* Analyzing the FCC’s 700 MHz spectrum rules
At the end of July, the Federal Communications Commission finally set the rules for how the newly available commercial radio spectrum will be offered for public auction. The 700MHz spectrum will become available in February 2008 when television broadcasters will be required to move from analog to digital transmission, freeing additional spectrum.
In its ruling, the FCC mandated that licensees “will be required to provide a platform that is more open to devices and applications. This would allow consumers to use the handset of their choice and download and use the applications of their choice in this spectrum block, subject to certain reasonable network management conditions that allow the licensee to protect the network from harm.”
Our translation: If you buy an iPhone from AT&T and want to use it on Verizon’s network then Verizon has to let you use the iPhone you bought from someone else (assuming, in our example that Verizon Wireless wins the bid for the new spectrum).
Many applications and content providers had hoped the FCC would require licensees to make their new wireless networks available in a similar way to the open architecture afforded to competitive local exchange carriers (CLEC) in wireline networks. Had the FCC chosen this path, companies like Google would have been able to offer wireless services over the new spectrum without having to build their own wireless infrastructures.
Applications and content providers still have the opportunity to operate as a Mobile Virtual Network Operator (MVNO) in the same way ESPN and Amp’d operated — but with both of these companies in the MVNO graveyard, the MVNO model doesn’t seem to work well.
The hoped-for open-architecture position was based on a premise that a more open architecture would foster more competition for independent applications providers to develop and deploy 4G mobile applications since they wouldn’t have to spend their resources on spectrum or network infrastructure. But as we recall, the same premise was used to suggest that CLECs would bring better, faster and cheaper phone service in the 1980s and 1990s. The CLEC promise didn’t turn out to well either, in our opinion.
So just like in the wireline world, would-be next generation mobile applications providers that want to offer VoIP, mobile e-mail, and other services well-suited to a 4G wireless network will still be required to either a) buy their own spectrum and build their own network, or b) sell their applications as a BYOB (bring your own broadband) service just like Vonage must do today over a wireline network.
The bottom line: Next generation applications companies that don’t own a wireline or wireless network will still be at the mercy of operators that have the money to deploy broadband connectivity. But the final word will go to the customers who can still demand that both the network operator and applications provider work together.
