The Google-Block and Silicon Valley WarfareWednesday, July 11, 2007
Wow, I had hardly hit the send key on yesterday’s Commentary when I received an email regarding Google’s latest ex parte letter to the FCC detailing yet another approach to the division of the 700-MHz spectrum coming up for auction. This was quickly followed by a statement from Steve Largent, President of the CTIA, a statement by Verizon and a number of articles in the press.
Google has proposed the following for all commercial licensees seeking to provide a CMRS (Commercial Mobile Radio Services)-type commercial service using 700-MHz spectrum:
· Open Applications. Must not block, impair, impede or otherwise unreasonably limit the ability of end users to download and use software applications.
· Open Devices. Must allow end users to use lawful handsets in conjunction with CMRS.
· Open Services. Must provide wholesale service to requesting resellers, based on reasonably nondiscriminatory commercial terms and conditions.
· Open Networks. Networks in the upper 700-MHz spectrum must open their networks to interconnect with any third party, such as an ISP or CLEC, at any reasonable point in the wireless network.
Google refers to the band plan presented by Frontline and the Coalition for 4G, which looks like this:
Google also implied it was more than interested in bidding for the spectrum, and says incumbents are likely to outbid new entrants for large spectrum blocks. Its research now shows that a 22-MHz spectrum block, by itself, will probably not be sufficient for a new market entry, meaning a newcomer to wireless that bid on and won 22 MHz of spectrum in a wide area of the country would not have enough spectrum to become a competitor to the existing wireless operators. One of our readers submitted a great email dissecting Google’s letter and in it is he says, “To me, this suggests that they are looking at consolidating the entire upper 700-MHz band, including the relocated guard band A-Block that is presently controlled by Access Spectrum and Pegasus Communications (which would be stuck right in the middle of the two commercial blocks).” The writer is an attorney practicing in the Washington, D.C. area who has had a lot of experience with the FCC and whose comments regarding the Google ex parte letter are, I believe, right on the money.
He ends his email to me with this summation: “So I think the take away here is probably this. Google doesn’t appear to be content to sit on the sidelines and it could become a significant factor in the 700-MHz auction and shaping rules for the upper 700-MHz band. If Google and the Coalition for 4G in America have their way, competition for the remaining licenses in the Lower 700-MHz band (with the auction likely to start in the late Fall) could be very fierce.” And I agree.
Meanwhile, Verizon Wireless, the CTIA and several others have weighed in with their own views of the 700-MHz situation. According to the press release dated July 11, 2007, Verizon Wireless Vice President and General Council, Steve Zipperstein, told the House Committee on Energy and Commerce, Subcommittee on Telecommunications and the Internet (only in D.C.), that Congress should resist calls for so-called open access regulation to ensure a fair and open auction of the 700-MHz spectrum. The press release goes on to say that, “The FCC, with Congressional oversight, should not be in the position of pre-determining or telegraphing auction winners. The so-called Google Block with rules tailored to one company’s goals leads in that direction.”
They go on to say that auction winners should be determined by market forces and by supply and demand. My comment: Verizon has always made it clear it wants a fair and open auction and will take its chances against all comers. In what I think is a great point, missed by most of the “open access” believers, is this statement: “The wireless industry has produced a steady stream of innovations―from devices to applications, to features―that have given American consumers myriads of choices about how they use their wireless services. Consumer choice would be the casualty of policies that mandate that all companies do the same thing the same way.”
Steve Largent, President of the CTIA, said this about the situation: “Crafting special rules for a company with a market cap of $170 billion to address problems that don’t exist in our competitive market makes absolutely no sense whatsoever.”
I know some of you might be saying, “Andy makes his living providing consulting services to the wireless industry, of course he wants to help protect their turf.” The first part is almost correct; I do make my living providing consulting services about wireless, but not only to the wireless industry. I also consult to Internet companies, computer companies and corporations that want to make use of wireless services. As for the second part, I welcome Google, Yahoo! and anyone else who wants to become involved in wireless. However, I do not believe in sacrificing network stability by letting any and all devices onto it, nor by permitting any and all applications to be downloaded across networks. I am certainly a believer in managed networks―not open, free-running networks.
