Editor's Letter: Open for Business

As you are reading this letter, the 700MHz spectrum auction will be in full swing. At press time, just two weeks before the auction’s start on Jan. 24, it’s unclear which companies will be the winners. It’s also unclear when we’ll know who the winners are since the auction has not set a close date. The auction will end when there are no new bids and all the spectrum blocks have been sold, leaving some experts to speculate that it could last through March.

The new spectrum will become available in Feb. 17, 2009 — the day when U.S. broadcasters switch from analog to digital signals, freeing up the 700MHz band. The auction has gotten a lot of attention because of its potential to further broadband wireless (4G) services, but also because part of it — about a third — will be "open access only." Companies licensing the upper 700MHz band C Block of spectrum must let consumers use any legal device and application. The provision emulates the Carterfone decision of the late 1960s, when the government freed consumers from having to rent phones from Ma Bell.

This is welcome news to users like me. Just a year ago the possibility seemed remote. Last spring, analyst Jack Gold of J. Gold Associates wrote an intriguing commentary about how mobile networks in the United States would need to move to open device access — meaning that they would need to give third-party devices (as opposed to carrier-sponsored devices) access to their networks.

At the time, I asked our wireless beat reporter, Tara Seals, to find out if there was some truth to this. She was dubious at the prospect, citing the mobile operators’ lack of motivation to relinquish their stranglehold on devices.

Late last year, Verizon Wireless became sufficiently motivated. It announced it will begin opening its mobile network to third-party devices and applications — at least the ones that meet certain technical standards. The announcement followed the release of the FCC auction rules and the debut of Google’s Android open-source mobile application platform. Thirty-four developers, wireless operators and handset manufacturers have come together to get Android-based products to market, calling themselves the Open Handset Alliance.

These recent movements toward open access in wireless networks are following a well worn path in the wireline world. Aside from Carterfone, there are numerous examples. Remember when 800 numbers became portable from network to network? It was in May 1993. Local numbers followed three years later with the Telecommunications Act of 1996. These two events were not the first, nor the last, in a concerted attempt to disaggregate the network from higher value content and applications in an effort to encourage competition and, as a follow on, innovation and affordable pricing.

The uncoupled structure largely materialized, but wireline carriers have sought to keep control of the revenue by aggregating and selling the bundled components, which also can be sourced separately. I suspect the same thing will happen in the wireless world. Gestures like Verizon’s are conditional, after all. As competitive 4G networks (e.g., WiMAX) come online, there will be increasing alternatives for end users, changing the imperative for wireless broadband network operators to compete apples to apples.

For continuing coverage of the auctions, visit www.phoneplusmag.com.

Khali Henderson
Group Editor