Who Makes the Any Apps Any Handset Call?

The Wall Street Journal today reported that FCC Chairman Kevin Martin wants to reject a Petition for Declaratory Ruling filed by Skype that would establish a wireless Carterfone policy, i.e., that wireless carriers must allow subscribers to use any compatible handset to aceess any application, content or software.

Chairman Martin has confidence that the marketplace solutions obviate any necessary FCC intervention. Such optimism must derive in part from the apparently newfound willingness of one major wireless carrier, Verizon, to support aspects of open access. Perhaps Chairman Martin has confidence in the marketplace based on the magnanimous offer of most wireless carriers to pro-rate their early termination penalties by $5 a month.

But here’s the rub: there is a big difference between a carrier making the decision of what constitutes compatibility and network harmlessness and the neutral criteria driven decisions of a third party. The variety of handset options that attached to wired networks attests to a robust marketplace structured by a rule that simply requires a third party lab certification that the handset will not cause technical harm to the any wired network. But for wireless handset access the carrier—and not a third party--can serve as judge, jury and executioner.

I recognize that wireless carriers have invested greatly in networks that they own and operate. But these network operators have agreed to take on the responsibilities of common carriers in exchange for major, financially quantifiable benefits. It works both ways, but the wireless carriers never seem to have to acknowledge the benefits for which they qualify including access to government owned rights of ways at bargain rates. Wireless carriers may not have gotten free access to land, which their wired carrier counterparts got, but the right to install towers adjoining the interstate highways and on other public lands does not cost anything near the price of access to private land.

Sponsored researchers, including economists who ought to know better, have attempted to make the concept of market failure an oxymoron. Call it what you will, but with a market as concentrated at wireless is in the United States with generally the same terms and conditions available to subscribers, does not appear to be a market upon which we can rely on the carriers to self-regulate.

I surely do not see the wireless carriers busting a gut to offer a discount to subscribers who do not trigger a handset subsidy, or to encourage more network use with generally open access policies. If the market were so robust, would not at least one carrier consider an alternative to bundling a subsidized handset with higher monthly rates to recoup the handset subsidy? For subscribers content to continuing using an existing handset, no carrier offers a lower rate reflecting the fact that they do not have to subsidize a handset.
The carriers might want to have every subscriber equipped with the latest handset containing the latest average return per user (“ARPU”) enhancing options, but I do not see the carriers aggressively offering new third generation features.

I guess one can infer that Chairman Martin seems to think a wireless Carterfone policy imposes more unnecessary regulations. But that simply is not the case. Carterfone establishes game rules about what constitutes fair play in terms of what subscribers can do with the handsets that they own. Carterfone established the consumer right to own and attach telephones to the wireline network. Chairman Martin has endorse applying Carterfone principles to the cable industry by requiring operators to support the CableCard option in lieu of allowing carriers to tie cable television service with a compulsory lease of a set top box.

But when it comes to wireless handsets—even one that you think you own—Chairman Martin thinks it just fine for those market-driven wireless carriers to limit subscribers’ freedoms well beyond any legitimate concerns about network harm.