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WASHINGTON — In the face of unprecedented regulatory interest in the wireless sector, it might seem a nervous time for the forces in the industry committed to opposing government oversight.
But to look at the head of the industry’s leading advocacy association, a consistent opponent of government interference in the private sector, you wouldn’t know it.
Most recently, the Federal Communications Commission issued a series of notices of inquiry (NOI) asking for comments on the state of investment, competition and innovation in the industry, a step that many have suggested is intended to lay the groundwork for a new era of regulation in the wireless sector.
“While some people may fear an NOI on innovation or competition, in the wireless industry, we relish those questions, those issues, as they come up before the commission, because we think we have a great story to tell,” Steve Largent, president and CEO of CTIA, told reporters this morning at the group’s Washington office. “It’s kind of hitting us right in our sweet spot.”
Largent and his team are in the process of meeting with the commissioners to discuss the issues and are compiling papers to submit in response to the inquiry. Largent said his first meeting with FCC Chairman Julius Genachowski, the Obama appointee who took over the commission in June, is scheduled for next week.
While Largent and the CTIA policy folks are eager to talk up the robust growth of the wireless sector and downplay the significance of the NOIs, some observers are convinced that the industry is headed into a period of intense regulatory scrutiny.
“At this point, the proceedings are focused on asking questions and collecting data and public comment, but we believe they will likely lead to proposals and actions next year and beyond,” Stifel Nicolaus analyst Rebecca Arbogast wrote in a research note after last week’s FCC action.
While it remains far from clear what form those proposals and actions might take, the commission is likely to look closely at the exclusive deals that wireless carriers strike with device makers to subsidize the production of chic new smartphones in exchange for exclusive service agreements.
Concerns about handset exclusivity have caught the attention of some lawmakers, who have made the issue the subject of recent hearings on the Hill.
The issue raises concerns about the state of competition in the industry, with smaller carriers complaining that their larger rivals are locking up all the hottest new devices hitting the market, putting them at a significant competitive disadvantage.
The big carriers counter that without the investment they make to subsidize the development and production, many of those devices would never make it to market at the current price point.
But for CTIA, which counts both large and small carriers as its members, that debate is a tricky one.
“The complaints are actually between our carriers,” Largent said. “We’re a little bit torn on this particular issue because we have small carriers, we have large carriers, and all the carriers have said to us, ‘CTIA, you guys just stay out of this fight. This is something that we’re going to work out amongst ourselves.’ And they actually have begun to work that out,” he said, referring to Verizon’s recent announcement to lift its exclusivity restrictions after six months, but only for the smallest carriers.
“We felt like that went a long way to calming some of the angst in our industry about the handset issue,” Largent said.
In addition to the handset issue, wireless network providers have become an increasingly popular conduit for the Internet — which has led them to begin facing some of the same calls for non-discriminatory network management that have long been leveled at cable and telecom firms.
Proponents of wireless Net neutrality favor government action to require carriers to allow all applications to pass through their networks without being slowed or blocked. But any effort to move legislation on the issue, or to extend the FCC’s existing broadband principles on openness and non-discrimination to the wireless sector, will encounter fierce opposition from CTIA.
“The first thing I would say is wireless networks are different than other networks,” Largent said. “We have to manage our networks because we’re not just sending Internet over our devices and through our networks, we’re sending voice calls as well.”
Largent described a scenario where a few users running data-intensive applications transmitted from the same cell tower could degrade the network to the point where an emergency phone call might have trouble getting through.
More spectrum would help, but only so much.
“If we’re able to get more spectrum, that problem to some degree may go away. Not go away entirely — I think we’ll always have to be able to have the capacity to manage our networks,” Largent said. “And that’s what really makes us unique in this argument … the necessity to manage our network to allow those 911 calls to go through in an emergency.”
Largent praised the efforts underway in Congress to take an inventory of how the wireless spectrum is currently deployed throughout government and the private sector, saying he hopes Congress and the FCC will move quickly to set up another auction.
“Our fear is that … the next spectrum auction takes somewhere between eight and 11 years to take place, as it did the last spectrum to be auctioned,” he said. “Our companies don’t need spectrum tomorrow, but they’re going to need spectrum before eight years.”
But in that spectrum auction, whenever it occurs, you can expect CTIA to oppose conditions such as open access or non-discrimination that many consumer advocates will likely press for. That’s because Largent, a former congressman and Hall of Fame football player, has an air of single-mindedness about his current position.
“My job is to always be concerned about additional regulation regardless of who’s in office,” he said. “Regardless of who the president is, regardless of who’s in Congress, regardless of who’s at the FCC, my job is to keep an eye out for harmful regulation of the wireless industry.”
