NEW YORK -- Proposed rules for a federal auction of valuable radio airwaves could entice tech giants such as Google Inc. to compete in the wireless market and spur the development of innovative consumer gadgets that work across any network.
But industry experts say a Federal Communications Commission plan with such "open access" requirements faces bruising opposition from major carriers such as AT&T; and Verizon Wireless.
The skirmish is over what will become of the multibillion-dollar radio spectrum that TV stations are giving up as they switch to digital signals in 2009. Those radio airwaves are widely desired, partly because they can easily penetrate buildings and could be used for long-range wireless broadband networks.
Debate intensifies
The debate intensified this week after reports that FCC Chairman Kevin J. Martin was preparing guidelines for the auction that attach conditions to about a third of the spectrum. Under those rules, winning companies would have to let consumers use any wireless device on those airwaves, a shift from the current U.S. system where cellular providers strictly control which handsets work for their subscribers.
For example, the popular Apple iPhone only works on AT&T; Inc.'s network.
Martin has said more open networks means more innovative devices and services.
His support is a victory for open access backers, including Google, Yahoo Inc. and Ebay Inc.'s Skype.
"If these open access conditions truly do create a world where any company can come in and make any kind of phone with any kind of an application that can be used on a wireless broadband network, that could really unleash a lot of cool stuff for consumers," said Rebecca Arbogast, an analyst with the Stifel, Nicolaus & Co. investment firm.
The auction is expected early next year, but Arbogast said the coming weeks in Washington may determine that future.
"There's going to be a lot of negotiation, posturing and maneuvering [by the carriers] trying to get the open access conditions as watered down as possible so that they become as meaningless as possible," she said. "And then there will be push back on the other side to try to beef them up."
She said some form of the proposal is likely to become reality.
AT&T; continued its fight yesterday, telling the FCC that Google's push to put conditions on license holders of the new spectrum would "deprive taxpayers of billions of dollars, inhibit the explosive growth of wireless broadband, and perhaps most importantly expose the FCC to reversal in the courts and thereby delay the vital public purposes to be served by [the auction]."
"Google's request is intended to diminish the value of those licenses, thus preventing wireless service providers such as AT&T; from bidding on them and clearing the path for Google to obtain them at below-market rates," AT&T; said.
Google and other technology companies want the government go even further than the proposed conditions by forcing wireless carriers to lease airwaves at wholesale rates to new players. "That's pushing the line further than I think the FCC may be willing to go," Arbogast said.
Advocates of open access often point to European and Asian countries, which typically lead the U.S. in wireless technology and offer consumers far more "unlocked" phones and gadgets. Those devices can use third-party software programs and work with different networks, staying with users if they switch carriers.
The trade-off is that those overseas customers often pay full retail prices for handsets, while U.S. carriers have embraced a business model that subsidizes prices.
While choice is good, most U.S. wireless subscribers prefer to have much cheaper handsets, even if it means being locked into two-year contracts, said Julie Ask, a Jupiter Research analyst. She said few Americans pay more than $100 for a cell phone.
'Bucket of minutes'
"What is really important for consumers is the quality of the coverage and the quality of the service as well as the perceived value - how much they're paying for a bucket of minutes," she said. "The device isn't as important."
Ask said U.S. carriers are careful about restricting devices and third-party applications because "they've paid a lot of money to get the spectrum, and if [customers] don't have a quality experience, consumers leave."
Part of the carrier resistance comes from the idea that multiple-network devices cost more and supporting them means "underwriting the freedom for their customers to leave," said Charles Golvin, a Forrester Research analyst. He said that because of this reality, the FCC's approach is naive.
Golvin said the carriers have tremendous lobbying power to get their way. He said that while anything that spurs innovation is good, in the end, "I don't see the auction being substantially different."