Networking

FCC probles wireless industry at 'pivotal moment'

As expected, the Federal Communications Commission has launched multiple inquiries into the wireless industry, one focused on the billing practices of some top carriers and the others aimed at spurring innovation and competition in the market.

The inquiries, announced late last month, come after months of criticism from consumer groups and users who have said that exclusive smartphone deals — such as the one that made AT&T the sole network for Apple's iPhone — and other industry practices are unfairly boosting wireless prices.

Complaints filed with the FCC about wireless industry billing practices rose some 47% between 2007 and 2008, the agency said.

A notice of inquiry is a first step in the process of creating new FCC policy. Seeking input from multiple interested parties is part of that process.

“We are at a pivotal moment in the history of the mobile industry,” said FCC Chairman Julius Genachowski during the Aug. 27 FCC meeting where the inquiries were approved. “We are transitioning from a voice-centric world to a world of ubiquitous, mobile Internet access. This transition promises to increase the pace of innovation and investment.”

Consumer groups, such as the Washington-based nonprofit organization Free Press, have said that carriers are using exclusive smartphone deals and other policies to help justify higher wireless prices even as their technology investments decline.

“Wireless carriers are charging more but not improving the quality of network service with network buildouts and coverage,” contended Free Press policy counsel Chris Riley in an interview.

Riley noted that the major carriers all charge similar prices. He cited texting costs as the “poster child” for the pricing issue, noting that all of the carriers simultaneously raised the price of a text message from 10 cents to 15 cents and finally to 20 cents. “It all happened at about the same time, although I'm not saying they met in a room in Washington to decide on it,” Riley added.

He said developments like simultaneous price increases would be less likely if the federal government could help inject more competition into the wireless market.

Jack Gold, an analyst at J.Gold Associates LLC in Northboro, Mass., agreed that wireless prices will stabilize only with more competition. “We don't really have true competition, even with multiple carriers,” he said.

Gold suggested that the wireless industry needs a period of “true disruption,” similar to the one that the U.S. auto industry experienced 30 years ago with the influx of Japanese cars. That era marked the start of the decline of U.S. automakers, but it led to a period of innovation that yielded lower-cost, higher-quality vehicles.

Gold suggested that emerging technologies like WiMax networks or cellular networks created by cable television companies like Cox Communications Inc. could spawn similar disruption in the wireless industry.

He added that some wireless carriers have avoided cutting prices because they fear that a rapidly expanding user base could lead to choked networks as more and more people download videos and other data-rich applications.

AT&T spokesman Mark Siegel defended his company and the industry in general on the subjects of pricing, innovation and exclusive deals. “The U.S. has the lowest per-minute voice price — 5 cents — in the industrialized world, and it's hard to argue with a system that has produced the highest level of innovation in the world,” he said.

He contended that smartphone prices are dropping, pointing out that it's possible to buy an iPhone for $99.

AT&T is spending $18 billion in network upgrades, Siegel said. “We feel really good about where we are,” he added.

Members of the CTIA, a wireless trade association, are confused by the level of criticism aimed at the industry, especially by charges of overpricing and a failure to innovate, said Christopher Guttman-McCabe, the organization's vice president of regulatory affairs. CTIA membership includes wireless service providers, handset makers and a growing number of vendors of other wireless-based products and services, such as Google Inc.

“I think it's extremely hard to understand the criticism we're hearing,” he said. “People pay a hell of a lot less than they paid [for wireless services] 15 years ago, and think of what you get now that you couldn't get then. The wireless industry in the U.S. has the coolest handsets, the applications are more robust, and the networks have the highest speeds with the lowest pricing.

“I'm willing to debate where the industry is from an innovation perspective, but it's not fair to say we're not innovative,” Guttman-McCabe added. “Can things get better? Yes. But things will get better.”

The CTIA said it plans to provide any information sought by the FCC in connection with the three inquiries.

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