While it will be months before President-elect Barack Obama gets his administration in place and begins to roll out policy priorities, the selection of individuals focusing on high-tech agencies and their issues in the transition period suggests industry giants Verizon Wireless and AT&T Mobility could face greater scrutiny on open access, consolidation and other issues than they have the past eight years.
Indeed, two academics assigned to the Federal Communications Commission transition review – Susan Crawford and Kevin Werbach – are vocal advocates of open networks in the wireless and broadband sectors. Both are influential bloggers on cutting-edge telecom and high-tech policy issues.
After the FCC’s 700 MHz auction ended in mid-March, Crawford – a University of Michigan law professor – commented on bidding results dominated by Verizon Wireless and AT&T Mobility.
“Verizon has won spectrum it arguably didn’t even need, given its existing spectrum holdings. It retains the discretion to act as a traditional cellphone-model company – picking and choosing among applications and devices, underselling ‘open’ devices, and discriminating against traffic that undermines its business model. This isn’t great news for the Internet model of access,” Crawford stated.
Crawford nevertheless left open the possibility of progress as a result of Verizon Wireless’ acquiring a national footprint of open-access spectrum at 700 MHz for $4.7 billion. But even that outlook was laced with skepticism.
“On the other hand, openness is more popular and more talked about than it used to be. It may be that the pressure of consumer preferences makes Verizon provide a truly open Internet and truly open devices to the rest of us,” observed Crawford. (The pressure of competition won’t be doing that – AT&T and Verizon have divided the U.S. between them, and the other players in the wireless space are far behind.) The Android project, Verizon’s own words about openness, and concerns about the place of the U.S. in the international race for innovation may all push towards a more open future.”
Likewise, Werbach – assistant professor of legal studies and business ethics at The Wharton School of the University of Pennsylvania and a former FCC policymaker – reacted cautiously when news surfaced in August about Google’s plans to market applications built on the Android platform. In late September, T-Mobile USA Inc. – the No. 4 U.S. mobile phone operator – unveiled the first handset based on the Android operating system.
“Along with Google Android/Open Handset Alliance, Verizon’s open development initiative, and the success of Apple’s App Store, this is good news for wireless subscribers in the U.S. For too long we’ve been stuck with a poor set of apps and features pre-selected by the carriers,” blogged Werbach. “However, a series of walled application stores is not the same as an Internet-like open platform. Developers still need to go through the bottleneck of Apple’s and T-Mobile’s (and soon, most likely, AT&T’s and Sprint’s and Verizon’s) certification process, pricing policies, and so forth. Not to mention that we’re just talking about the U.S. here. The U.S. is a big mobile market, but less than a tenth of the global handset total . I’m pleasantly surprised how quickly the major U.S operators are backing off their policies of tightly controlling handsets and applications. The question is whether the shift will stop at walled markets, or move toward a truly open environment.”
Internet search engine goliath Google, Skype Ltd., consumer advocates and public-interest groups remain skeptical that 700 MHz open access and vows by the four national cellular carriers to embrace open network platforms are enough to open wireless pipes to a plethora of new third-party applications and devices. They prefer an across-the-board wireless open-access mandate like the one imposed on landline telephone companies since 1968. Skype, a leading software-based Internet phone company, asked the GOP-led FCC to do just that in early 2007. FCC Chairman Kevin Martin said he wanted to dismiss the Skype petition earlier this year, but the agency has yet to take final action supposedly because of differences among Republican commissioners over the wording in the draft decision.
Short codes, market clout
On a related front, the Obama administration could significantly shape the debate on whether short-code texting messaging should be regulated by the FCC. The cellphone industry opposes government intrusion into business decision-making on granting short codes for marketing campaigns. Some proponents of wireless open access and net neutrality are aggressively lobbying the FCC to establish a policy that forbids discrimination when wireless providers issue short codes.
The market clout of Verizon Wireless and AT&T Mobility – which towers over weaker rivals Sprint Nextel Corp. and T-Mobile USA Inc. – also has prompted other competitive concerns that could put the two carriers and their parent companies under the microscope in the Obama administration. Small, medium-size and rural wireless carriers have been pressing the FCC for stronger voice and data roaming rules. Rural carriers are lobbying as well for spectrum limits and for an investigation of exclusivity arrangements between major wireless providers and handset manufacturers.
