has learned about the phone business, and more about shoring up the lucrative iTunes business and exploring other means of connectivity (e.g., Wi-Fi) than anything else.
Roughly concurrent with introducing the iPod touch, Apple will begin rolling out a service to allow users to order songs over certain Wi-Fi networks. Perhaps in anticipation of this new front, another article observes that Microsoft introduced price cuts in the Zune the day before the iPod touch was announced.
Here's another point to consider: as the boundary lines between applications, content, devices, networks and services dissolve, who charges a fee for what, where and when (the SanDisk Connect device requires an open Wi-Fi network), all begin to blend, so follow the economic realities of network buildout.
Verizon has appealed the FCC's 700 MHz spectrum auction rules to the Court of Appeals for the DC Circuit, alleging the open access requirements sought by Google and a number of consumers groups are "arbitrary and capricious" unsupported by the record and law.
At issue are the rules requiring the buyer of the spectrum to allow users to bring any device to operate on the band, which means in theory that users armed with unlocked phones, laptops and more will interconnect with one another, helping to spur innovation.
The suit was filed Monday, but looks to have become widely known some time Thursday evening. In looking for some info on this turn of events, I ran across a number of comments, blogs, and articles that re-confirm what I have long suspected, namely, that many writers today were inspired, stylistically if not philosophically, by Mad Magazine.
It Takes One to Know One Dept.
In other riveting news, Qwest has re-filed their petition for forbearance, along with an expedited pleading schedule, in what is rapidly becoming one of the more dramatic of any recent FCC dockets in recent memory - with the possible exception of the 700 MHz proceeding mentioned above.
Similarities between the proceedings abound, primarily in (but not limited to) the degree of head scratching about what's driving the debate to various outcomes and their impact.
In our last episode, the FCC was due to act on several petitions for forbearance of Title II common carrier provisions filed by a number of telcos, including, as discussed on September 11, 2007, Embarq and AT&T.
The complete list may be found in the FCC news release deleting these petitions from the agenda meeting agenda, from September 10, 2007, and which list also includes Qwest.
Qwest’s petition was due to be acted on, up or down, by September 11, 2007 – the day of the FCC’s agenda meeting – or “be deemed granted,” such as that outcome in a similar petition for forbearance, previously filed by Verizon – taking effect March 19, 2006.
Qwest withdrew its petition and the carrier has the option of re-filing should they choose to do so, assuming it divines how the how the agency intends to treat such matters. The next petition due to expire under the FCC’s statutory shot clock for such petitions is AT&T's, due to be acted on by October 11, 2007.
In terms of guidance, the agency recently addressed another, similar petition for forbearance filed by an Alaska telco, which order is linked here, other recent forbearance relief granted by the FCC (collapsing the line between local and long distance), linked here, both of which are briefly referred to in FCC Commissioner Robert McDowell's statement on Qwest, which is here.
Some interesting news clips yesterday and today, from the Convergence Front.
In the UK, Vodafone announced that it plans to offer unlimited music downloads from both major labels and independents through an arrangement with Omnifone, a mobile music company based there.
Speculation continues to swirl about Apple: their move to cut the price of its 8 gig iPhone by $200 bucks, and its impact on customers, along with some creative thinking about whether component parts of unsold iPhones will be cobbled together to create the coming-soon-to-a-store-near-you iPod touch.
Meanwhile, Apple helped clarify things by announcing that the company has hit the 1 million sales mark for the iPhone, a month ahead of schedule.
Adding to the unanswered questions about whither the market heads is this piece from VonMag, on whether Internet video represents the wave of the future, given the recent marriage of You-Tube + handset; Apple and NBC apparently not quite completely in agreement about the price Apple would pay for NBC shows.
Whether that spat might introduce a new character to the haiku-short “hi, I’m a Mac” “and I’m a PC” ads, where the perpetually chagrined PC finds himself joined by an equally hapless sidekick for comic relief – as the legacy content owner – is unclear, but the possibility remains, and is fun to consider.
Speaking of content ownership, the FCC’s public meeting Tuesday, September 11, 2007, features the agency’s consideration of an extension to the program access provisions of the ’92 cable act, among other issues, including some important 911 items, in honor of 9/11 (today marks the anniversary of the WTC attacks).
