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8/3/2007
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FCC's Open Access Rules Fall Short Of A Wireless Revolution

Even if a more open network gets built, businesses likely wouldn't feel the impact for years.

It was a cause for celebration in Silicon Valley, consternation among the Big Four U.S. wireless carriers, and hope among cell phone consumers. The U.S. Federal Communications Commission set new rules last week for the upcoming auction of valuable spectrum in the 700-MHz band, including a requirement that winning bidders for some of the spectrum let any device or application work over the networks.

For businesses deploying mobile devices and applications, this spectrum auction is less than the wireless broadband revolution they might've hoped for. The FCC moves aren't likely to shake up whom they do business with or what they can do on their phones--at least not in the short term, and perhaps not for many years.

FCC's Kevin Martin opens up a bit. --Photo by Dominic Bracco

FCC's Kevin Martin opens up a bit.

Photo by Dominic Bracco
A true nationwide wireless broadband network would let the United States keep up with countries in Western Europe and East Asia that are rapidly building advanced wireless networks. But any networks using the new spectrum--which can carry signals over long distances and through thick walls, making it ideal for wireless broadband systems--won't be built until 2010 at the earliest.

It remains to be seen who will capture the airwaves in the bidding, which is expected to bring the U.S. Treasury some $10 billion to $15 billion, and what they'll do with it. A 10-MHz block will be sold to a nonprofit to create a public-safety network that could be shared at low-usage times with commercial operators. A little more than one-third of the available 62 MHz is subject to the open-access provision.

Even that won't have open access unless a deep-pocketed buyer steps up. The FCC set what art auctioneers call a "reserve price": If no bidder puts up at least $4.6 billion for the 22-MHz block of commercial airwaves, the auction will be restaged without the access requirement. Google had committed to bid if four conditions for "openness" were required. Only two were, but Dow Jones quoted Google's Chris Sacca, who's in charge of the company's wireless efforts, as saying it's still "very interested" in the auction.

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Even if the stars align for new wireless competition--a new entrant wins the open spectrum, has the money to build a wireless broadband network, and makes it work as promised with choice of device and application--the average enterprise IT manager is likely to stick with his existing carrier for some time: It's proven, it's probably cheaper at first than switching, and it's a lot more prepackaged than buying unlocked devices and hooking them up to various provider networks.

"I'd recommend no change in strategy" for companies deploying or planning mobile-technology roll-outs, says Craig Mathias, a wireless analyst who heads the Farpoint Group. "I look at this as the beginning of the transition rather than the transition itself."

THE OLIGOPOLY COULD SURVIVE
If indeed a more open network gets built using the new spectrum, one of the biggest benefits for business customers would be the pressure it would put on established carriers to offer more hardware options. Critics of the wireless-carrier oligopoly consider carriers a barrier to innovation by their limits on devices and applications that can be used on the network. Device maker HTC, for example, "makes 10 to 15 different phone models a year--that's tremendous innovation," says Rob Veitch, senior director of business development at Sybase iAnywhere, a provider of mobile business-computing software. "But through a restrictive carrier channel, they may make only one model available." Veitch says businesses need more advanced hardware to deploy increasingly sophisticated business applications.

A new bidder might not even get enough "open" spectrum to serve businesses, when you compare that 22 MHz to what the wireless carriers already own. "You'll be able to download some high-bandwidth apps," says Gartner analyst Tole Hart, "but you won't be able to service a lot of customers that way because of the limitations of the amount of bandwidth."

What's more, because the auction rules don't require spectrum buyers to resell airwaves at wholesale prices to other providers--a condition Google wanted--there's no guarantee the new wireless industry will look much different than the oligopoly of today. "This auction might not end up being the stimulus to a third pipe, the right to attach devices, to run applications, and to encourage the innovation and entrepreneurship that we all hope for," said Michael Copps, a Democratic FCC commissioner who supported wholesale reselling.

The wireless revolution will have to wait a few years. As Republican commissioner Deborah Taylor Tate put it, "The entrepreneur-inventor who will make all this happen is probably just in the eighth grade."

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Our Take: Open Networks Still Have A Lot To Prove

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