You know a Congressional Hearing is good when the Chairman uses “Hotel California” lyrics to drive his point home. This was the case on Wednesday when The Subcommittee on Telecommunications and the Internet Committee on Energy and Commerce held a hearing on Wireless Innovation and Consumer Protection. As the title suggests, the official order of business was to evaluate the current state of the wireless realm. Unofficially, the hearing was all about the iPhone. In his opening comments, Chairman Edward Markey (D-MA) held the iPhone out as the embodiment of the vast potential of wireless technologies, as well as the poster child for technology encumbered by ineffective wireless systems. Later in the hearing, Chairman Markey noted that iPhones are shackled to AT&T’s network, so customers can “check out, but they can never leave.”
The pitfalls of the iPhone illustrate many of the flaws built into wireless communications systems and regulations in the United States. Consumers can’t connect any device to any wireless network, and innovators have to ask permission to put applications and products on the market. In some instances, service providers will block new, innovative applications or services so that they can place their own products on phones and devices that their consumers are forced to buy–because consumers are basically bound to both their network and their phone. This applies to applications as well as content like ringtones and video downloads.
Professor Tim Wu of Columbia Law School pointed out that the United States’ wireless communications system is highly unusual. Where the US was a world leader in computers, consumer electronics and the Internet, its wireless services leave much to be desired. Even stranger, the usual rules of personal property seem to be suspended. Roads aren’t restricted based on the type of car a driver uses, and a refrigerator works no matter which electricity provider a consumer uses, yet consumers are tethered to a single network when they purchase their phones. Professor Wu fears that we are heading towards a “spectrum based oligopoly” where a small number of wireless providers control the market.
Conversely, Steven Zipperstein, Vice President Legal and External Affairs and General Counsel of Verizon Wireless, one of the four major incumbant wireless providers, testified that the market meets consumer demand, and that there is no reason to impose regulations on networks that would allow consumers to use multiple devices on multiple networks. One of his main points of reference was a type of Blackberry that Verizon developed to meet the needs of customers who wanted to be able to use their devices in the US and abroad. He was of the view that if customers want something, the market will make sure its customers are taken care of and that their needs are met.
However, if customers are only aware of applications that have been designed by incumbent wireless providers, they won’t know to ask for them. According to Jason Devitt, the CEO and co-founder of Skydeck who spoke on behalf of frustrated innovators, Verizon offers about 30 devices as compared to the 800 or so that the European Vodaphone offers its consumers. Devitt made it clear that the technology is out there, but when innovators have to ask wireless networks’ permission to make those devices available to consumers, consumer choice is drastically reduced. He implored Congress to impose regulations that would let anyone connect any non-harmful device to any network–essentially, for “Carterfone” requirements.
Philip Verveer of Willkie Farr & Gallagher, who is a well-renowned telecommunications lawyer and was instrumental to the trust-busting that broke up the incumbent telephone companies in the 1980s testified that since the government never has as much information as industries do, it shouldn’t impose any additional regulations on wireless providers. When pressed by Rep. John Dingell (D- MI) to explain why networks shouldn’t be opened up to any devices that are technologically compatible, Verveer said there may be unforeseen consequences and providers may have to raise prices.
In addition to discussing the devices and applications used on wireless networks, one of the panelists spoke about the networks themselves. Edward Evans, Founder and CEO of Stelera Wireless, whose company won a piece of spectrum in the AWS auction, opened the door to discuss the pending 700 MHz auction. As one of the few owner of a piece of the scarce wireless spectrum (ie: he doesn’t necessarily have a desire to encourage competition), he suggested that from his point of view, placing requirements on the 700 MHz auction would limit the number of bidders. At first glance, the upcoming 700 MHz auction, has little to nothing to do with the iPhone, but they both teeter on the edge of the wireless frontier and illuminate the number of possibilities there are in the future of wireless if the right choices are made now.
In addition to all of the iPhone talk, Commissioner Tony Clark of the Public Service Commission of North Dakota on Behalf of the National Association of Regulatory Utility Commissioners testified about the benefits and drawbacks of federal wireless regulations. Chris Murray, Senior Counsel of Consumers Union focused on increasing consumer choice and reducing high termination fees. Both were also concerned about federal preemption issues that might create difficulty for local consumers when they have wireless billing or service problems.
As Ben Scott of Free Press highlighted in a video post, one of the most exceptional things about the hearing is that Chairman Markey, Rep. Chip Pickering (R-MS) and Rep. Dingell (D-MI) made it abundantly clear that they support wholesale open access and Carterfone requirements. Hopefully, the FCC was listening.