FCC

Verizon’s smartphone direction still chasing AT&T?

Verizon is apparently planning a total smartphone blitzfor the holidays, including the already-discussed Droid from Motorola, but also according to rumor, a new HTC Android smartphone and perhaps a third model as well.

The Verizon moves are, we think, are calculated to make things complicated for AT&T and Apple with the iPhone for the holidays. A multiplicity of models at various sizes and price points makes sense at this stage in the market, but there is no question Apple still has the cachet that other smartphones have so far been unable to match.

We think all of these smartphone wars are a signal that whatever the FCC might do with wireless net neutrality, operators are committed to the mobile web.

FCC includes pivotal issue in Net Neutrality NPRM

The FCC isn’t “considering” net neutrality rules as a formal order; they’re “proposing” specific actions. That’s the meaning of what happened yesterday at the public meeting. The FCC approved its net neutrality Notice of Proposed Rulemaking (NPRM) by unanimous vote, but Republicans dissented in part, just enough to keep alive the partisan bickering that’s characterized Washington and to reflect their concern with some of the points.

If you look at the document closely, you find it really consists of four parts. One codifies the original principles of net neutrality that were published in 2005. The second requires that providers treat lawful traffic in a non-discriminatory way and publish any traffic management policies. Both these sections (which are subdivided further in the NPRM) are largely accepted by all. The third element asserts the FCC’s position that these principles be applied across access types, meaning wireline telco, cable, and wireless. This raises some ire in the industry, and also with some Republicans.

The final point, in our view this is the most controversial, asks for comment on the specialized services that are IP-delivered and share the broadband pipe with the Internet. The FCC wants to know how to define these and what rules (including the six defined in the first and second parts we’ve outlined) should apply to these special services.

This last issue is pivotal because should the FCC decide these services are also to be regulated in some way, they could impose access-sharing requirements on telco IPTV offerings. We think it will be months before any order comes out of this process, but just the fact that the FCC is thinking about the third and fourth issues here could force operators to consider what would happen to their mobile and wireline walled-garden services if access connections had to be wholesaled to competitors at a fair price.

Regulatory issues are never covered well in the media, and the public interest in this one will likely make it worse. Make no mistake; the key to the future is in the single issue of those managed or special services!

Policy clues surface as FCC hits its stride

The FCC is hitting its stride in regulatory policy terms, primarily relating to the issues of next-gen voice. In one matter, the FCC has already asked Google for specific details on Google Voice, in response to AT&T filing a complaint that the service was really a regulated voice service and was discriminating against open call routing to exchanges with high reciprocal compensation rules.

Now the FCC’s chairman is making it clear that his FCC thinks mobile services are the really hot regulatory issue. Genachowski applauded the AT&T decision to open its mobile network to VoIP services and the Verizon Wireless partnership with Google. He still feels that mobile services aren’t necessarily as competitive as the FCC would like. The knotty issues for mobile are the application of net neutrality and the question of open handsets and handset subsidies.

FCC universal broadband cost estimate doesn’t factor in performance

The FCC said that giving 100 Mbps broadband to every home would cost $350 billion, which is about half what we think it would cost to give every household FTTH and therefore pretty consistent with our own models. The FCC also said you could provide 50 Mbps for $50 billion, and our model says that’s a third of the actual number.

The relationship between broadband cost and service performance is complex, and we suspect that most planners simply haven’t delved into the details at this point. The issue here is that public policy goals in broadband might be aggressive because of intense industry lobbying, but that real progress is unlikely to be made toward universal service unless there are major compromises in performance.

We are covering this issue in depth in October’s issue of our newsletter/journal Netwatcher.

FCC net neutrality proposal confuses the issue

Reviewing FCC Chairman Genachowski’s comments on the net neutrality process, we find that there are a number of interesting points.

• First, the FCC is indeed proposing to apply net neutrality to wireless, which is something that’s already caused concerns among wireless providers. Wireless is the last bastion of profitability for the operators, after all.
• Second, the FCC is making it very clear that net neutrality rights will apply only to lawful content, and in fact Genachowski specifically said it would not apply to P2P that infringes on copyright. That means that the ISPs would be free to interfere with “non-lawful” traffic.
• Third, and perhaps most significantly, the FCC is saying that while it is important to offer managed services, which we assume means services with managed QoS, in parallel with the Internet, these can’t be allowed to compromise Internet service capacity and quality growth. This could pose the risk that the FCC might reverse its long-standing position on IPTV.

