How the FCC's misguided efforts stifle carrier innovation

The Federal Communications Commission’s attempts to regulate the wireless industry, from everything from net neutrality to handset exclusivity to early-termination fees, remind me of the phrase: “The road to hell is paved with good intentions.”
I blame Apple. When Apple first introduced the iPhone, it decided to go exclusive with one carrier. That wasn’t new; when the Motorola Razor first launched, it was exclusively available at Cingular Wireless (now AT&T) and no one seemed to mind. But upon fanboys learning that the iPhone would only operate on the AT&T network, people went into a rage and the good people at the FCC and in Congress noticed. Smaller wireless operators also complained that they were being hampered by handset exclusivity deals at large carriers, and (let’s face it) it’s true. No matter how innovative Leap Wireless is, it lacks the marketing muscle and subscriber base of an AT&T Mobility or Verizon Wireless, thus it doesn’t hold the same lure to handset makers that the nation’s largest providers do. Since the introduction of the iPhone, VZW and AT&T have battled tooth and nail for customers, and inadvertently punched a few other carriers in the process. Imagine had Apple chosen to build the iPhone for Sprint Nextel Corp., whose network likely would have withstood the pressure of data-hungry subscribers much better. Sprint Nextel would be a strong third contender in the race for wireless customers and no one would be worrying that AT&T and VZW have too much power.
But that didn’t happen and in the time since, companies like Google have complained that carriers should have to open their networks to everyone that wants to access it, a move that the nation’s carriers resent because they a) have to manage their networks; b) are worried the move will give them less power, and c) don’t like being told what to do. (Nobody likes being told what to do.) So the FCC acquiesced to Google and forced a block of 700 MHz spectrum to be open to all devices. But when Google chose to introduce its own smart device, it picked one chipset designed to run optimally on one carrier’s network. In fact, few devices are dual-mode CDMA/GSM even though the chips have been on the market for years.
Google also chose to follow traditional carrier/manufacturer pricing and subsidize the handset, and charge a high-termination fee if NexusOne users return the device too soon. Now the FCC is asking the nation’s top operators and Google why their early termination fees are so high.
In the meantime, Apple has introduced yet another device, which despite the claim that it is sold unlocked, is optimized to run on AT&T Mobility’s network.
In all three instances – handset exclusivity deals, net neutrality and early termination fees – the FCC has control over only one part of the equation – the carrier that leases wireless spectrum. The government can’t force Apple to put a CDMA chip into its devices. It can’t force Amazon or any of the other companies that make e-books put a chip into the device that optimizes it to run on every carrier’s network. Further, even if it could and it did, it would only increase the cost of those devices – which is a disservice to the customer that the FCC is sworn to protect.
Most of the innovation that has come to the market recently has been on the device side and the application side, the two pieces of the equation the FCC cannot control. If the government wants to spark more innovation and more investment, it shouldn’t tie up the third piece of the equation – the carrier – just because it can.