DEMOCRATS WARNED FCC CHAIRMAN KEVIN MARTIN not to cripple the open-access stipulation on the 700 MHz spectrum up for auction early next year, following the agency chief’s failed attempts to revise the rule through a procedural maneuver shortly after Verizon Wireless lobbied on the issue. Martin’s attempts to revise open access also preceded the agency’s consideration of regulatory challenges to the ruling.
“Chairman Markey would be concerned with any ruling that weakened or diluted the effectiveness of the open-access rule,” said an aide to House telecom subcommittee Chairman Edward Markey (D-Mass.).
Martin, according to sources, tried to revise 700 MHz open-access regulatory language but ditched the idea after meeting resistance from at least two other commissioners. Sources said Martin then turned to a different policymaking vehicle-a declaratory ruling-to modify the auction’s open-access guidelines in a way that responds to concerns raised by Verizon Wireless executives at a Sept. 17 meeting with Martin, the chairman’s staff and Fred Campbell, chief of the Federal Communications Commission’s wireless bureau.
“If the effort here is to eviscerate what we managed to get into the 700 MHz [decision] with regard to Carterfone . I would look upon that with a lot of concern,” said Michael Copps, one of the two Democrats on the Republican-controlled FCC. “People fought long and hard for these things.”
Skype Ltd., Google Inc., consumer advocates, special-interest groups and others want the 1968 landmark Carterfone decision-which forbid the blocking of devices from connecting to the wireline telephone network-applied to the wireless industry. The FCC 700 MHz ruling applied that principle to both devices and applications on a third of the spectrum-the C block-up for auction in mid-January. However, there appears to be some confusion about precisely how the open-access condition would play out as a practical matter.
“The question of how this issue is resolved will impact the value of the C-block [open-access] condition,” said Harold Feld, senior VP of the Media Access Project.
An FCC spokesman declined to comment. It remains uncertain whether Martin-in the face of the backlash-will persist in pursuing 700 MHz open-access revisions before the agency reviews petitions filed just last week for reconsideration of the 700 MHz decision.
“I haven’t seen any new proposal,” said Copps at a press briefing last week.
Lobbying influence?
Key industry players are worried Martin wants to water down the open-access condition outside of the normal public-comment process. Why Martin is in such an apparent rush to alter 700 MHz open-access language is unclear.
Some industry sources said they fear Martin is caving to pressure from Verizon Wireless, which recently sued the FCC over the imposition of the open-access requirement. Verizon Wireless’ participation in the auction could help determine whether the event generates the anticipated $10 billion to $15 billion in winning bids.
Verizon Wireless declined to comment.
Verizon complained about the 700 MHz open-access rule in a Sept. 17 meeting with the FCC, which the No. 2 mobile phone carrier first vaguely summarized in a Sept. 19 lobbying disclosure filing. Then, in a Sept. 25 filing at the FCC, Verizon Wireless provided more detail about the Sept. 17 meeting. Verizon Wireless’ first lobbying notice was criticized by some as being cryptic and at odds with federal regulations governing public disclosure of meetings between FCC officials and outside parties.
Indeed, Frontline Wireless L.L.C., a Silicon Valley-backed startup anxious to enter the wireless market in a big way through the 700 MHz auction, said Verizon Wireless should be subject to sanctions-including being barred from the auction-for running afoul of lobbying disclosure guidelines.
In the second of its two lobbying filings on the Sept. 17 meeting with FCC officials, Verizon Wireless laid out its opposition to the open-access obligations. The carrier said the open-access conditions would “force C-block licensees to allow any and all lawful applications to be downloaded to any devices that licensees provide, including devices that are not configured to accommodate any and all lawful applications.”
The carrier added that the stipulations would “inhibit C-block licensees from differentially pricing a package of benefits, features and services (including customer service) made available with devices they provide, as compared to a package of services provided with non-licensee-supplied devices, and thus fail to recognize the different value propositions these different packages of services offer to customers.”
Attending the Sept. 17 meeting was Thomas Tauke, Verizon Communications’ top lobbyist, as well as Verizon Wireless’ CEO Lowell McAdam and general counsel Steven Zipperstein.
“Verizon asserts . that consumers would somehow not be able to choose a ‘Verizon package’ of services versus taking a third-party supplied device and different services. This debate is as old as the Carterfone decision itself,” Frontline told the FCC. “Verizon’s position in 2007 is not that different than Ma Bell’s in 1967: ‘Trust us. We know best what the consumer wants. Choice is confusing.’ The commission, thankfully, rejected that view in 1967 and it should do so again here. Of course, Verizon wants to use its current business model-locked-in, subsidized phones with limited capabilities-into the future. The commission rightly decided that approach was anti-consumer, anti-innovation and not in the public interest. Nothing has changed to alter that conclusion.”
Staking out positions
Interestingly, chip giant Intel Corp. staked out an open-access position that bears similarities to that of Verizon Wireless. In a meeting with FCC regulators last week, Intel officials-including the head of its WiMAX program-said the 700 MHz openaccess requirement should prohibit C-block licensees from locking out third-party devices, but permit such operators to market locked-in devices.
“The latter arrangement might enhance consumer welfare by allowing carriers to subsidize devices and foster consumer acceptance of new services and technology,” Intel stated.
One industry source said that Verizon Wireless’ open-access lobbying, at a minimum, seems to suggest the carrier has a strong interest in competing for the 22 megahertz open-access C block. Likewise, AT&T Inc.’s push for rule changes governing the 10 megahertz D block, designated for a commercial-public safety broadband offering, may suggest where its interest lies in the 700 MHz auction.
In its petition, Frontline urged, among other things, that the FCC impose a wholesale access mandate in 700 MHz spectrum and reduce the $4.6 billion and $3.1 billion reserve prices for the C and D blocks, respectively. MetroPCS Communications Inc., in its petition, did not protest reserve prices for licenses, but rather recommended they be eliminated if spectrum is re-auctioned due to bidders’ failure to meet reserve-price thresholds.
Rural telephone companies called the FCC’s strict geographic build-out requirements for some licenses unworkable, suggesting coverage compliance be based on population instead.
