Unlocking the Wireless Broadband Gates

The Federal Communications Commission (FCC) is working out the rules for what could be the most important radio spectrum auction for years to come. At stake is the right to use spectrum in the coveted 700 MHz bands, which are characterized by the ability to travel long distances and go through the walls of buildings.

The spectrum was previously used by TV stations that are now moving to digital distribution, and a variety of interested industry players -- primarily cellular service companies -- want to get their hands on it.

Open Broadband On the Way?

The biggest news to consumers is the possibility that the auction rules may require the winner to provide a portion of the spectrum for open use, leading to the possibility of competition for broadband Internet access, which is currently dominated by traditional cable and telecommunications carriers.

At the same time, consumers may be able to buy "unlocked" handset devices that would let them access features and services from a variety of businesses.

Currently, most handsets in the U.S. are locked by the carriers that provide them. The most recent example is the Apple (Nasdaq: AAPL) iPhone, which is limited to AT&T's (NYSE: T) service network. The draft of the new rules for the spectrum may let businesses and manufacturers provide a variety of innovative devices and services that might otherwise be stifled by a lack of competition.

The Public Interest Spectrum Coalition (PISC), for instance, advocates that a provider could deliver broadband Internet over the spectrum, allowing consumers more widely available Internet access and freedom of choice of service providers. PISC wants the FCC to require winning bidders to provide half of the spectrum to third parties at wholesale rates.

Industry insiders are expecting FCC Chairman Kevin Martin to circulate a draft of the proposed auction rules to four other FCC commissioners this week, with a public version possibly appearing by the end of July.

Complicated Scenario

"This is a political rat's nest," Bill Hughes, principal analyst for In-Stat, told LinuxInsider.

"It has to do with business cases, but all of the public pronouncements are put in the context of what's fair. All I can say is, fair was an issue that was forgotten long ago when you get right down to it. Some companies are going to do better with different licensing options, and some are going to win and some are going to lose," he said.

Wireless communications companies have invested a lot of money in their own business plans, Hughes noted, and they don't want to risk the status quo. In addition, the concept of what's best for consumers comes into play when one considers the billions of dollars the spectrum sale will bring to the U.S. government. Open access rules would likely drive down the bidding, reducing the cash infusion.

Google's Take

A public statement from Google (Nasdaq: GOOG) appeared on the company's Public Policy Blog, posted by Richard Whitt, who is the company's Washington telecom and media counsel.

"One of our top public policy objectives is to expand the Internet's reach to more Americans," Whitt noted.

"In part, that means creating new competition to challenge the existing broadband access duopoly (between cable and phone companies) by paving the way for consumers to gain meaningful alternatives via advanced wireless services," he said.

Google sent an open letter to the FCC, encouraging the FCC to require winning bidders to adhere to enforceable rules that would require the adoption of four types of open platforms, specifically open applications that would let consumers download and use any software, content or services they desire; open handheld communications devices; open services for third-party reseller usage; and the ability for Internet service providers to interconnect with and use the spectrum.

"Not only are new entrants more likely to embrace an ethos of openness, but additional forms of competition will emerge from Web-based entities, such as software applications providers, content providers, handset makers and ISPs," Whitt wrote. "And consumers ultimately will come out ahead in that rich and vibrant broadband environment."

For winning bidders, who may end up spending billions of dollars, the risk is buying a large portion of spectrum and then facing a wide host of competitors operating essentially right next door, unencumbered by the investment it took to build an existing wireless infrastructure and the investment in the new spectrum.

The opening up of the 700 MHz spectrum may be a boon to consumers who want freedom of choice, but it may also come at the cost of shaking up the existing wireless and Internet industry.

Satisfaction Hard to Find

"My personal opinion is that the whole debate here is going to be impossible for people to really understand the underlying motives of all the people [businesses and organizations] who have strong opinions," Hughes noted.

"The notion of fairness really depends on your point of view and the business plan that you have and people not wanting to change their business plans based upon changes in political events," he said. "You're never going to come up with a solution that's going to satisfy everyone."