Unlocking the wireless safe: opening up the wireless world for consumers.

• Author: Clay, Adam

1. INTRODUCTION II. BACKGROUND: SKYPE'S PETITION TO THE FCC III. ARGUMENT: TURN CARRIER FOCUS ONTO NETWORK INFRASTRUCTURE A. The Time for Openness Is Now 1. Mobile Internet Is Developing Rapidly 2. What Is Net Neutrality? B. Is Opening the Networks Going To Help the Consumer? 1. Is Carterfone Properly Applicable to the Wireless Industry? 2. Wireless Carriers Should Be Forced to Allow Any Handset to Attach to Any Network 3. Allow Consumers To Use Whatever Applications They Wish as Long as They Do Not Harm the Network 4. Networks Should Share Their Limitations on Users as Well as Provide Technical Standards for Developers C. Recent Developments in the Wireless Industry 1. Verizon Wins Auction; Announces "Any Apps, Any Device" Plan 2. Google's Android and the Open Handset Alliance. IV. CONCLUSION I. INTRODUCTION

   Frustrated with the way that wireless carriers choose which applications they offer and which phones customers can use on their networks, a growing number of companies and interest groups are pushing to place these decisions in the hands of consumers. These groups want the FCC to take away some of the restrictive power that the wireless network operators hold over their networks in order to create an open network where consumers are free to use the handset of their choice and run any application they choose. The opposing wireless carriers want to retain the control they have historically retained over their wireless networks. The carriers would prefer to let the market, rather than the FCC, decide if consumers are actually demanding open networks. Internet phone service provider Skype Technologies (Skype) brought the first major initiative with its petition to the FCC asking for the application of the Carterfone (1) decision to the wireless industry. The FCC has yet to issue a ruling on this petition, and there have been many recent developments since June 2007 that may have an effect on the FCC's ultimate decision. This Note will track these developments relating to the open networks initiative and evaluate whether the relief that Skype is requesting is appropriate. In light of the current state of the wireless industry, the FCC should (1) require the carriers to provide technical standards detailing what kind of equipment and applications will be allowed to connect to their networks, (2) encourage the carriers to allow any devices which conform to be used by consumers, and (3) allow the carriers to continue to control what kinds of applications may connect to their networks.

2. BACKGROUND: SKYPE'S PETITION TO THE FCC

   Skype is a Luxembourg-based company that offers telephone service sending voice conversations over the Internet using Voice-over-Internet Protocol (VoIP) technology. (2) Skype offers free calls between users calling from their computers and low rates on calls between computer users and landline and mobile phone users. (3) Skype supplies the software that enables users to turn their computers into phones with the simple addition of a microphone. By filing its petition, Skype is essentially seeking to expand its market outside of computers by allowing consumers to use Skype from their wireless telephones. The low rates charged by Skype, and its position as a competitor, make it an ideal party to challenge the wireless operator's practices and appeal to the FCC for relief.

   Skype alleges that the wireless industry is not acting in the best interests of the consumer. (4) It points to wireless network operator practices such as phone crippling (5) and handset locking (6) as evidence that the networks are acting inappropriately. Skype points to the European model of allowing users to change the Subscriber Identity Module (SIM) card of the phone when moving between networks in order to retain a local number while in different countries. (7) In addition, Skype argues that the operators deny consumers the use of features and applications for reasons unrelated to harm to the network. (8) Finally, users are often unknowingly limited through their terms of service, which can prohibit the use of programs-such as Skype--that might compete with the operators. (9) All of these issues stem from the wireless network operator's near absolute control over what devices can connect to, and use, their network.

