Open AccessTuesday, July 10, 2007
There is a lot of talk about forcing wireless network operators to provide "open access." But what is open access? To me, it means one company spending $billions building out its network infrastructure and then another company buying that same service in bulk and reselling it at a profit. The network operator that has invested the $billions it takes to build and maintain the network is expected to provide access to others for a fraction of the income it could derive from selling the services directly to customers.
According to the online dictionary Wikipedia, Open Access, or OA, is immediate free and unrestricted access to digital scholarly material, primarily peer-reviewed research articles in journals. OA was made possible by the advent of the Internet.
According to the Ad Hoc Public Interest Spectrum Coalition (PISC), wireless open access means that those who own the pipe (transport) don't control the retail or content side of the equation. They simply build the network and let anyone who wants to offer services over it to do so as wholesalers and retailers. In this model, a company wins (purchases) a license, builds out a network (broadband is implied in this model) and then simply sells bulk packets to anyone to resell to their customers.
Applying this model to the 700-MHz auctions, PISC has asked the FCC to limit wholesalers' ability to also be retailers. PISC claims this would make wholesalers (wireless network operators) more cooperative with independent retailers. It points to the success of MVNOs such as Virgin Mobile, Helio, ESPN Mobile (now defunct) and Qwest Wireless. I'm not sure I would call any of these MVNOs all that successful. Several have had their share of problems, notably AMPS, and Helio has had to go back to one of its parents for a large infusion of money.
ESPN tried to the tune of $50 million and failed, the others have put in their own millions, and the business model, as far as I can see, has not proven to be a success. PISC points to these as an indication that network operators can make money simply as wholesalers and, therefore, should be required to make their networks available on the 700-MHz band.
The points PISC missed are that operators that have let MVNOs onto their networks manage the network resources and limit the number of MVNOs they work with, how much of the network resources they can access and other related issues.
PISC uses MVNOs as an example, but I am not at all sure it understands the huge investments MVNOs are making, the way in which their access to the networks is structured and that network operators are using MVNOs as a way to attract additional revenue using some of their network capacity. If you look at the various operators, you will see a big difference in the number of MVNOs they have permitted. Sprint, a network that seems to believe is has sufficient capacity for itself as well as many other MVNOs, has been the most aggressive. However, AT&T and Verizon Wireless have not been nearly as open to letting MVNOs on their systems because they are trying to manage their networks' resources.
Now the FCC
Over the past few days, the Chairman of the FCC has called for 700-MHz spectrum to be open to all. But he wants the to-be-auctioned 700-MHz spectrum to be open in a different way. He wants it open to all devices that consumers might want to use on the network, which includes customers' ability to move from network to network keeping the same device. There may be more to his comments published July 10 in USA Today, but the description there of what he plans to propose makes it sound as though every winning bidder will use the same technology for their network build-out, so every device built to operate in the 700-MHz spectrum will work on any 700-MHz network.
The article cites Europe as an area of the world where this is already happening, but it does not mention that the reason this works in Europe, or at least sort of works, is that the EU, and the individual countries before it, mandated which technologies were to be deployed on what portion of the spectrum.GSM and UMTS are the standards in Europe while in most other parts of the world, spectrum is not tied to a specific technology. In Africa, Japan, South America, Korea and North America, different network operators employ different technologies. Operators are free to choose the technology they believe is best for their network and spectrum allocations.
In order for Chairman Martin's idea to become a reality, the FCC will also have to decide which technology is to be supported at 700 MHz, sending us back in time. There are at least two next-generation technologies that will be contenders for this spectrum: UMB and LTE. LTE is the next-generation technology from the GSM/UMTS organization known as 3GPP, while UMB is being driven by the CDMA world including many manufacturers and 3GPP2. Some might contend that WiMAX should also be considered in this spectrum. In any event, if the FCC mandate is put into place, either a single technology will be required or devices will need to be capable of multiple technologies, which will drive up their cost.
Another problem with this scenario is that if existing network operators use some of the 700-MHz spectrum in combination with their existing network, they will want devices that work with their existing technology along with whatever technology they use on 700 MHz. Since Martin has said he is only concerned with the upcoming 700-MHz spectrum auctions, for now, and some of that spectrum will probably be bought at auction by existing operators, I wonder how the rules will apply. Too many times ideas are turned into rules without considering the technology side of the equation. The Commissioners are, after all, attorneys. The FCC used to have a strong engineering group headed by someone with a great grasp of technology. It still has a lot of engineers and people who understand the issues, but it appears as though the Commissioners have stopped seeking their guidance in matters such as these or are simply ignoring answers provided by the engineers.
The Future of 700 MHz
PISC expects network operators to build out their 700-MHz spectrum (for which they will have paid a huge amount of money to acquire) and turn around and offer the networks wholesale to virtually anyone who wants to use them. These operators are expected to build world-class networks, complete with coverage to their entire license area, provide all of the backend connections (the amount of backhaul required from each site will be costly for next-generation networks), maintain the networks and continue to add sites where there are capacity or coverage issues. For this, network operators can expect a return on investment that is much less than if they were selling services directly to customers and their return on investment will take much longer, if it is ever reached.
