Is Verizon's flip-flop on the 700MHz auction rules for real?

Verizon Wireless says it will now go along with proposed FCC rules for the 700MHz auction, but is this concession really such a big deal after all?

Verizon Wireless says it will go along with proposed Federal Communications Commission rules for the upcoming 700Mhz spectrum auction that would require the company to permit subscribers to bring any device to its network.

The company's CEO Lowell McAdam told The Wall Street Journal (registration required) in an article published Thursday that the company is now prepared to accept a set of rules proposed by FCC chairman Kevin Martin that would require winners of certain licenses in the 700MHz auction to allow any legal device to connect to networks using this spectrum.

On the surface, this looks like a pretty big deal. Verizon Wireless has the toughest policy of any major U.S. mobile operator when it comes to certifying new phones or allowing third-party applications on its phones. Many developers and even some consumers have complained that Verizon's "walled garden" is too restrictive and hurts innovation.

So for Verizon to say that it will go along with rules that would force it to allow any device on its network is a pretty big deal. The change in position also looks to be a compromise with Google, which last week said it would bid $4.6 billion in the auction if the FCC adopted several open-access rules .

AT&T made a similar policy reversal last week after Google announced its intention to bid on the spectrum.

But are AT&T and Verizon really compromising anything?

Combined, they have more influence in Washington, D.C., than any other set of technology or communications companies in the entire country. They don't need to be making conciliatory gestures that could hurt their businesses.

So why are they doing it? My guess is because the proposal that Martin has touted won't have much impact on the market anyway.

Martin's proposal, which few people have actually seen yet, only would require the "any device rule" to apply to a small sliver of the 700MHz spectrum. So if Verizon won these licenses, the requirement would be only for areas where those licenses are used.

The rest of the Verizon Wireless network would be just as closed off as it always has been. What would this mean for consumers? Well, if you're a Verizon customer, you could theoretically bring your own phone to the network, but it would only work in regions where Verizon has won and built out its network using the 700MHz licenses.

If you want to use the rest of Verizon's nationwide network, you'd still have to use a Verizon phone, because the company is not required to adhere to this rule for any other spectrum licenses that have been used to build its nationwide network. So at the end of the day, this rule by itself is completely meaningless for the average consumer, and it does nothing to promote true open access for devices.

What Google and others, like Frontline Wireless, really want to see is for the FCC to also adopt rules that would guarantee open access to wholesalers. This way, a new entrant like Frontline could buy 700MHz spectrum licenses, build a network and then lease capacity to someone like Google, which would then offer a nationwide service that would compete against Verizon and AT&T . Google would allow any device to be used through its service, which would then put pressure on Verizon and AT&T to also open up their networks.

This would be the phone companies' worst nightmare. As a result, it should come as little surprise that this requirement is not included in Martin's proposal. As anyone who follows the FCC closely could attest, Martin has never been described as an enemy of the phone companies. In fact, some might say he's their best friend, pushing through mega-mergers and supporting policy changes that favor their business interests.

In reality, the phone companies will get to protect their turf. They'll likely be the big winners in the spectrum auction slated for early next year. And average consumers will still be getting their cell phone and broadband services from the same companies that offer it to them today.

I'd love to hear your thoughts, so please let me know what you think in the discussion attached to this blog.

 

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