FCC: The Mobile Crackdown Cometh

A Federal Communications Commission request for comment hints at possible new rules for smartphone apps and Web-phone calling

By Olga Kharif

Internet companies that want a piece of the telecom market are getting a sympathetic ear from federal regulators.

At an Aug. 27 hearing in Washington, the Federal Communications Commission signaled that it's preparing to scrutinize the data services and software available on the most sophisticated mobile phones and whether wireless carriers are inhibiting competition. The FCC will "look more broadly at all of the elements that affect the mobile marketplace," Chairman Julius Genachowski said during the meeting.

The FCC's statement is positive news for companies including Google (GOOG), Vonage Holdings (VG), and Skype (EBAY), which want less fettered consumer access to their software and services that allow cheap or free phone calls over the Web. The regulations would also affect providers of other applications, such as mobile video. The FCC "is asking the right questions to maximize innovation across the wireless ecosystem," said Christopher Libertelli, a senior director at Skype, in a statement sent to BusinessWeek.com.

The FCC invited cell-phone software developers and companies that sell mobile-phone applications to submit comments about whether the carriers the agency regulates inhibit competition in the markets for smartphone software and related services. The commission may use the commentary to craft a new set of regulations for the wireless market, expected in 2010.

A More Hands-On FCC?

The broadened scope of the FCC's inquiry—it hadn't previously invited mobile software developers and marketplace owners to submit comments—could mean additional regulation of data services by wireless service providers such as AT&T (T) and Verizon Wireless. "The early indications are that there will be a little bit more hands-on activity at the FCC," says Ronald Gruia, a principal analyst at consultant Frost & Sullivan.

Software makers say the FCC is finally taking their complaints to heart. On July 31 the FCC began asking why Apple (AAPL) hasn't yet approved Google Voice software, used for making Internet phone calls, for inclusion in its iPhone App Store.

In August, Web-calling company Vonage said its iPhone app's approval has been delayed as well. "Apple identified one issue, stating that it is 'simple to fix,' " Vonage said in an Aug. 27 statement. "We've made the requested change and resubmitted the application for approval." Web-calling service provider Skype has complained to the FCC that U.S. service providers have been restricting its usage for months.

Ripe for Regulation

The FCC is now expected to examine a range of what Web companies say is anticompetitive behavior by AT&T, Verizon Wireless, and Sprint Nextel (S). But mobile applications and data services will likely be the center of the commission's attention. "A lot of the focus will be on the applications," says David Farber, a professor at Carnegie Mellon University and former chief technologist at the FCC.

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