CTIA honchos dish on FCC regs (Q&A)

The wireless industry is revving its lobbying machine as it attempts to influence policymakers in Washington on a slew of key issues.

Much of the association's firepower is in the hands of Steve Largent, a former Congressman from Oklahoma and a Hall of Fame NFL wide receiver. Since taking over as president of CTIA in 2003, Largent has watched the industry move from 2G technology to 3G technology and now soon to 4G technology.

During his tenure as head of the association, wireless penetration has grown to more than 90 percent with almost every American now owning a cell phone. As the industry grows into a major contributor to the U.S. economy, generating billions of dollars in revenue each year, as well as creating millions of jobs, Largent and his team of lawyers and lobbyists are making sure the industry's interests are heard on Capitol Hill and within the halls of the Federal Communications Commission.

Largent and Chris Guttman-McCabe, head of regulatory affairs for CTIA, came to New York recently and sat down with CNET to discuss some of the hottest issues affecting the wireless industry today. From the FCC's plans to impose old-style telephony rules on broadband to its plans to create new Net neutrality regulations that include wireless communications and to what many are calling an impending spectrum crisis, Largent and Guttman-McCabe weighed in on the industry's position.

Below is an edited excerpt of the conversation.

[Earlier this month] FCC Chairman Julius Genachowski announced his "third way" of regulating broadband services to make sure that the FCC maintains authority over the Internet. This plan essentially changes how broadband will be regulated, applying some old telephony rules to broadband services. Much of the discussion thus far has centered around wired broadband services. Do you think the FCC's plan will affect wireless broadband?
Largent: Yes, I do think it will have an effect on us. I think there will be exceptions made for wireless, but we believe there isn't any need to apply Net neutrality regulations to wireless. There's never been a violation of Net neutrality rules by a wireless carrier, so that's never been an issue.

Why should wireless be treated differently than any other kind of broadband? Given that wireless broadband will be used in many places to replace or compete against wired broadband, shouldn't wireless broadband also be regulated the same as wireline broadband to keep them on the same footing?

Guttman-McCabe: Not necessarily. There have always been instances in communications regulation where services are regulated differently. If you look at wireline and wireless networks, they are regulated differently. Satellite is regulated differently. Cable is treated different from broadcast TV and the list goes on.

Largent: The real difference is that wireless has spectrum constraints. So it must be treated differently. I mean you look at the usage of wireless service and smartphones and there are already constraints in some markets like New York City and San Francisco. There have already been a lot of complaints in those places.

What are you hearing from the FCC? I know Chairman Genachowski has been adamant publicly about including wireless in Net neutrality regulation. Has that stance changed at all from your perspective?
Largent: We have been hearing mixed signals. At the very least I think there will be exceptions made for network management with respect to wireless. But in general it looks like wireless will be included in the reclassification from Title I to Title II and in the Net neutrality regulations.

So the CTIA doesn't think the exceptions for network management are enough?
Largent: No, it still concerns us. We don't think Net neutrality regulations should apply to anybody. And we definitely don't think they should apply to the wireless industry. So we're working to educate the commission about that.

There's been a lot of talk about a spectrum crisis. But there are new technologies that could be available soon that would allow radios to sense unused spectrum and allow devices to use that unused spectrum. Do you think it's possible for spectrum license holders to share their spectrum when it's not being used?
Largent: There are lots of solutions to this problem that we need to explore. But the bottom line is that for spectrum that is allocated for wireless services today there is not enough of it, if the explosion in wireless data use that we are seeing now continues. And I think regulating wireless or changing the classification of service to Title II will have a chilling effect on investment.

But don't you think in a way that the FCC has created the spectrum shortage by selling spectrum licenses? I mean, if someone spends a lot of money to buy spectrum, they own that spectrum even though they aren't using it all the time. The result is less spectrum available for new uses by everyone else.
Largent: I think you're asking about unwinding policies that have been around for a while now. The reason [the FCC] went down that road in the first place was because of money. A lot of politicians and policy makers in Washington would probably not want to admit to this in public, but they like the fact that these auctions have generated money for the government. Just in the last two wireless auctions the wireless industry has spent $33 billion on spectrum. That's a lot of money. They didn't spend that kind of money for fun. They spent it because they saw value in owning the spectrum.

Guttman-McCabe: The commission tried to give away spectrum at one point. They had lotteries. And then the economists came in and said that auctions were the way to go because the companies that valued it the most would pay for it. And that's how we got here.

We'd argue that the wireless industry is actually an industry that has made more efficient use of spectrum than others. Look at broadcast TV. Every TV broadcaster in a market gets 6MHz of spectrum, so in a market like Washington, D.C., where there are 17 broadcasters, that's 102MHz of spectrum. And not all of it is getting used, because they have to be careful about interfering with broadcasters in adjacent markets. So they claim to use their spectrum efficiently because they broadcast signals to thousands of users, but really a lot the spectrum allocated isn't really used at all.

