Thanks to an unidentified bidder in the FCC’s closely watched wireless spectrum auction, it’s now all but guaranteed that an open wireless network will emerge in the United States.
The Federal Communications Commission, which is not revealing bidders’ identifies, on Thursday said it had received a $4.7 billion offer for a block of frequencies in the 700MHz band.
Since the bid meets the FCC’s reserve price, it puts into play an important rule governing the auction: The spectrum winner now must allow any devices and any applications on the frequencies.
That now stands to unleash both unlimited possibilities for wireless services as well as fears that the possibilities may be undercut if the high bidder isn’t fully behind the notion of an open network.
“The dream of the 700MHz band is that you can walk into Best Buy and everything in there is wireless,” said Amol Sarva, co-founder and CEO of Txtbl, a wireless start-up in New York and leader of the Wireless Founders Coalition for Innovation.
“However, this may end up looking like your broadband experience at home, and nobody likes their cable company,” Sarva said. “It would be one step short of the dream.”
In an effort to stimulate competition in broadband delivery and innovation in the wireless industry, the FCC decided last year that the winner of one subset of 700MHz frequencies — known as the C Block — must allow any devices and any applications on the network.
Google led the charge for these and other open network requirements, and public interest groups lauded the company’s plans. The requirements would have been dropped, however, had the minimum-acceptable bid of $4.6 billion not been received.
Now that minimum has been exceeded, however, application developers, entrepreneurs and start-up companies will have the freedom to begin experimenting.
How might an open network change things?
For instance, today’s Internet-enabled mobile phones and in-car navigation systems use wireless networks. But the closed networks on which they operate limit their functionality and availability, locking them into carrier-sanctioned features while excluding non-approved devices and applications.
“Pretty much every consumer electronics device you can imagine stands to be improved by having some wireless functionality,” said Jason Devitt, CEO of Skydeck, a mobile services start-up in San Mateo, Calif. “The point is to give innovators and entrepreneurs the chance to come out with as broad of range of ideas as possible, as opposed to a handful of executives sitting in office suites.”
Industry experts compare the new opportunities to those brought about by the introduction of competition in plain old telephony. Today, it’s hard to even recall the day when the only phone available was a plain, black model plugged into the wall — with a price dictated by the phone company.
“If you allow third-party device makers to come in, you don’t have the network provider picking winners and losers in handsets,” said Gigi Sohn, president of the public interest group Public Knowledge. “It’s like regular telephones — I can buy a telephone for $7 today.”
Will the real bidder please stand up?
While auction bidding is anonymous, analysts speculated that of the 214 participants, Google, Verizon Wireless, AT&T and Echostar were the most likely to be interested in the C Block.
Several analyst groups, including UBS, speculated on Thursday that Verizon Wireless likely placed the $4.7 billion bid, and that it is unlikely to be outbid.
Ironically, Verizon Wireless, along with AT&T, initially fought the open network rules. Verizon went so far as to file a lawsuit against the FCC, alleging that the conditions would violate the First Amendment. Almost immediately, the wireless industry’s largest lobbying group, CTIA, filed a similar suit against the commission.
Still, given the incumbent phone companies’ track record on openness and innovation, public interest groups would rather see Google win the spectrum.
Additionally, Google unsuccessfully sought a requirement to make the C Block frequencies available at wholesale prices, which would have created an opportunity for even more providers to offer services.
“I do think that Google is dedicated to not only open platform but also wholesaling,” Sohn said. “I think it benefits them to have more broadband providers in the mix than fewer. But if Verizon gets [the spectrum], Verizon doesn’t compete with itself.”
Some industry observers expect that if a large network like Verizon wins the C Block spectrum, it will incorporate it into its existing network — along with the restrictions that entails.
Fortunately for open-network advocates, since the FCC established the open network conditions for the C Block, a number of wireless carriers have made public statements touting varying degrees of “openness” on their networks.
In its own claims, Verizon Wireless said it expects later this year to give customers the option to use devices and applications offered by other companies. It also plans to sponsor a conference in March, focusing on the development of new devices to run on its existing network.
Yet Verizon said in November it would still require device manufactures to submit to an approval process before their products can use its network.
As a result, it’s how unclear how unrestricted its network might become, and how open its C Block spectrum might be if it chooses to merge it with its existing business — as some say is likely.
“It makes sense for [Verizon] to not want to operate two business models,” Devitt said. “It’s not merely a question of saying you’re open. The C Block gives them discretion. It’s not as simple as it’s open or it’s closed.”
The FCC will release the identity of spectrum winners after the auction is closed, which could be several weeks or several months, depending on bidding in other blocks.