Lobbyists from several consumer advocacy groups, led by the Open Internet Coalition, got together Tuesday afternoon for a press conference in Washington, D.C. to raise awareness about a hearing scheduled for Wednesday before the U.S. House Subcommittee on Telecommunications and the Internet.

 

The topic of the conference, and the upcoming hearing, was advocating—in the name of consumer interest—for more and different government regulation of the wireless industry. The groups are lobbying for regulations designed to create a more consumer-friendly wireless market by doing away with 'unfriendly' practices like early termination fees and blocking third-party applications.

 

To achieve this vision of increased consumer fairness in the wireless market, lobbyists at the press conference proposed that the Federal government should focus on regulations that promote more 'openness' for mobile phone networks, thus spurring increased innovation and more choices for consumers.

 

Ben Scott, Washington Policy Director for Free Press (a nonprofit that works to increase participating in policy debates) dubbed the upcoming testimony before Congress ‘the iPhone (News - Alert) hearing.’

 

“Wrapped up in the iPhone's introduction are three of the most important consumer issues with regards to the future of the Internet,” Scott said during the press conference. He identified those issues as consumer choice, open networks, and the FCC’s (News - Alert) policies for auction of the 700 Mhz spectrum.

 

“The iPhone is really a bellweather,” Scott said. “It's a bellweather about how the device market for wireless broadband proceeds, and it's a bellweather for how the future of the Internet looks.”

 

The third item on Scott’s list of issues references concerns about how the FCC is handling the auction of the 700 Mhz spectrum. Consumer advocacy groups like Free Press are concerned about the FCC's plans for the 700 Mhz spectrum, which is slated to be auctioned off as part of the transition to digital TV. These groups argue that the characteristics of the spectrum make it ideal for use by broadband Internet providers who compete with incumbent phone and cable companies. The groups worry that big corporations will end up grabbing all of the 700 Mhz spectrum, stifling competition.

 

Spectrum (News - Alert) 'hogging' wasn't the only concern these advocates had on the agenda, however. They also said consumers should have more choice in the form of device portability and freedom from early termination fees; in other words, the choice to decide which combination of devices and services to use, and the ability to switch either without penalty whenever desired. These and related issues, the lobbyists said, exist because in the U.S. the market for handsets/devices/applications and the market for network services are so closely tied together.

 

“The result is a lot less innovation for consumers, less exciting applications and higher prices,” said Chris Murray, Legislative Counsel for Consumers Union (which publishes Consumer Reports magazine).

 

At the hearing Wednesday, Murray will be testifying about how early termination fees relate to innovation in the wireless space. He argued that it’s unfair for some carriers to charge as much as $200 for terminating service before the contract runs out.

Murray said that, when arguing in favor of early termination fees, carriers mount two defenses. First, they claim that these fees provide subsidies. But, iPhone shows why this claim is false.

 

“Consumers don't get a single dime of subsidy on the new iPhone yet it's still going to get them locked into a two-year deal with a $175 penalty if they want to leave for another carrier,” Murray said during the press conference.

 

The second defense carriers mount for early termination fees is that these fees ultimately lower prices for consumers. Murray was equally skeptical of this claim, expressing his belief that no carrier bases its policies strictly on consumer welfare.

 

Tim Wu, who also will be testifying before Congress during the ‘iPhone hearing’ on Wednesday, was among the most outspoken of the advocates at the press conference. He said his testimony will focus on device portability as it relates to the practices of 'locking' (preventing handsets from being used with competitor networks) and 'blocking' (preventing consumers from using third-party applications). 

 

“Possibly the most important rules are the device portability rules,” Wu said. He noted that consumers already enjoy number portability, and now are asking why they can’t also keep their cell phone when they switch carriers.

Wu gave the carriers credit for, during Net Neutrality hearings, saying they will not engage in blocking or degrading practices when delivering Internet service. But, they have not kept that promise in the wireless sector.

 

“Blocking is not the exception but the norm,” Wu said. “No-one disagrees in the net neutrality discussion that blocking is just an anticompetitive conduct. It's time for that to come to the wireless world. A ban on blocking is long overdue.”

To emphasize the issue of device locking, Wu asked whether consumers would tolerate it if every time they changed electricity providers they had to buy a new fridge.

 

“This kind of stuff is unacceptable,” Wu said. “The time has come for this industry to become a normal industry.”

 

Wu was not alone among the consumer advocates in calling for regulations to do away with locking and blocking in favor of device portability. Skype (News - Alert), provider of the popular Internet-based calling service, has a related agenda.

 

On Feb. 20, Skype filed a petition with the FCC asking the agency to begin applying the Carterfone principle—requiring carriers to allow use of third-party hardware and software—in its regulation of the wireless industry. Skype wants the FCC to start using the Carterfone principle as a way of forcing carriers to loosen their control over the types of hardware and software that can be connected to particular wireless networks.

