ASI Editor to NYT EditorMonday, August 06, 2007
I just read the New York Times editorial published today titled "A Half-Win for Cellphone Users" about the FCC Report and Order regarding the 700-MHz spectrum. Normally, I let this type nonsense just fade away, but coming from the New York Times, which I thought was a respectable newspaper with some intelligent people on their staff, I have to publically take issue with a much of what it had to say.
The most ludicrous paragraph is the last one in the editorial: "The closed nature of America's wireless networks is the main reason that its cellphone technology is so primitive compared with Europe's and Japan's. The F.C.C.'s new rules go part of the way to solve this, but unfortunately, American consumers have once again been denied a truly open and competitive cellular market."
There are a few things wrong with this statement. First, in Japan, there are three networks, NTT DoCoMo, KDDI and Softbank (the ex-Vodafone network). KDDI uses CDMA and NTTDoCoMo and Softbank use PDC (similar to GSM) and UMTS. The cell phones on NTTDoCoMo cannot be used on KDDI and vice versa. The next point that is incorrect is that we have such primitive cellphone technology compared to Europe and Japan. AT&T Wireless uses exactly the same 3G technology used in Europe and Japan, while NTTDoCoMo and Softbank, AT&T Mobile and T-Mobile use exactly the same 2G technology as all of the European networks (GSM). In the United States, we have as many if not more wireless devices available on a per-network basis and most of our handsets are subsidized so they are less expensive to the consumer than in Europe or Japan.
A case can be made that tying a specific portion of spectrum to a specific technology, as they do in Europe (but not in most other parts of the world) actually stifles competition because every network is the same, using the same technology, and if a better technology comes along there is no way to deploy it. Suppose for a moment that a brand new technology was discovered that was so compelling it would change the world of wireless as we know it. In the United States and most other parts of the world, it could be implemented. In Europe, unless the EU changes its policy, it would not be able to be deployed because it would not be one of the two permitted technologies.
What is primitive about our wireless networks? They are world class, they are evolving rapidly with third-generation and soon fourth-generation technologies and they do offer wholesale access to others. How does the NYT think MVNOs (Mobile Virtual Network Operators) such as Virgin Mobile, Helio, Disney Mobile and others deliver their services?
One difference I will concede to is coverage, but there are reasons for the differences. In Europe and Asia, the first wireless networks were built by government-owned telephone companies. Why is this important? They were built using tax dollars, with no permits for sites, virtually no limit to where sites could be built and with few if any restrictions. The coverage was good from the beginning and then improved. When the networks were privatized and new networks were permitted, the new networks had to build to the same footprint as the original networks in order to compete. It should be noted that today these countries have the same issues getting sites permitted and built as we do. And since Europe's 3G networks are limited to a single band, which is considerably higher than ours, their build-outs require more sites for the same coverage at a much higher cost. The last reason is the sheer size of the United States when compared to all of Europe or Japan.
The NYT editorial starts out by saying, "The Federal Communications Commission opened the door to much needed competition in cellphone services last week when it set the rules for an auction of public airwaves early next year. It did a disservice to consumers by not requiring the winners to resell capacity to other carriers on a wholesale basis. This decision is likely to slow the arrival of new competitors and technologies. It could also delay creation of a higher-speed cellular pipe to the Internet to compete with D.S.L. and cable."
I don't know who the NYT has been talking to, but how could not letting other networks buy service on a wholesale basis (which they do) impact or slow down the arrival of new competitors and technologies? New competitors can show up at the auctions and bid on the spectrum and they can enter into wholesale agreements with existing networks. What does wholesaling have to do with new technologies?
WiMAX, a new technology, is being deployed by Clearwire and Sprint, both of the 3G technologies in use today in the United States are being enhanced and there are at least two new technologies in the wings that should make their debut prior to 2010. Where is the slowdown?
Open Access, which the NYT says is a partial victory for the consumer, is very misunderstood today. It does not mean free access, it does not mean my iPhone will be capable of running on the Verizon Wireless network and it does not mean the next iPhone or next-generation devices can't be tied to exclusive deals. It simply means that on one segment of one portion of spectrum, it will be possible to obtain a device and be assured you can put it on that network―not that you can take it to some other network with a different technology.
I am disappointed with the NYT's editorial staff for not checking the facts, for making errant assumptions and for writing an editorial that so completely ignores the facts.