Network operators will be building themselves into a wireless pipe and will face the same issues as the major wired network operators: lower revenues and higher costs of operation. I have heard no plans as to how bandwidth is to be allocated (even for 700 MHz with next-generation technologies, bandwidth per MHz of spectrum is finite and will have to be managed).
Next, if Martin has his say, networks that now wholesale wireless bits won't have any say as to what devices are permitted on their networks and what types of software and applications can run across them. Today, devices are managed, tested and certified to work on a network. This does not mean simply testing the devices in a lab or passing FCC tests, it means extensive field testing to make sure the device works with different infrastructure installed in different parts of the network. For years, problems have been found when new devices were tested in the field. For example, a device that works fine with Ericsson equipment installed in a section of a network might not provide a reliable hand-off when on the Nokia portion of the network, and might behave in a different way on a portion of the network provided by Motorola.
Further, network operators have control over what applications run across their networks. This is less so today, and probably even less so tomorrow, but the fact remains that they manage their networks and try their best to prevent a rogue piece of software or device from bringing some or all of the network down. Think back to the times when the Internet was attacked by a virus that swept across it rapidly, bringing servers to their knees, disrupting traffic and causing millions of dollars in damage to servers all over the world. Because the Internet is a non-managed pipe with a zillion connections, there is no way to stop the spread of some mischievous programmer's bug or virus. Today's wireless networks are managed and much more immune to such attacks than the Internet. What PISC and Chairman Martin seem to want is to open the wireless networks just like the Internet and, therefore, make wireless networks as vulnerable as the Internet. If you take network management out of the equation and let the network flow freely in all directions, with devices and servers attached virtually at will, you effectively extend the Internet and all of its flaws to the wireless world-a world of much more restrictive shared bandwidth where the cost of additional capacity has to be offset by the ability to recoup the investment.
Wireless networks have a finite capacity and the only way to increase capacity is to add more channels on a per-site basis (if more channels are available) or build additional sites that are closer together (the permitting process for new sites takes two to three years and is very expensive). Yet these networks, which are adding new customers every month, are supposed to manage their own traffic as well as provide cheaper access to others who can and do drive the traffic higher?
Wired operators missed the importance of the Internet and let themselves become merely wired bandwidth providers. For the most part, they did not embrace any way to capitalize on the traffic that flowed over their networks. Then they were forced to open their networks to others to resell on them, and over the years their income has declined. Yet they still must maintain the networks and provide services. The result has been industry consolidation, long-distance companies filing for bankruptcy and, today, we have fewer choices on the wired side, which, in many cases, is combining wired and wireless plays into a set of converged offerings.
Chairman Martin mis-spoke when he said combination devices that enable Wi-Fi and wide-area connectivity should have been in the market prior to now. T-Mobile just launched their HotSpot @Home, but they are not using VoIP because their tests determined VoIP is not ready for prime time. There are already a number of devices on various networks that permit "side loading" of content from a PC as well as access to content over a network, we have some of the lowest prices for wireless services in the world and some of the best built and maintained networks.
If Europe and its "open" device model is to be the measure of success for us, then I guess we should be prepared to pay on average three times what we pay today for voice and data services. This idea appears to be driven by two things: the Internet model and the desire to provide more competition which will, in turn, drive down the cost of access, but our cost of access is already a bargain. We complain about gas prices going up, but for years we were paying less than anywhere else in the world, far less.
Competition is good and we will see more of it when the 700-MHz spectrum is released for auction. But tying the hands of those who spend the $billions to acquire it by making them employ a technology that makes their network compatible with everyone else's so phones can be moved from one network to another, and opening access to new WISPs and MVNOs while restricting the ability of network service providers to sell into the retail space does not appear to be the way to accomplish our goals.
Everyone has an idea about how to make wireless more open, more accessible and more like the Internet. Yet those working on the next-generation Internet are suggesting changes to make the Internet more like today's managed wireless networks with the ability to stop attacks and ensure open but monitored access.
Eachof these ideas seems to miss one important point. If the 700-MHz auctions are to be successful, and if network operators and others from the Internet community are to spend billions of dollars for this spectrum and then billions more building the networks, where is their motivation if their ability to make a reasonable profit on their investment is restricted by new rules of engagement? Sprint once said that in order to become a viable MVNO it would cost the MVNO between $300 and $400 million. ESPN gave up its attempt after $50 million and we know others are having some success, but none are making money.
My idea is to change the rules for the 700-MHz spectrum for rural America. I want to see the resources of a number of organizations combined to provide broadband for our first responders and citizens who today have broadband access only via expensive satellite services. Let's try a cooperative approach to broadband in rural America where the incentive to build out networks is low. A model that works for rural America is different from one that works for more densely populated areas.
Let's not "fix" our wireless future by making the networks more vulnerable to hackers, deciding which technology to use and, most importantly, by not providing those willing to make huge investments an opportunity to make a profit. Our economy is designed to provide for competition and profits and it works well. Let's give it a chance to work in wireless. There no such thing as a free lunch-not even on today's Internet.