We don’t know exactly what the FCC has in mind (nor does anyone else (which likely includes the FCC!), but this announcement could create more uncertainty than clarity, which could influence U.S. providers’ investment in broadband. A Senate bill to block the order has been introduced, but it has no chance of passing. The House net neutrality bill will, according to sponsors, move forward.

Google Voice, Apple, AT&T and the FCC: The flap continues

Google has released some information that suggests that Apple’s statements to the FCC in July about blocking Google Voice were not correct, and the rumor is that even more damning information is available at Google for release should Apple not reconsider its position.

Apple claimed that its “rejection” of the Google Voice application was for look-and-feel reasons, but the Google release suggests it was explicitly because Google Voice competed with basic Apple/AT&T functionality, something the FCC would likely rule on.

This issue could bite both Apple and AT&T because an actual false statement to the FCC would be bad politics, at the minimum. We say this because it’s not clear whether the FCC really has authority over Apple and handsets. The FCC would have to contend that Apple was simply a stalking horse for AT&T interests in this case, and AT&T is within the FCC’s jurisdictional web.

Market pressure could cost AT&T Apple iPhone exclusivity

There’s growing speculation that AT&T’s honeymoon with iPhone may be coming to an end. Pressure from the government on the wireless industry is mounting, and Apple is no longer doing exclusive deals with iPhone. In fact, it can’t afford to.

With iPhone in the U.S. locked to AT&T, there’s too much of a risk that the U.S. market (the number-one smartphone market) will end up validating a host of iPhone competitors that might have little chance under normal circumstances. AT&T has relied on iPhone to gain some market share, however, and has won some Verizon customers. Since Verizon would be likely to get the iPhone next, the loss could send a bunch running back.

We’re hearing some speculation that Apple and Verizon will do a 4G deal, though, so the opening of the iPhone won’t be imminent.

FCC on wireless: Defining competition is task one

The FCC voted unanimously to move both of its wireless investigations to the formal Notice of Inquiry phase, but it is clear that (as usual) the body is divided along party lines regarding just what might be done.

Democrats think the industry has competitive issues and Republicans do not. Their differences seem to us to come out of the definition of “competition.” Republicans want to define it as having multiple wireless provider choices available, while Democrats define it as having relative freedom and flexibility to exercise handset and service options without being locked into a single provider.

In short, the “mobility” of customers is a concern of Democrats, and that may be a harder point to cover in a regulatory sense.

FCC wireless market inquiries overdue, could affect spending

The FCC’s agenda for its August 27 meeting shows a commitment to a broad review of the wireless market, from its role in the national broadband policy to the state of competition and some wireless practices.

Both these activities are being considered for a Notice of Inquiry, which would launch a formal FCC process here. The interest in wireless is overdue. The FCC has far better data on and oversight of the wireline communications services, and yet wireless is becoming the prime mechanism for communications for a large segment of the population.

Operators hate this sort of thing; it raises the risk that the wireless cash cow will be shut off by the FCC in the form of new rules. The problem is that most U.S. operators are profitable because of wireless, and it’s not clear what would happen if the FCC were to curtail revenue/profit growth there through new regulation. The process will take time, and it’s not likely to impact 2010 budget planning, but it may keep wireless infrastructure spending plans tilted to the conservative side.

Comcast appeals FCC traffic management order

Comcast has decided to appeal the FCC’s order for the cable giant to stop metering P2P traffic, even though Comcast ceased that practice even before the FCC order was issued. The goal of the company is to test the FCC’s net neutrality principles, which since they were not contained in an FCC rulemaking/order, are likely not to have force of law.

The move, which is supported by some other ISPs, may well backfire on the industry because an FCC decision that did not, in fact, have enforceable net neutrality principles (which the agency has long said it did) would certainly result in the introduction of legislation. That might be far more restricting, and it might open other issues as well.

We said when this order was issued that Comcast would be foolish to appeal it, and Comcast appears to have been just that.