THE MOBILE-PHONE INDUSTRY INCREASINGLY finds itself confronted with disruptive digital technologies, a phenomenon that is challenging carriers’ tight control of wireless networks and forcing policy-makers to grapple with how to promote consumer choice without unduly interfering with companies’ ability to manage their businesses.
The issue has played out most prominently in the net neutrality debate, which until recently largely centered on fears by Google Inc., Yahoo Inc. and other Internet-based companies that
cable television and Bell telephone giants will leverage their broadband duopoly to block, degrade or charge extra for outside content. The debate has now bled into the wireless space, but it remains to be seen whether Congress will sign on.
A spokesman for Sen. Byron Dorgan (D-N.D.), who’s working with Sen. Olympia Snowe (R-Maine) on net neutrality legislation, said the lawmaker has not spoken publicly on how wireless fits into the picture. But, he added, that does not mean the lawmaker is not thinking about it. Aides to Snowe and House telecom and Internet subcommittee Chairman Edward Markey (D-Mass.)-another top net neutrality proponent-could not be reached for comment.
The challenge for the wireless industry goes beyond net neutrality, however. It’s also about creative disruption itself, about how Apple Inc.’s Steve Jobs reportedly persuaded Cingular Wireless L.L.C. CEO Stan Sigman to market the iPhone to the former’s liking. Verizon Wireless, ranked right behind No. 1 Cingular, apparently was not ready to let Jobs call the shots.
Skype challenge
Last week, Voice over Internet Protocol phone company Skype asked the Federal Communications Commission to rule that consumers can load third-party Internet communications software onto cellphones and attach whatever devices they want to mobile-phone networks.
“As the wireless market has matured and wireless handsets have become an integral part of most Americans’ lives, carriers are using their considerable influence over handset design and usage to maintain control over and limit subscribers’ right to run software communications applications of their choosing,” Skype’s petition stated. “Instead of carrying the subscribers’ messages indifferent to content, carriers have exerted more and more control over the way consumers access the mobile Internet.”
Skype wants the FCC to declare that wireless carriers are subject to the agency’s 1968 Carterfone decision, which allowed two-way mobile radios and other devices to connect directly to the old AT&T monopoly network so long as no harm was caused to the telephone system. Skype also asked the FCC to launch a rulemaking to enforce the Carterfone mandate on the wireless industry.
Cellphone association CTIA fired back at Skype in a statement.
“Skype’s self-interested filing contains glaring legal flaws and a complete disregard for the vast consumer benefits provided by the competitive marketplace. Skype’s ‘recommendations’ will freeze the innovation and choice hundreds of millions of consumers enjoy today. The call for imposing monopoly-era Carterfone rules to today’s vibrant market is unmistakably the wrong number,” said Steve Largent, president of CTIA.
VoIP pioneer Jeff Pulver weighed in on his blog page.
“I think this petition should have important ramifications for all those that wish to attach devices or provide Internet-based voice and video applications over wireless networks,” said Pulver. “As things stand now, users are beholden to the wireless gatekeepers who unilaterally determine what devices, what functions, what applications may attach or ride or be accessed from the wireless networks. . I ask our friends who care about innovation in the wireless space, edge devices and Internet applications to take this petition seriously, shine a spotlight on the issue and help move the FCC in the right direction.”
The Skype filing followed on the heels of Columbia University law Professor Timothy Wu’s harsh criticism of the cellphone industry over carrier control of content and features and his call for wireless net neutrality.
Skype longs for wireless
Skype, which offers free Internet calling software, has been working for years to enter the wireless space. Indeed, the company has signed agreements with several overseas carriers. Internet auction company eBay Inc. purchased Skype in 2005 for $2.6 billion.
“Part of what we’re doing is telling our story,” said Christopher Libertelli, senior director for government and regulatory affairs at Skype. Libertelli said he plans to meet with CTIA officials in March to discuss the Skype proposal.
Libertelli, who was a top adviser to former FCC chairman Michael Powell, said Skype’s efforts to engage U.S. cellular carriers the past two years were largely rebuffed. He said mobile-phone carriers have legitimate concerns about wanting to be masters of their networks-wireless pipes of limited bandwidth-but he said that should not be used as an excuse for anti-consumer behavior.
While Libertelli is familiar with Wu’s work, he said Skype’s proposal does not necessarily fit within the Columbia University law professor’s argument.
“This is more about blocking than net neutrality,” said Libertelli.
Another little wrinkle in the cellular business model equation is last November’s Library of Congress ruling that exempts mobile-phone locking software from U.S. copyright law. The new policy makes it easier for consumers to take their cellphones with them when they switch wireless carriers, while not forbidding the carrier practice of handset-locking itself. Whether the rule will impact the dominant industry practices of bundling service and heavily subsidized phones remains to be seen. With new features and functionalities being introduced on a regular basis, cellular subscribers in the process of changing carriers may prefer upgrading their handsets to keeping old ones.