   The relief Skype is requesting revolves around a previous FCC ruling concerning the wired telephone industry. In Carterfone, the FCC was asked to rule on tariff FCC No. 132, which provided that, "[n]o equipment, apparatus, circuit or device not furnished by the telephone company shall be attached to or connected with the facilities furnished by the telephone company, whether physically, by induction or otherwise." (10) The Carterfone was designed to connect to the base station of a mobile radio system. (11) The developer of the Carterfone, Thomas F. Carter, filed a formal complaint pursuant to Section 208 of the Communications Act of 1934 (12) against AT&T. The examiner of that complaint found a need for the Carterfone device and, in addition, found that the Carterfone presented no "material adverse effect" when used in connection with the telephone network. (13) The FCC upheld the examiner's finding, ruling that it was "unreasonable and unduly discriminatory" for the tariff to apply to devices such as the Carterfone. (14) The FCC found that users have a right to attach devices to the telephone system as long as the device does not adversely affect the operations of the telephone company or the usefulness of the telephone system to other users. (15) AT&T's request that telephone companies be the sole arbiter to determine what may connect to the network was denied. (16) The FCC did, however, give the telephone companies the right to issue reasonable standards that devices connecting to the network must meet. (17) The FCC placed the burden of compliance with these and any revised standards upon the manufacturers of devices such as the Carterfone. (18)

   Skype and its supporters point to the positive outcomes arising from the Carterfone decision as further reason for enforcing the decision's principles in the wireless industry. The petition points out that the technical standards provided by the phone companies eventually led to the RJ-11 telephone jack, which in turn eventually gave us the dial-up modem. (19) The ruling also led to end-to-end production or "innovation without permission" in the wired industry, which allowed software designers to build a single component of a finished service without first getting permission from the network operator. (20) This kind of innovation is the exact opposite of the permission-based approach that Skype alleges is present in the current wireless industry. (21)

   In addition to Carterfone and the advantages deriving from its application, Skype points to two other FCC actions that support its petition. (22) Skype believes that both the FCC's Broadband Policy (23) and its 1992 Bundling Order (24) support the relief requested. The FCC's Broadband Policy states that consumers "are entitled to connect their choice of legal devices that do not harm the network" as well as being "entitled to run applications and use services of their choice, subject to the needs of law enforcement." (25) If applied to the wireless industry, this policy promotes the same relief that Skype is requesting from the FCC. In addition, the 1992 Bundling Order provides that wireless companies must offer, in addition to bundled services, "unfettered, nondiscriminatory service to consumers irrespective of equipment." (26) Skype asserts that the wireless companies are discriminating between customers based on the customer's equipment, a violation of the requirements of the FCC's order allowing the carriers to bundle handsets and service together.

   From the Carterfone ruling, the FCC's Broadband Policy, and the 1992 Bundling Order, Skype seeks three main forms of relief. (27) First, Skype wants the FCC to state clearly that the principles behind Carterfone--allowing users to connect all non-harmful devices to the network--will be applied to the wireless industry. Second, Skype requests that the FCC initiate a proceeding to determine whether the current practices by the wireless carriers are in line with those principles. Skype's last request is the creation of a mechanism that will ensure the openness of the wireless networks.

3. ARGUMENT: TURN CARRIER FOCUS ONTO NETWORK INFRASTRUCTURE

   The relief Skype is calling for has been challenged as inappropriate by both economists (28) and wireless network operators. (29) These groups believe that the current state of the market is sufficient to foster the innovation and competition that Skype states must come about through FCC regulation. Some even believe that application of the Carterfone principles to the wireless industry will have a negative effect for consumers. (30) In light of these arguments, the FCC should be careful in forcing the network operators into opening their networks, and should evaluate all the costs and benefits associated with doing so.

   1. The Time for Openness Is Now

      Skype believes that consumers and developers are ready for open networks. Carriers provide mobile phone service to over 200 million people in the United States. (31) In fact, wireless phone service has surpassed traditional wired phone service in number of users. (32) Along with this increase in users, there has been an increase in demand for mobile Internet, which allows users to access e-mail and surf the Internet from their mobile phones. (33) These developments prove that wireless technology has become increasingly important to consumers. It remains important that the FCC ensures the wireless industry is acting in accordance with the consumer's best interests.

      1. Mobile Internet Is Developing Rapidly

         Mobile Internet is one of the most important developments in the industry, and will only become more useful as the network infrastructure becomes more advanced. The...