FCC Launches Probe of Wireless Industry

Published November 1, 2009

The Federal Communications Commission announced in late August it will do as Congress asked and launch an investigation of the wireless industry.

The FCC probe will be two-pronged. First, it will review the state of “innovation” in the wireless market, a move that could lead to greater regulation of carriers and government intervention in disputes such as one that recently erupted over Google Voice and the Apple App Store.

The other will evaluate whether “truth-in-billing” rules ensure subscribers know what they’re paying for on their monthly phone bills.

Kohl A Major Player

Sen. Herb Kohl (D-WI), chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, sent a letter to the FCC this summer asking the commission to investigate such matters. The commission’s vote in August to launch the investigations was unanimous, meaning it was approved by Republicans Robert M. McDowell and newly minted FCC commissioner Meredith Attwell Baker.

The two Republicans, however, did voice concerns the probe could lead to heavy-handed and legally questionable regulations. The Democrats on the FCC, meanwhile, stressed their belief that reforms are long overdue.

Wireless Carriers Respond

The wireless industry welcomes the probe, at least officially.

“We are excited to tell the industry’s story,” declared Steve Largent, president of CTIA – The Wireless Association in a written statement. “The wireless ecosystem—from carriers, to handset manufacturers, to network providers, to operating system providers, to application developers—is evolving before our eyes, and this is not the same market that it was even three years ago. In this industry, innovation is everywhere.”

The innovation has occurred largely without government intervention. But the FCC’s recent moves could mean more commission scrutiny on deals such as handset exclusivity.

Spurring Innovation

Industry analysts say the exclusive handset deals spur innovation because the partners know they can spend time developing the market. Opponents counter by saying the deals are anti-competitive because not everyone can participate.

The CTIA has members on both sides of the issue, so the organization does not take an official stance on it.

Fruitful Partnerships

However, CTIA spokesman John Walls notes the marketplace has seen the development of 100,000 new wireless applications. Plus, partnerships are evident in other industries—in many restaurants, for example, a diner can get a Coke or Pepsi, but usually not both.

“A lot of this stuff came to a head when Google brought its voice app to the Apple store and Apple denied it,” said Scott Testa, a professor of business administration at Cabrini College in Philadelphia. “Denying that application opened up a can of worms.”

Partisan Rotation

“Every time the government changes hands between Republicans and Democrats we have this same issue,” said Jeff Kagan, an Atlanta-based telecommunications analyst. “Republicans like to take a hands-off posture, letting the markets fix their own problems, and we see rapid growth [at those times], with some bumps in the road. Democrats like to control the playing field to protect everyone, but that limits growth.

“Both ideas have merit, but they have different results,” Kagan added. “The intentions are right, but we have to tread very carefully and thoughtfully. Otherwise we may be dealing with unwanted results.”

Phil Britt ([email protected]) writes from South Holland, Illinois.