Thursday, September 13, 2007

Verizon Scrambles Lawyers to Keep Wireless Market Closed

Verizon Wireless, America's second largest mobile phone service, is suing the Federal Communications Commission (FCC) over its recent decision to unlock cell-phones from restrictive carrier agreements.

The FCC decision, limited to cellphone use on the 700 megahertz band "C block," had been heralded as a landmark move by the FCC -- one that would benefit consumers by unshackling mobile phones and bringing competition and innovation into the wireless devices marketplace.

Locked Down

Verizon Locked Down
(photo courtesy of Wired)

In reality, it was a small step on the long road to breaking up the anti-competitive, anti-consumer oligopoly that controls nearly every level of the wireless marketplace: devices, services, networks and applications.

Send Lawyers, FUD and Money

Yet even such a minor gesture towards consumers was enough to unleash Verizon's lawyers.

In a Monday court filing at the U.S. Court of Appeals in Washington, Verizon claimed that the FCC decision was "arbitrary, capricious, unsupported by substantial evidence and otherwise contrary to law." It also accuses the Commission of exceeding its authority under the 1934 Communications Act, the U.S. Constitution and the Administrative Procedure's Act, without offering further detail.

Reading between the lines we see a brazen effort by Verizon to use the courts to deprive consumers of choice in America's wireless marketplace.

Locking in a Frozen Business Model

America lags far behind other technologically developed countries. A lack of competition has left wireless companies complacent and stifled innovation. At the moment a consumer can't use his or her cellphone with other wireless carriers, and many of the devices themselves are "crippled" by carriers so they can't perform to their full potential

"Many consumers feel trapped having bought an expensive device or having been locked into a long-term contract with significant penalties for switching," Rep. Ed Markey (D-Mass.) said during a July House Subcommittee hearing on wireless freedom.

This system has left the U.S. generations behind the rest of the developed world, a failure that prompted New York Times blogger David Pogue to call American carriers "calcified, conservative and way behind their European and Asian counterparts."

"For some reason I have never been able to understand, I have to ask permission of Verizon Wireless to attach a computer or the computers that they now call phones to their wireless networks," Jason Devitt, co-Founder and CEO of Skydeck testified during the Markey hearing. "I have to ask their permission to run applications and services on those phones."

Half Gestures in Small Slices

The FCC's July 31 order was meant to remedy this. In a four-to-one vote the agency moved to follow the "Carterfone" provisions that were imposed on the AT&T monopoly in a groundbreaking 1968 telecommunications decision.


Life without Carterfone

Prior to Carterfone, AT&T controlled every phone on its network, as wireless providers do today. The 1968 ruling pried opened the devices marketplace so that numerous new phone products -- including answering machines, fax machines, cordless phones, and early computer modems -- could be introduced by other manufacturers.

Applying Carterfone rules to the wireless marketplace could open the market for a similar revolution in gadgets while freeing up users to bring their handheld devices with them from one carrier to another. But the FCC order only applied to a slice of the 700 MHz band.

The FCC's move was praised in the trade press, even though it was a "half gesture" towards consumer and public interest advocates who have been calling for rules to foster innovation and create real open access standards across the entire spectrum.

But as with any change to the system, no matter how small, it posed a creeping threat to those that now dominate the marketplace.

And that's why Verizon sent in their lawyers.

1 comment:

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