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10/18/2007
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Web 2.0 Summit: Verizon Wants '2-Door' Policy For 700MHz Auction

Verizon wants to be able to sell "locked" devices that are subsidized by the carrier and limited to applications and services approved by the carrier.

When it comes to the upcoming 700 MHz wireless auction, Verizon is making its position crystal clear: new systems should accept both open, "unlocked" devices and ones tied to specific carriers.

Thomas Tauke, Verizon's executive VP for public policy, restated his company's stance on the open access requirements for new wireless broadband networks Thursday. Tauke appeared on a panel on new wireless technology at the Web 2.0 Summit in San Francisco. Verizon Wireless is expected to be one of the major bidders in the upcoming auction of valuable spectrum in the 700MHz band, considered prime frequencies for advanced wireless networks.

The Verizon position has been the subject of controversy and confusion since Verizon filed suit against the FCC last month to have the rules for the auction -- in particular, the provisions calling for open access to devices and solutions over any network the auction-winner builds -- struck down as "arbitrary and capricious."

"We don't think there should be rules for the auction period," Tauke said on the panel, "but that's a philosophical disagreement. Our second point is the network should be open not just to all the devices described [in the rules], but if you've got a closed device you should also be able to use that device over the spectrum."

The FCC this summer set rules for the auction that stipulate that the winner in the 700MHz auction must allow open access to the network for any device and any application. Verizon's position essentially means that Verizon still wants to be able to sell "locked" devices that are subsidized by the carrier and limited to applications and services approved by the carrier.

"We call it the two-door concept," Tauke said after the conference session. "Door No. 1, in the rules as written, you can bring your own device and it's open and you can get on the network. Door No. 2 is for the customer who wants the kind of contract they have with Verizon today, where we provide the device and we guarantee the service quality and so on."

Verizon's rivals, including new entrants to the wireless spectrum market like Google and startup Frontline Wireless, consider this a continuation of the current carrier-dominated market for mobile phone service in the U.S.

"Their theory is that so long as 'unlocked' devices (those that can be configured to work with any network) are theoretically available to consumers through other means, the winning bidder in the auction shouldn't be required to make its devices open as well," wrote Richard Whitt, Google chief lobbyist in Washington, on his blog. "From our perspective, this view ignores the realities of the U.S. wireless market, where some 95% of handsets are sold in retail stores run by the large carriers."

Rule 27.16(b) of the FCC regulations for the auction, expected to take place in January 2008, states that licensees "shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice."

Tauke was also present at a meeting between FCC chairman Kevin Martin, staffers from the commission, and Verizon officials last month in which the auction guidelines were discussed. That meeting has been cited by Frontline Wireless as a violation of laws governing transparency in the auction process. Verizon has denied any impropriety.

Tauke acknowledged that Verizon Wireless is facing wrenching changes in the transition to more open networks and business models.

"Look, what we do is build networks, and now we have to have lots of partnerships to succeed," Tauke said. "We understand that we've got to make this change, to give our customers what they want in the future. But that's a big change for a network company, a big cultural change."

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