from: NY Times [1]

August 1, 2007
F.C.C. Hands Google a Partial Victory

By JOHN MARKOFF and MATT RICHTEL
SAN FRANCISCO, July 31 — The Federal Communications Commission moved cautiously Tuesday toward creating a more open national wireless broadband network, handing a partial victory to Google, which was pushing for more competition in cellphone services.

The agency approved rules for an auction of broadcast spectrum that its chairman, Kevin J. Martin, said would promote new consumer services. The rules will let customers use any phone and software they want on networks using about one-third of the spectrum to be auctioned.

The F.C.C. did not approve a provision that would have required the winner of the auction to sell access to its network on a wholesale basis to other companies. Google favored the rule as a way to hasten competition and innovation in the cellphone industry, a market it is considering.

While the language of the ruling has not been made public, it appears that any company that buys the new spectrum will have to leave it open to devices it does not approve or control. If, for instance, Verizon were to buy spectrum, consumers would have to pay Verizon for access to its network but they could use devices of their own choosing on it.

At present, the carriers decide what devices are used on their networks and therefore control many of the services and software available to consumers. The carriers contend this lets them control the quality of the customer’s experience.

The ruling does not affect the existing spectrum, controlled by major companies like Verizon Wireless. But it appears to signal a shift in how policy makers and, in turn, companies, will approach access to and control of future wireless networks.

The ruling did not go far enough for some consumer activist groups, but even those groups applauded parts of it.

In recent weeks, Google and other technology interests pressed the commission to create an open-access wireless network — in contrast to today’s closed cellular networks — and to permit owners of the spectrum to sell portions of it wholesale to other companies. That would loosen the carriers’ grip on service offerings and might also open the door to new entrants like Google.

The 700-megahertz wireless band has been referred to as the “last beachfront property” in the radio spectrum. It is being made available for new digital wireless services, including emergency communications, by television broadcasters moving to digital television transmission in February 2009. By law, the auction must start no later than Jan. 28, 2008. It is expected to raise $15 billion or more for the federal government.

Google called the decision an indication of progress at the F.C.C. The agency adopted two of the four openness standards that Google proposed this year, including open access to software applications and devices.

“The Federal Communications Commission made real, if incomplete, progress for consumers this afternoon,” said Richard Whitt, Google’s Washington telecommunications and media counsel.

In trying to influence the commission debate, Google had said it would bid at least $4.6 billion if the F.C.C. approved all its proposed rules. However, Mr. Whitt said a Google bid was still not out of the question.

Google’s efforts also drew attention to the debate over the pace of innovation in the wireless market.

Speaking before the F.C.C. on Tuesday, Jason Devitt, co-founder and chief executive of Skydeck, a Silicon Valley wireless content firm, said the cellular phone industry had failed to innovate. “Ten years and we have ring tones,” he said.

The F.C.C. tried to strike a balance between the interest groups, Mr. Martin said in a telephone interview: “The commission needs to decide what is in the public interest, not what one company advocates.”

Public interest groups and Silicon Valley technologists said they were disappointed with the ruling. Public interest groups said the $4.6 billion minimum auction price set by the F.C.C. might discourage bidders. The rules say that if the reserve auction price is not met, the open-access provisions adopted by the F.C.C. will be dropped in later bidding.

The meeting, which was scheduled to begin at 10 a.m., was delayed into the afternoon because of last-minute negotiations over the open-access provision, an industry executive said. The limited open-access agreement resulted from a compromise between Mr. Martin, a Republican, and two Democratic commissioners, Michael J. Copps and Jonathan S. Adelstein, who favored the wholesale rule that Google proposed.

Congressional leaders applauded the action.“This gives Google a chance to step up to the plate and it can create a revolution in the telecommunications market,” said Edward J. Markey of Massachusetts, the ranking Democrat on the House Telecommunications and Internet subcommittee.

The nation’s largest telecommunications carriers were not that vocal in response to Tuesday’s decision. “We don’t really have anything to say about this,” said Jeffrey Nelson, a spokesman for Verizon Wireless.

AT&T’s wireless unit said the FCC “appears to have struck a reasonable balance between the competing interests debating the Google Plan.”

AT&T also said the ruling appears to force Google or other would-be competitors to bid on spectrum, rather than to have the opportunity to lease it from other carriers. “We commend the FCC for adopting this approach rather than stacking the deck in Google’s favor, which would limit competing bids and effectively force wireless carriers to alter their competitive business models to Google’s liking,” AT&T said.

The major carriers have not committed to bid at the auction, which means they may express any discontent by refusing to participate.

Other potential new entrants said they were disappointed by some of the rules and by the minimum price set by the F.C.C.

“As a practical matter, the F.C.C. has laid down the gauntlet to the technology industry and said the following: ‘If you want a wireless market that serves your purposes, you’re going to have to pay for it, and you’re going to have to pay a lot,” said Reed Hundt, a former F.C.C. chairman who has founded Frontline Wireless, a national digital wireless network.

Mr. Hundt said he would continue to look for ways to bid in the auctions.

Public interest groups were also qualified in their endorsement of the commission decision. “Consumers should be pleased with part of the F.C.C.’s decision today,” said Gigi B. Sohn, president and co-founder of Public Knowledge, an advocacy and education organization that focuses on intellectual property issues.

Read: FCC Statement on Spectrum [2]