Then there are special access lines, dedicated links that carry traffic from wireless base stations to mobile-switching centers and public switched telephone networks. Verizon Communications Inc. and AT&T Inc. dominate a special access market that the General Accountability Office -Congress’ watchdog arm – said is not competitive in major U.S. cities. Other wireless carriers – large and small – continue to press federal regulators to aggressively address the issue in light of Verizon’s and AT&T’s market dominance and the costly nature of special access as a component of wireless business operations.
Consolidation concerns
Increasing cellular industry consolidation could also get a thorough re-examination in the Obama administration.
Reed Hundt, overseeing international trade and economic agencies for the Obama-Biden transition team, enacted a spectrum cap during his tenure as FCC chairman in the mid-1990s. The 45-megahertz spectrum cap gave way to a 55 megahertz before being eliminated in 2003. The FCC currently utilizes a 95-megahertz “spectrum screen” in analyzing proposed mergers. The screen is an internal benchmark designed to trigger closer examination of markets involved in spectrum acquisition as a result of wireless mergers. More recently, the FCC recently ruled spectrum acquired at auctions will be counted toward the screen in the future. As such, at a minimum, Verizon Wireless and AT&T Mobility could find it more difficult to do more deals in the Obama administration. The era of mega wireless mergers could be at an end.
AT&T and Verizon executives were big bundlers of campaign contributions for Sen. John McCain’s (R-Ariz.) failed presidential campaign. AT&T executive vice president Timothy McKone raised at least $500,000 for McCain, according to Center for Responsive Politics. Verizon CEO Ivan Seidenberg generated between $50,000 and $100,000 in campaign donations for the Arizona lawmaker’s presidential run. In addition, political action committees associated with AT&T and Verizon accounted for substantial campaign contributions in this election cycle, with the two companies PACs favoring Republicans over Democrats. Democrats that will control the White House and have stronger
majorities in Congress next year are not apt to forget soon who supported them and who di
d not.
Dale Hatfield, a former telecom policy-maker who teaches at the University of Colorado and consults with industry, is another member of the Obama-Biden transition team tackling the FCC. Hatfield has been major force in bringing attention to shortcomings and challenges facing wireless 911 location accuracy. The FCC’s Martin has taken steps to improve enhanced 911 service, despite push-back from wireless carriers. The mobile-phone industry and the public-safety community have subsequently found common ground by agreeing that location accuracy should be measure at the county level for compliance purposes.
Wheeler’s influence
On the other hand, perhaps the deck is not entirely stacked against Verizon Wireless, AT&T Mobility and others in the wireless industry.
Thomas Wheeler, focusing on reviews of technology and other agencies as a member of the Obama-Biden transition projects agency review working group, had a big hand as a high-profile lobbyist in helping to persuade Congress to deregulate the cellphone and cable TV industries. While cable TV and wireless deregulation bills in 1984 and 1993, respectively, spurred tremendous growth in the two sectors, both industries have become targets of widespread consumer complaints.
What is unclear is how much influence Obama-Biden transition individuals assigned to review specific agencies, like the FCC, will have on future policy direction for wireless, telecom and other high-tech industries.
The transition team recently established separate working groups that will concentrate specifically on policy, a process in which policy proposals from the Obama campaign are further developed for official delivery in the new administration.
The group working on technology, innovation and government reform policies include two former senior aides to ex-FCC chairman Hundt and a Google official. Blair Levin, a managing director and tech analyst at Stifel, Nicolaus & Co., was chief of staff to Hundt from 1993 to 1997. Julius Genachowski, a Harvard Law School classmate of Obama’s who co-founded Rock Creek Ventures and LaunchBox Digital, was chief counsel to Hundt. Sonal Shah oversees Google.org’s global development efforts. Shah previously served as a vice president at Goldman, Sachs and Co., where she worked on the firm’s environmental policy.
Overall, the Obama-Biden transition team is highly populated with telecom policy makers – who remain political insiders in telecom-tech circles – from the Clinton-Gore years. Any of the individuals on the Obama-Biden transition could end up with top posts at the FCC, National Telecommunications and Information Administration and the office of tech czar.
Meantime, transition members are under a strict gag rule, a carry-over of the kind of discipline that characterized the Obama campaign. But that is beginning to show signs of strain as the transition process – including intensive vetting of prospective cabinet members – gives way to leaks to major media outlets.