I am also a realist and know that wireless bandwidth is a finite resource. There is not enough bandwidth available to turn every wired connection in the world into a wireless connection, and there is not enough bandwidth in to turn wireless networks into the wireless Internet (at least not the Internet we access from our desktops). Network operators have to manage bandwidth and the next generation of technologies includes Quality of Service (QOS), which is an important next step in managing bandwidth demand and usage.
Having to accept any device a consumer chooses on a network could create problems with the network, and permitting interconnection at “any point in the network that is convenient” is not a sensible thing to do. The wireless networks are deploying IP back-ends, but most have a central touch point for interconnection that is secure and monitored to make sure what is coming to the network won’t cause a problem.
There is no doubt in my mind that with the interest of the Google’s of the world, we will see some changes in the wireless industry. But if you believe wireless networks are just like wired networks—that is, merely open pipes to be used by anyone who wants to move bits around―then you don’t understand how these networks are built, run and managed.
While I am on this subject, I have to wonder why DirecTV is involved in the call for open access. Why should it be entitled to open access on a wireless network? Are its satellites open for any company that wants to use them? Somehow I don’t think so.
The battle rages on, but it seems to me as though Google, and even Chairman Martin, are issuing statements and demands without truly understanding the limitations of wireless, the cost of the networks and the fact that they are already providing open access in many ways. When I log onto the Verizon network with my notebook computer with built-in EV-DO Rev A technology, I can go anywhere on the Internet I want, I can download anything I want―any application, software or picture. I pay a monthly fee for almost unlimited access (I cannot set up a server farm using EV-DO), and using my BlackBerry on T-Mobile, I can do virtually the same thing―go to any Website I want and download anything I want. What I download onto my BlackBerry might not run on it, but I can download it.
If I want to offer services to others, I can become an MVNO. All I have to do is make a deal with a network operator, buy the bits at wholesale prices and set about marketing my products and services. Yes, I have to play by the network operator’s rules; yes, my devices have to be approved to work on the network; and yes, I have to abide by any terms and conditions for the use of the network. But I can do it.
So what is all this fuss really about? It is about believing that the “Internet model” needs to come to wireless? A free-running network that is not mission critical, the ability for anyone at any time to send spam, junk mail and viruses over the network and, in some cases, cause millions of dollars in damage?
At the end of the day, do these new players really believe wireless data will make them richer? Voice still pays the bills and will continue to do so for a long time. Not free VoIP calls, calls that are paid for because they are important and need to go through. Today, data represents only 12-15% of a network’s monthly income. That percentage will rise over time, but we are living in a nation where the average wireless voice customer uses more than 700 minutes a month. No other nation has that high an average. Why do we talk so much? Because it is affordable and because the networks have invested heavily to make sure we can.
Open Access? Rearranging the 700-MHz spectrum to benefit one group over another? Incumbents vs. newcomers? How about partnerships, alliances, cost sharing, co-marketing and competition? It seems to me that customers would be better off in the long run with the latter.
Wireless bandwidth is a finite resource. You cannot simply pull more copper, coax or fiber. No matter how much speed and capacity can be provided, some customers will want more than their share. No matter what the price, some will want it for less. No matter what devices are available, some will want something different. If I were Google, I might bid on the spectrum and then sit down with the incumbents and use the spectrum as currency to make deals, figure out how to partner and how to use wireless to my advantage. Google’s competitors are not Verizon and AT&T. Google’s competitors are eBay and other Internet companies. Google is in the business of attracting eyeballs to its site (I have never figured out why it doesn’t charge for some of its services; I don’t believe the pay-per-eyeball model will withstand the test of time). But it does not have to own a network in order to attract eyeballs over a network.
I am watching the 700-MHz battle continue to rage and commenting on it, and from where I sit the biggest problem is that there is a lack of knowledge exchange between Internet and wireless players. Wireless is not easy, it is part science and part art. It is not about DSL or cable connections that are installed and simply work. It is about radio waves traveling through the ether, interfering with other radio waves, bouncing off buildings and being absorbed by trees. It is about being bandwidth constrained, now and into the future.