The FCC's Wireless Redial

Are the commission's new rules for an auction of a huge swath of airwaves enough to jump-start U.S. wireless innovation?

by Olga Kharif

Kevin Martin, chairman of the Federal Communications Commission, compared it to Goldilocks and the Three Bears; he was referring to compromises made by the FCC as it set ground rules for an auction of a huge, valuable swath of airwaves for providing mobile-phone services. In the children's fairy tale, Martin joked during a July 31 hearing, every bear has something to complain about. "I only hope we are closer" to pleasing all sides, he said.

Not likely. While a group that includes Web-search giant Google (GOOG) got much of what it asked for, there's cause for grumbling by the nation's largest mobile-phone companies, including AT&T (T) and Verizon Wireless (VZ, VOD). Companies hoping to loosen the hold of entrenched players can point to such rules as the provision that earmarks certain airwaves where carriers would be barred from placing restrictions on what devices and services can be used on their networks. "The FCC has embraced important principles of openness," Richard Whitt, Google's Washington (D.C.) telecom and media counsel, wrote in a blog.

Tough Broadband Love

The aim of the new rules is to encourage new service providers to enter the wireless industry and jump-start innovation in wireless, where the U.S. has long lagged behind Asia and Europe. Martin likened the new rules to a landmark 1968 FCC ruling that for the first time enabled any equipment—not just gear supplied by phone companies—to be connected to phone lines. The decision paved the way for an explosion of new phone services, the proliferation of devices such as modems, and, ultimately, led to the rise of the Internet. "This auction provides a rare chance to promote [similar] innovation in wireless," Martin said.

Indeed, any regulations that wrest control of the customer experience from existing stalwarts such as Sprint Nextel (S) and Deutsche Telekom's (DT) T-Mobile could lead to new services, content, and payment plans (see BusinessWeek.com, 7/25/07, "The New Wireless Playing Field").