Mobile operators avoid potential regulation

Updated 12:30 p.m. PDT with comment from the Open Internet Coalition.

LAS VEGAS--It seems mobile operators have dodged a regulatory bullet by promising to open up their networks on their own.

On Tuesday, Federal Communications Commission Chairman Kevin Martin said he was rewarding U.S. wireless operators for their efforts to open up their networks by not pushing for more regulation.

During a keynote address here at the CTIA tradeshow, Martin said he is going to circulate an order among the FCC commissioners to dismiss Skype's petition to apply Carterfone rules to the wireless industry. The Carterfone decision by the FCC in 1968 forced the Bell telephone monopoly to open up and allow outside devices to run on its closed network, as long as the devices didn't cause damage to the system.

Last year, Skype, which offers free software to let people make phone calls over the Internet using their computers, asked the FCC to apply these rules to the wireless industry so that applications, such as Skype's, could be used on cell phones. Most mobile operators today ban Skype on their phones, mainly because it competes directly with their own voice service.

Skype's petition was part of a growing lobbying effort to get the phone companies to open their networks. Google successfully pushed the FCC to add open access rules in the big 700MHz spectrum auction.

Mobile operators responded to the threats of more regulation and rules by voluntarily opening up their networks. In November, Verizon Wireless, which has been known to have the tightest "walled garden," did an about-face and said it would create a new service in addition to its traditional service that allows any device that meets basic certification requirements and any application to operate on its network. This means that customers will be able to buy any pre-certified device from a retailer or device maker and add any applications they want to use without restriction. In addition, customers won't be bound to a contract.

AT&T has followed suit with its own open access network offering. And T-Mobile and Sprint Nextel are also moving in this direction by working with Google in its Open Handset Alliance to help promote Google's open software platform called Android.

Dan Hesse, Sprint Nextel's CEO, who also spoke at CTIA on Tuesday morning, said the company will continue to make it easier for customers to get access to any application and to use a wide variety of devices on its network.

"The 'walled garden' networks are a thing of the past," he said. "As a charter member of Open Handset Alliance, we will explore and push wireless data even further than it's ever been pushed before."

Verizon Wireless CEO Lowell McAdam made it clear during his keynote speech here that the industry has to be proactive to keep regulation at bay. He said that if the carriers open up their networks and listen to what customers want, there will be no need for regulators to get involved.

"We must get rid of some baggage," he said. "This means getting rid of practices and policies that no longer make sense to our customers and listen even more closely to customers and respond quickly. That is how we un-invite potential regulation."

Martin said that the wireless industry's efforts so far have "not gone unnoticed."

"The requirements of open access is leading (the wireless operators) to realize the benefit of open access," he said. "And they've gone from vocal opponents of open access to vocal proponents, embracing open platforms."

Clearly the FCC's pressure has worked to hasten mobile operators' movement in this direction just as it helped push operators to allow cell phone subscribers to take their phone numbers with them when they switched providers and when operators implemented e911 location information to help emergency responders locate callers.

McAdam intimated in his talk that the industry made these changes on its own. But the reality is that Congress mandated number portability and the FCC demanded carriers adhere to e911 requirements. So while McAdam likes to pretend that he and his wireless brethren were simply listening to what customers wanted, that is a little disingenuous.

Still McAdam urged regulators to stay out of the wireless business.

"Remember what regulation has done to the wireline communications industry," he said. "We can't allow (wireless) to become a 21st century regulated phone company...To tamper with a formula that built this growth engine is extremely dangerous. Even as the economy has worsened in recent months wireless is one of few bright spots."

Consumer advocates say that the industry's promises of openness are not enough.

"It is important to recognize that despite the wireless carriers' discussion of increasing openness, the existing wireless handset marketplace for all consumers still remains closed," Markham Erickson, executive director of the Open Internet Coalition, said in a statement. "It would be a serious mistake for the FCC to dismiss Skype's Petition before we've seen whether the telcos will follow through on their promises."