D6 wrapup: The access panel

Walt Mossberg and Kara Swisher grill Lowell McAdam, CEO of Verizon Wireless, and Kevin Martin, chairman of the FCC.

Rafe Needleman Former Editor at Large
Rafe Needleman reviews mobile apps and products for fun, and picks startups apart when he gets bored. He has evaluated thousands of new companies, most of which have since gone out of business.
Rafe Needleman
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Conference co-hosts Walt Mossberg (left) and Kara Swisher interview FCC Chairman Kevin Martin and Verizon Wireless CEO Lowell McAdam. Ina Fried / CNET News.com

CARLSBAD, Calif.--The D6 conference wrapped up on Thursday with a session on broadband access: Walt Mossberg and Kara Swisher interviewed Lowell McAdam, CEO of Verizon Wireless, and Kevin Martin, chairman of the FCC.

Mossberg started by putting a chart up showing how far behind the U.S. is in broadband access, and how expensive our access is. Martin said you need to look at the unique demographics of the U.S., and if you compare some states, like Massachusetts, to Korea, then they'll hold up better. Of course, providing access to less-advantaged areas is still a challenge.

So why do we pay four times as much per megabit, Mossberg asks? Again, Martin says, it's because of demographics: The average cost considers rural areas, which are more expensive to serve. On the issue of providing service to more communities, Martin wants to get away from providing subsidies to multiple carriers in rural regions, although he recognizes that limited subsidies will lead to the "carrier of last resort" being the provider in each community.

Open access
Mossberg asked about spectrum auctions and the open access provision that go with that spectrum. Will we have an open system?

Martin: "I think it's important. I've heard that from consumers and entrepreneurs. So in the most recent auction we did, we proposed that whoever wins this spectrum has to be willing to be more open." He said, "We're not completely there yet, but every carrier is embracing and talking about how they are going to be more open." He listed T-Mobile, Sprint, Google, and Clearwire as participants in this movement. And, of course, he was sitting onstage next to Verizon Wireless' CEO, which has also announced open access to its network.

"Would you have done this without Google?" Swisher asked Verizon's McAdam, referring to Google's push for open wireless access. "Yes, we launched this before Google. We've seen what open networks can do. We don't ever want to be in the business of excluding business."

Regarding the new "open Verizon" network that's been announced, McAdam said access to it will be at the same rates as it is for Verizon's own hardware, although some value-add services that Verizon handset customers get may not be available, at least not for free, for the non-Verizon customers.

McAdam said he's aiming for service penetration beyond the current 80 percent or so that Verizon Wireless enjoys. He's looking for growth up to "500 percent penetration." How is that possible? By counting access to multiple Verizon services available to each customer, perhaps home network access and other services.

"Let's talk about termination fees," Mossberg said, bringing up a pet bugaboo of his. "How do you justify charging people hundreds of dollars two years after they've bought a phone?"

"We don't do that now," McAdam said. It's been about a year since the charges have been adopted. It costs about $200 to subsidize a smartphone, he said, but "we're going to tier that down...pro-rate it over time, so it makes it easier for the customer to leave if they want."

"If they wanted to pass a law that said no more subsidies, I'd eliminate it tomorrow. None of us (the carriers) would complain."

Martin agreed that termination fees "need to decline over time," and that new customers should have a period of time for a new phone--"14 days or so, after your first bill"--during which they should be able to cancel with no nuisance fee. There are class action lawsuits already under way, he said, which are blocking the FCC from working on this issue proactively.

"This practice is now going on in other industries," he said, and implied that he would like to halt the spread of it.

Access and speed
Martin said that many of the same debates that we have on wireless networks apply to other networks. Access providers cannot limit access to content, he said, but "network management" applications can be appropriate. "I think the commission needs to address that in a constructive way, to reinforce that the consumers have unfettered access to the network without the operator getting in the way."

Mossberg repeated to McAdams an AT&T claim that it can double their wireless access speed this year, triple it next. "And you guys are stuck," Mossberg said. "Is your technology limiting you?"

"There are no miracle technologies. You have to work through it. There's a difference between peak speeds and average throughput in the field. There's a difference in how much spectrum you want to dedicate to it. And the third factor is devices. In the next three or four years, that's a series of interesting financial decisions."

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