By David Hatch, Technology Daily
© National Journal Group Inc.
Wednesday, Aug. 1, 2007

The wireless telecommunications industry underwent a tectonic shift Tuesday when federal regulators adopted ambitious rules designed to make it easier for consumers to switch carriers and for new competitors to emerge.

	Frequencies will be auctioned in various geographic sizes to make some of the airwaves more accessible to small bidders.

The FCC voted 5-0 for the overall rules and 4-1 to impose "open access" conditions on a portion of airwaves to be vacated by television broadcasters as they transition to digital signals. The auction must begin by Jan. 28.

The open-access conditions, a compromise championed by Chairman Kevin Martin, a Republican, divided much of the communications sector and Capitol Hill in recent months, prompting encouraging words from several Democrats and consternation from GOP members.

"This auction has the potential to unleash a new era in wireless technology," Martin said at the meeting, which was delayed by three-and-a-half hours due to last-minute negotiations. "The public interest is not about what any company wants. It's about serving the people."

Robert McDowell, one of three Republican members, was pleased that the FCC rules would create a nationwide wireless network for emergency responders to communicate across jurisdictions. But he said consumers could be "short-changed" by the open-access conditions, which fall short of what various potential bidders had wanted. He dissented on that issue.

Michael Copps, one of two Democratic FCC members, praised aspects of the rules but lamented that smaller players will have a lack of mandatory access to networks at wholesale rates. "This action might not be the stimulus" to create a "third" nationwide high-speed Internet service to compete with dominant telecom and cable providers, he complained.

Copps also warned that the rules are "tilted" to companies with "competition-killing" operations.

"While this item doesn't deliver everything that consumers and innovators wanted," it is a "positive step for consumers," said regulator Jonathan Adelstein, another Democrat. Nevertheless, he agreed that the lack of wholesale access is problematic. "At the end of the day, we may have missed an elusive opportunity to open that third channel into the home," he said.

Republican Deborah Taylor Tate, who usually allies with Martin, backed the public-safety components but was "lukewarm" about the open-access requirements. Tate said she hopes the FCC's decision will not result in less innovation and fewer consumer options.

Seeking to accommodate rural carriers, the FCC announced that frequencies will be auctioned in various geographic sizes to make some of the airwaves more accessible to small bidders.

The vote occurred amid a flurry of business deals by major carriers to bolster their rural wireless holdings, which Jessica Zufolo, a senior telecom analyst at the investment firm Medley Investment Group, said could strengthen the bidding positions of dominant firms.

On Monday, Verizon Wireless announced that it would spend $2.67 billion to acquire Rural Cellular, which operates in 15 states, including Maine, New Hampshire and Vermont. Verizon Communications is selling its traditional telephone assets in those three states to FairPoint Communications.

Earlier this month, AT&T said it would buy Dobson Communications, a rural wireless carrier with substantial operations in Alaska, for $2.8 billion.

For weeks, Google has been in the headlines for demanding four open-access conditions as a prerequisite for bidding on the spectrum. On Tuesday, the FCC granted two of the requests, permitting devices and software unaffiliated with any license holders to be used on a third of the airwaves to become available.

A Google spokesman said Monday that the search engine would take a "fresh look" if some of its requests were not met.

Industry reaction to the FCC action was not immediately available. AT&T recently endorsed the open-access concept, but the wireless association CTIA and Verizon have been strongly opposed.

While the FCC created parameters for a public-private nationwide network, it did not adopt all of the conditions sought by Frontline Wireless, a startup backed by former FCC Chairman Reed Hundt. In particular, Frontline failed to secure "designated bidding credits" that would have provided it with a 25 percent discount and mandatory leasing of spectrum on designated frequencies to smaller companies.

Despite not getting everything it wanted, the company vowed to press on. "We're planning on going forward and bidding -- period," spokeswoman Mary Greczyn said before the vote.

Public Knowledge, an advocacy group, had urged the FCC to impose additional conditions designed to benefit consumers and smaller competitors. Officials with the Information Technology Industry Council, whose members include Cisco Systems, Intel, Qualcomm, eBay-owned Skype and Texas Instruments, indicated on Monday that the group was pleased with the FCC's plans.