Verizon Drops 700 MHz Suit; CTIA Picks It Up

Published December 1, 2007

Verizon Wireless abruptly ended a short-lived legal challenge against an important U.S. spectrum auction requiring large successful bidders to open access on their networks for competitive operators and their customers.

The company filed notice in late October in the United States Court of Appeals for the District of Columbia that it was dropping its appeal of its lawsuit against the Federal Communications Commission (FCC) rules for auctioning attractive 700 MHz radio frequency bands, citing the court’s previous rejection of its request to have the appeal considered on an expedited basis before the auction begins in January.

New Suit Filed

Verizon’s decision not to press its action did not settle the rules for the upcoming auction. (See “FCC Mandates Test of Net Neutrality,” IT&T News, September 2007.)

CTIA, the wireless industry association, almost immediately filed a second suit in the same Washington, DC court to block the FCC auction rules it considers onerous.

“In challenging the 700 MHz order, petitioner does not seek to delay or overturn the results of any auction,” CTIA told the court. “Petitioner does, however, seek to overturn certain aspects of the order that are at odds with prior commission rulings and with the realities of the competitive marketplace for wireless services.”

Experts disagree on whether the legal challenges pose any serious obstacle to the FCC conditions. Some questioned the CTIA lawsuit’s likelihood of success because courts often defer to FCC in such rulemaking procedures. Others pointed out many clear court reversals of FCC rules, especially the previous unbundling requirements on incumbent landline telcos.

Hot Topic

In addition to speculation about the lawsuit’s potential impact on FCC’s sale of the spectrum, the open access and network neutrality principles remain hot topics.

“It is totally unnecessary and inappropriate,” said Hance Haney, program director and senior fellow at the Discovery Institute. “There’s a real question as to why the government would need to go back in history with regulation.”

Encumbering spectrum with additional rules reduces its value, notes Scott Wallsten, a senior fellow at the Progress & Freedom Foundation. “No special rules are needed if a carrier wants to try such an open access network,” Wallsten said. “In fact, I think it would be great if someone did try it so that we could see whether or not it is a viable business model. But it’s a bad idea for the government to mandate particular business models.”

Randolph May, president of the Free State Foundation, said he found the FCC spectrum provisos disappointing and disturbing. “Such a mandate established an unfortunate precedent,” May said. “FCC did this in a market segment that the commission has repeatedly found to have considerable competition.”

May said the FCC decision-making essentially relied on openness per se being worthwhile regardless of the level of competition. The potential harm, according to May, is that the rule could dampen new product, service, and business model development.

“By essentially requiring services, applications, and content to be unbundled as a mean of ensuring equal treatment, that kind of separation prevents network providers from integrating their own [applications], content, and even equipment in ways that would be more efficient and less costly,” May noted.

Corporate Wrestling

The original Verizon Wireless lawsuit drew criticism from competing firms that advocate government imposition of open access and network neutrality obligations on large carriers. Among the most vocal were Google and Frontline Wireless.

Google suggested it would be willing to commit a minimum of $4.6 billion to bid on spectrum in the January 16, 2008 auction if FCC were to guarantee open-access requirements. At press time, Verizon Wireless hadn’t disclosed whether it would participate in the auction. Other detractors of the open access provisos, such as AT&T and Sprint, have indicated they are likely to enter the bidding despite the restrictions.

FCC is selling off a 62 MHz block within the 700 MHz band, radio spectrum that is highly desirable for wireless broadband services because it can carry large amounts of information over moderate distances and penetrate into the interiors of most buildings, yet still use relatively low power.

The auction is expected to raise at least $10 billion to $15 billion for the U.S. Treasury. The spectrum is being made available through broadcast television’s forced migration from analog to digital transmission.

Frank Barbetta ([email protected]) writes from Little Falls, New Jersey.