Program access provisions addressed how satellite broadcast companies, including the then-fledgling DirecTV, could obtain programming produced by cable systems, which, in addition to constituting the primary competitor to Sat TV, also owned the programmings producing the shows that satellite operators wanted to show on their (competing) network.
In other agenda items, or maybe not, the FCC deleted several forbearance petitions from the agenda for today’s public meeting, which brings the total to 3 items deleted.
One of the Title II petitions is filed by Embarq, which also happens to be a feature story in the “Money” section in today’s US Today.
The offspring is outperforming the stock (stork?) of its parent, Sprint, which the CEO attributes to the company’s integration of its wireline and wireless service offerings.
Perhaps they occupy the Convergence Front with just a little more vim and vigor; although, not to be outdone (AT&T is mentioned in the US Today piece, albeit briefly), AT&T seeks to rebrand again, seeking to get just a little bit better.
By the way, AT&T also has a petition for forbearance which was pulled from today's FCC agenda.
Apple cut prices on its two month old iPhone Wednesay, and made some intriguing changes to its lineup – effectively eliminating the 4 gigabyte iPhone – while introducing a new iPod with many of the same features of the iPhone, only without the phone... maybe.
The new device, called the iPod touch, will have the browser (but not e-mail) and music storing capability of the iPhone (and iPods), and will also feature in an interesting marketing deal with Starbucks, set to go live in Seattle and New York October 2.
Starbucks has Wi-Fi access at most of its locations, through T-Mobile, and while "on location," iPod touch users will be able to automatically access iTunes through the Starbucks hotspot and download songs playing on the Starbuck's Hear Music channel, without being required to sign up for AT&T’s phone service.
There has been some speculation about whether this represents a wireless “land” grab – using Wi-Fi connectivity instead of cellular networks (such as AT&T's). When I asked at the Apple store whether I would be able to use, say, a VoIP application and make calls over a Wi-Fi network instead of using cellular, and bypass a carrier altogether, I got a big smile, some fun banter to the tune of "maybe" and "some 17 year old will probably figure it out anyway."
It’s a clever idea. Neither one of these companies, however, really needs to expand on their walled garden marketing tactics, which they have perfected to a science... maybe. Early adopters of the iPhone will get a credit of $100 to spend on more Apple products; no word as to whether this coupon is convertible to lattes.
This is brilliant: the iPology, and it shows the extent to which all the hoopla continues to publicity for the company in ways that other handset makers probably only dream about.
While most people in the US probably aren't going to take out a loan just to purchase a new phone (although using a credit card probably amounts to the same), yesterday's Wall Street Journal had an interesting piece about a woman in China doing just that. She committed a large chunk of her yearly income, and considered herself to be not nearly as "phone-crazy" as others she knew.
All this is fascinating, and bound to be more so: America's Network Magazine reports that the market for mobile video traffic and messaging is expected to skyrocket in coming years, driven by such high tech, and highly desireable, devices.
Last week, the FCC mooted a petition for forbearance filed by AT&T, which sought to extend the deregulatory status that had previously been applied by several state commissions to providers of long distance services throughout the particular state or within certain cities.
Essentially, AT&T argued that FCC rules requiring that carriers maintain separate subsidiaries between local and long distance units, or be subject to price regulations as dominant carriers, were woefully outdated by virtue of the changed competitive landscape, and the realities of marketing service bundles to consumers.
The FCC agreed, and wisely decided that continuing to apply the rules did not make a great deal of sense, and even more wisely, the agency applied this deregulatory brush broadly enough so that their rulings applied to other large carriers (Verizon and Qwest), rather than affecting only AT&T (which could have led to the dreaded regulatory condition known as “unparity”).
On this score, FCC Commissioner Robert McDowell noted in his separate statement that, while the FCC’s order dealt only with the BOCs, the smaller independent ILECs might be due for a lighter regulatory touch as well.
On the whole, the FCC’s move should allow the telcos to establish some real efficiencies in the way companies both provide and market their service bundles, as well as build and operate their networks, and as such, it represents a step forward for the carriers and their customers.
It also represents yet another step toward obliterating old notions in distinguishing between local and long distance.
This blurring of distinctions between services and markets (e.g., in region verus international), technologies and standards raises all sorts of issues going forward, many of which are definitional in nature, a facet of regulatory reality that policy makers struggle with all the time.
