Do wireless tubes need to be neutral too?

A new paper argues that cell phones are a lousy development platform, and that …

As the debate over network neutrality regulations has raged over the last year, the focus has been on wired networks, and especially the "last mile" in residential broadband networks. Commentators on both sides have tended to hold up the cell phone market as an example of the kind of fiercely competitive and vibrant market that's made possible by real competition.

Now a new paper by Columbia law professor Tim Wu suggests that conditions in the wireless network are not as rosy as generally supposed. Wu's study is sponsored by the New America Foundation, a Washington think tank. It will be presented at a workshop being held yesterday and today by the Federal Trade Commission.

Wu criticizes the "oligopoly" of four major wireless carriers—Verizon, AT&T, Sprint/Nextel, and T-Mobile—for engaging in the same types of anticompetitive behaviors seen in the days of Ma Bell. And he argues that federal regulators must step in—as they did in the 1960s—to ensure that the incumbents do not stifle competition.

"A tar pit of misery, pain, and destruction"

The bulk of Wu's paper is devoted to discussing the various ways that the incumbent wireless carriers have impeded the development of new applications and devices for use on wireless networks. He notes that the major third-party development environments now available on cell phones—Java and BREW—employ virtual machines that limit applications' access to the capabilities of the underlying hardware. Moreover, all four of the carriers require extensive qualification procedures before someone can become a cell phone application developer, which effectively excludes small firms and hobbyists from entering the market for cell phone applications. Given the number of successful tech companies that started out as hobbies or grad school research projects, Wu argues, these barriers are a significant drag on the nascent market for cell phone applications.

Advanced SMS services are another example. Deploying a new SMS-based application costs thousands of dollars per month and requires the explicit permission of each carrier. It can take months for carriers to review and approve an application, and carriers have a wide variety of seemingly arbitrary reasons for rejecting proposals. Some carriers prohibit games or sweepstakes. Others ban dating services, "suggestive" images, and "crude" words like "fornicate" and "genital." Bizarrely, all four carriers ban charities from using SMS as a fundraising tool.

Carriers have also been known to deliberately cripple the capabilties of cell phones. For example, in an effort to protect their revenues from ringtones and subscriptions to photo-sharing sites, Verizon disables most of the Bluetooth capabilities of its cell phones. In many cases, the European or Asian version of the same phone comes with full Bluetooth capabilities, including the ability to transfer files to PCs. Carriers tend not to allow cell phones that have call timers, lest customers have an independent record of their calling activity for use in billing disputes. Rather than giving users access to the actual web, carriers in the late 1990s created a brand-new wireless-specific protocol, known as WAP, that was markedly inferior to traditional web standards and has since been abandoned.

Finally Wu criticizes Verizon and AT&T for misleadingly advertising their 3G data services as "unlimited broadband access" when in fact the service is sharply limited. As previously reported here at Ars, users are only allowed to use the connection for web browsing and email. They are not allowed to download videos, games, or music. And if they exceed the services' bandwidth caps (which are not published but appear to be around 166 MB/day), their accounts can be abruptly terminated. Some Verizon customers have even reported being chaged a $175 termination fee after their accounts were suspended.

Carterfone for wireless?

Wu argues that these problems are serious enough to merit regulatory intervention. He draws an analogy to the famous Carterfone decision, in which the FCC articulated the principle that has governed the regulation of the public telephone network ever since: that consumers have a right to attach any devices they choose, as long as those devices do not interfere with the proper functioning of that network. The Carterfone decision and subsequent FCC rulings opened the door for an explosion of new telecommunications devices in the 1970s and 1980s, including fax machines, answering machines, and modems.

Wu proposes that policymakers adopt the regulatory equivalent of the Carterfone decision for wireless networks. He would prohibit carriers from banning unapproved phones on their networks or locking phones to their networks. He also proposes that the FCC should "define a basic interface to which any equipment manufacturer could build a mobile device and sell to consumers." Wu urges that the network neutrality principles that the FCC now applies to cable and DSL providers be extended to the broadband services of wireless carriers as well.

On the other hand, he does not recommend government action to rescue third-party developers from the "tar pit" of limited and incompatible software development environments. Rather he urges carriers and equipment manufacturers to rethink their current technologies, with an eye to lowering the barriers to entry in cell phone software developments.

Surprisingly, Wu does not mention one reform that could alleviate what he identifies as the biggest barrier to entry in the wireless market: the high cost of spectrum. Various scholars have proposed that more spectrum be auctioned off to private firms for use in next-generation wireless services. That would make it feasible for more firms to enter the wireless marketplace, providing much-needed competition. Wu himself notes that the smallest of the national carriers, T-Mobile, also has the least restrictive policies. It is likely that if enough spectrum were made available to allow additional carriers to build nationwide networks, those carriers would tend to follow T-Mobile's lead and build more open networks than the largest incumbents.

Wu also does not spend much time considering the feasibility of enforcing open access rules on wireless carriers. Although Carterfone is widely regarded as a success, some more recent attempts by the FCC to force incumbents to open their networks to competition have not been so successful. The FCC unsuccessfully attempted to force the Baby Bells to share their DSL lines with competitors during the Clinton administration, sparking nearly a decade of litigation that only concluded with Supreme Court's 2005 Brand X decision. And the cable industry is fiercely resisting the FCC's attempts to open up the market for cable boxes, a process that has has been raging for close to a decade with no end in sight. It is likely that the wireless industry would be equally resistent to any effort to forcibly open its network to new entrants.

With the debate over network neutrality regulations of wireline broadband providers sucking all the oxygen out of the room, it's unlikely that Wu's proposals will have an impact on the telecom debate during this session of Congress. But as wireless technologies become ever more ubiquitous, questions about whether and how to regulate the wireless industry will only become more frequent and more contentious.

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