Is the FCC drawing a new regulatory map?

On the surface, there isn’t much to suggest that this newly Democratic-led FCC will make any radical regulatory changes in the wireless industry. There is a loud camp cheering for new FCC Chairman Julius Genachowski to take a more heavy-handed approach in wireless affairs, but popular opinion inside the Beltway paints a different picture.
While the President Obama appointee is digging into wireless matters such as competition, innovation and third-party application control perhaps more swiftly (and publicly) than his predecessor, the Federal Communications Commission is only asking questions at this point. Questions are cheap. Policymaking is an entirely different matter that must measure political fallout against results. And more important: the nation is still digging out of the greatest economic challenge since the Great Depression.
‘It’s the economic recovery, stupid’
The economic dark cloud hanging over everything is magnified in Washington, D.C. The extent to which things will change is up for debate. Regardless, economic recovery and jobs will be the political driving force for years to come.
Jeffrey Silva, senior policy director of telecommunications, media and technology at Medley Global Advisors writes: “The Genachowski FCC appears to have embraced White House Chief of Staff Rahm Emanuel’s ‘You-never-want-a-serious-crisis-to-go-to-waste’philosophy insofar as policymaking in the telecom, media and tech sectors and in the management of the agency itself. Genachowski, who continues to assemble a cerebral, blue-chip team of players from the public and private sectors, appears to be laying the foundation for a bold FCC starkly different in style and substance than the one run by his controversial Republican predecessor, Kevin Martin.”
Martin’s FCC was roundly labeled as “secretive, dysfunctional, too friendly to telecom titans … unnecessarily hostile to cable TV companies and highly unpredictable with respect to large, regional and small wireless carriers.”
Genachowski has, while still playing his cards close to the vest, launched inquiries regarded by some as provocative and a shift away from the market-forces-led philosophy of the previous Republican-controlled FCC. Silva argues it’s still “too early to conclude the newly configured agency is headed toward an uninhibited regulatory binge. Indeed, with the fragile economy attempting a recovery and telecom/tech sectors expected to play key roles, it is possible Genachowski will seek a third way as he assesses the costs and benefits of telecom policymaking as the Great Recession begins to show signs of receding.”
Even while the FCC’s recent inquiries have surely rattled some nerves, it would be a tough stretch to suggest Genachowski has a pre-determined goal of radical regulation.
Here’s what Genachowski wrote in a separate statement when the FCC announced its plans to look into wireless innovation and investment: “With respect to mobile, it is hard to think of a sector of the communications marketplace that better illustrates the potential of innovation coupled with investment. Over the past decade and a half, cellphones have gone from something accessible to a relatively small segment of the population – just 33.8 million users in 1995 – to an indispensable device carried by over 270 million Americans today. With the advent of extraordinary and innovative new devices like the iPhone, Pre, and Blackberry, we are on the verge of a second transformation: from mobile voice to mobile broadband, from handheld devices that can do just one thing to smart mobile mini-computers that can do almost anything at all.”
CTIA’s role
In some ways, his take on the wireless industry’s state of affairs mirrors that of CTIA, the industry’s greatest cheerleader.
“The chairman has made it clear that decisions will be factually based,” CTIA’s VP of public affairs John Walls told RCR Wireless News. “We think, given that premise, that we have just an exceptionally well-grounded story to tell and we absolutely look forward to it.”
CTIA plans to use this opportunity to support the belief that the U.S. wireless industry is among the most competitive and innovative. It will also argue for the government’s help in areas such as spectrum allocation, tower siting and taxes.
Walls said the last two spectrum auctions took around eight years to move from an idea to actual purchase, and still some of that spectrum has yet to be cleared for use. CTIA doesn’t want another eight years to pass before another auction takes place. “This is about long-term planning and being bold and ambitious,” Walls said.
“I would hope that any decision that’s made with an economic regard would be based on the facts,” he added. “While a lot of industries are finding themselves grasping for air, it’s full-speed ahead for the (wireless) industry and the contributions it’s making to the country.”
Jobs in the wireless industry pay 50% more on average than other production-oriented jobs around the country, Walls said, and mobile is tied to 2.4 million jobs in the United States.
“This is really a great American success story and we would hope that the government would recognize that and adopt policies or philosophies that would enhance that value,” he added. “So many of our issues are nonpartisan. We all want the same thing. We want American consumers to receive the greatest value for wireless communication.”
Finding the middle ground
How the FCC comes down on these issues during Genachowski’s five-year term will have lasting impacts on the mobile space. Genachowski will probably seek a middle ground on many issues, particularly the most controversial.
Democrats regulate more by nature and the Genachowski-led FCC will probably follow up some of its inquiries with new policy proposals, but you can be sure an Obama-appointee is going to be very careful not to stunt growth in an industry with so much economic prosperity at its fingertips.
Moreover, even if the FCC decided to browbeat the four nationwide carriers, there’s only so much damage it could inflict. Spectrum, arguably the greatest asset in all of wireless, can’t be manufacturered and most of the good spectrum is already taken.
Genachowski may score some political points by taking on issues that carry less of a political burden if they backfire. He may do away with handset exclusivity deals, for example, but it’s worth noting that debate took shelter at the FCC under Martin, in large part due to the iPhone.
The iPhone equation
Since Apple Inc.’s iPhone was first released, there has been rich commentary from users and non-users about everything it represents: exclusive deals with carriers, a monopoly on mobile application sales, network issues and control over apps on the device.
It appeared to come to a head earlier this summer when Apple blocked the Google Voice application from its App Store. Many bloggers went into full-tilt mode and some even ditched their iPhones and AT&T over the matter.
Critics were heard loud and clear at the FCC. Within days, the agency sent questions to Apple, AT&T and Google to seek clarity on the matter. When all three of power players responded to the FCC, it illustrated how difficult (and bold) it would be if the FCC were to dictate changes based on this single issue. Sure, other applications have been denied from or restricted on Apple’s mobile platform, but Apple’s explanation didn’t exactly defy logic: Google Voice would replicate existing features on the iPhone.
Going further, even if the FCC does venture into an issue on the margins like third-party application control, it would be at least 12 to 18 months before any new rules are implemented. Juxtaposing that against the current pace of innovation in the industry, it’s more likely Apple will reverse its decision or the issue will be muted thanks to new technology or an even better, more capa
ble device or network. Writer Matt Kapko can be reached at matt@mat
tkapko.com.