I just wrote a story about Research In Motion and how their BlackBerry phones consume far fewer network resources than an iPhone or Palm Pre. Right now it doesn't cost the consumer any more to buy a phone that uses more network resources than one that uses fewer. Is this something that needs to change to help alleviate congestion and capacity issues on wireless networks?
Guttman-McCabe: Well it's not just phones, but applications too. There are some apps that use way more network resources than others. I was just talking to network engineers at a carrier the other day who said that they have two different weather apps, which use their network in very different ways. One application is constantly pinging the network for the latest weather update so when a consumer clicks on the app he sees the real-time weather. The other app waits until an update is requested and the consumer waits a couple of seconds while the data is being retrieved. So even similar applications can be written to use more or less capacity on the network.

How should wireless operators encourage people to use applications or phones that consume fewer network resources?
Guttman-McCabe: I don't know the answer to that. There's been some talk about charging the application community for data intensive applications. But I don't really know the answer to that yet.

How does CTIA feel about the use of unlicensed white-space spectrum?
Largent: Our only concern with using white-space spectrum is interference. We will encourage the use of more unlicensed spectrum, but we also think there is a need for more licensed spectrum to be made available. And if the government doesn't make more spectrum available that they can buy, wireless operators could turn to some unlicensed spectrum.

The FCC is considering a plan that would require carriers to send text messages when users are running up roaming chargesor are close to hitting their data limit. This process has been in use in the European Union since June 2009. Do you think the FCC should require this? If not why?
Guttman-McCabe: It's not as if customers don't already have a lot of information about usage at their fingertips. They can go online or access usage from their phones.

Yes, that's true. But how many people really use that? The carrier billing systems are already set up to charge customers when they exceed their limits, so why can't they just program the billing systems to send a short text message at the same time?
Guttman-McCabe: I don't know if it's technically possible or not. But it can't happen without at least some cost to a carrier.

But wireless operators have been making big profits. It seems like they can afford it.
Guttman-McCabe: Our organization represents all wireless carriers, big and small. Changing billing systems has some cost. We just don't think it's fair to make this mandatory for every carrier. We don't think the government should micromanage in this way.

Largent: I don't know how I want to say this, but I guess you could say that the carriers may not have always been very sensitive to some of these billing issues. But I don't think they are sitting around hoping customers will run up a $10,000 bill. And often if customers go over some kind of limit, many carriers will alert the customer or call them. I think in general when issues are brought to the carrier community's attention, they respond.

I guess they did eventually respond to early-termination fee issues.
Largent: Yes, early-termination feesare a good example. Carriers listened to customers and they changed their policies. I think a lot of people thought that carriers were just holding out as long as they could on early-termination fees, but I don't think that's true. Once they realized it was an issue for consumers they responded. They did it rather quickly. And they did it without there being any government regulation that had to be passed to get them to change.

But there had already been several lawsuits filed. The FCC and Congress were also putting pressure on them and threatening new regulation or laws. Don't you think their response had more to do with this pressure than anything else?
Guttman-McCabe: I wouldn't call it pressure. That's not the word I'd use.

Come on, you're a lawyer, Chris. Most people would simply call it "pressure."
Largent: Ha! Yes, I tell him that all the time. [Slaps me a high-five.] There was some public pressure applied from consumer groups. And the industry responded. But there never had to be any new regulation implemented. I think the same could happen with Net neutrality. When there has been public pressure to change something, the industry has reacted.

Carriers have had trouble keeping up with demand from smartphones. 4G networks are coming, but they won't cover the entire country right away to relieve congestion everywhere. Some carriers have been talking about metered billing. Do you think this is a good idea?
Largent: I have heard some carriers mention metered or usage-based billing. But I think ultimately the average user won't really be impacted by this. I think this is something that the high-end users who are downloading movies and other things on their phones all the time will see. But I think it is one area that is still evolving.

I know you served as a Congressman for eight years representing Oklahoma, and you ran for governor of Oklahoma and lost in 2002. Would you ever run for public office again?
Largent: No, that part of my life is done. If it were 1994 again, I'm sure I'd run again. But not now. I always thought of myself is a private-sector person. I was a reluctant candidate. I put in my time. Now it's somebody else's turn to take charge. But I am still very interested in politics.

Did you ever imagine you'd be the head of the wireless association?
Largent: No, I didn't. But I never dreamed I'd be in Congress or even in the NFL for that matter. Well, I guess I dreamed about being in the NFL, but I didn't believe it would happen. I'm not the biggest guy. But I guess that's the story of my life.

As the head of the wireless association, you have access to the latest and greatest phones, I'm sure. So what kind of phone do you use?
Largent: I have an iPhone. I could get a phone on every carrier, but I don't do that. I know it's probably not proper etiquette as the head of the industry association to show up to a meeting with a wireless CEO with a phone from someone else's network. But I just put my phone in my bag. I just think it would be a waste of money for me to have all those phones.

So does Lowell McAdam [chief executive at Verizon Wireless] give you a hard time for using an iPhone?
Largent: They all give me a hard time.