Chris Libertelli, Senior Director of Government and Regulatory Affairs at Skype, said Skype filed the Carterfone petition because the Skype service is moving off computers and onto mobile devices.

 

“There is a growing understanding of why openness principles are needed in wireless,” Libertelli said during the press conference. “We're encouraged that the FCC is taking seriously openness principles in the context of their auction and broader rule-makings.”

Libertelli predicted that, during the hearing on Wednesday, wireless industry representatives will argue that the wireless market is perfectly competitive, and everything is okay. But, he disagreed.

 

“The truth of the matter is that the wireless market is not so perfect, and that more competition and innovation could be put to work for consumers,” he said. “In short, it's our view that we can do better.”

 

Gigi Sohn, President and Co-Founder of Public Knowledge (nonprofit dedicated to preserving public access to information in the emerging digital culture), expressed a similar sentiment.

 

“We always hear about how the wireless market is the paragon of competition and consumer choice, because there are four providers and they all compete with each other and they're all open,” Sohn said. “But clearly, this is not the case.”

 

Libertelli said that the old model of competition, in which there is competition only between wireless networks, worked in the past but is now outdated. He predicted that policies promoting true openness of wireless networks could help the industry grow from four providers to 4,000.

 

“Carterfone is about establishing a core set of consumer rights that balance investment in both sides of the equation—at the edge of the network and in the core of the network,” Libertelli said. “It's a mistake to think of this issue as the Internet companies against the carriers. We're not tearing down the carrier's house, we're saying to the carriers, let us help you renovate that house and it becomes more valuable.”

 

He added: “Openness principles make network more valuable because consumers will be able to do more with the underlying connections.”

 

What might a more 'open' and 'competitive' network, as these lobbyists envision it, look like? Chris Murray at Consumers Union said he would like FCC regulators, and carriers, to look at other areas of the world for examples.

 

“If you look at markets in Europe, we see how to do this properly,” Murray said. In Europe and Asia, because the networks are de-coupled from devices, customers can use any device on virtually any networks. The result, Murray said, is a more robust set of choices, including phones that are two or three years ahead of those available in the U.S.

 

“We stand here in a country that traditionally has done innovation really well, and ask ‘Why can't we do it well in the wireless space?’,” Murray said.

 

Applying the Carterfone principle—which Libertelli referred to as the ‘no blocking and no locking’ rule—to the wireless industry could help make that happen, the lobbyists at the press conference suggested.

 

“It would allow consumers to go out onto the open market, choose the most capable, most fully-featured device, and hook it up to any wireless network they subscribe to,” Libertelli told TMCnet in response to a question about how application of the Carterfone principle might practically look.

 

Libertelli continued: “You would have a meaningful consumer choice between the subsidized model which may persist in the United States, and an unlocked and unsubsidized model for these fully-featured mobile computing devices. We would expect to see that the device level competition would increase and consumers would have more choices for unlocked devices.”

 

But is more regulation really the answer to the problems these lobbyists perceive? Bill Hughes, principle analyst at In-Stat (News - Alert), isn't so sure.

"The issue of regulation is a real can of worms," he told TMCnet. "This gets 'political,' in the negative sense of the word, very quickly."

 

Hughes, who was not present at the press conference but commented on the lobbyists' concerns as a bystander who studies the wireless industry, said that he tends to prefer less government interference because he believes a lighter touch is ultimately better for consumers.

 

"When the government does get involved in regulating something, it has a responsibility to manage it carefully and responsibly," he said. "The problems arise because governments have a hard time not getting political, particularly when there is lots of money at stake."

 

Hughes went on to say that, while lobbyists like those at the Tuesday press conference use phrases like 'fair' and 'in the interest of the public' to bolster their viewpoint, what is really at stake is money and power. And, all too often, it is the opportunity for making money and the illusion of power that drives politics.

 

"I would like to deconstruct much of the testimony from the 'consumer advocates' to show that what they say they want and what it would achieve are actually opposite," Hughes said. "More regulation would stifle long term competition. However, I would not know where to start."

 

Clearly, this is a complex topic so it's hard to answer the question of which viewpoint is ultimately best for everyone—that expressed by the consumer advocates/lobbyists stance, or that expressed by Hughes and others who view regulation as a potentially dangerous, slippery slope.

 

Given the capitalistic nature of the U.S., and the current FCC administration, though, it seems likely that the scale will tip more on the side of deregulation than 'consumer rights.'

Mae Kowalke previously wrote for Cleveland Magazine in Ohio and The Burlington Free Press in Vermont. To see more of her articles, please visit Mae Kowalke’s columnist page. Also check out her Wireless Mobility blog.