The U.S. Federal Communications Commission has approved a measure that
could force wireless operators to open their towers to competitors, including
small operators, for the first time. The vote was divided directly on
party lines with the Democratic majority voting to approve the measure.
Ostensibly the new rules are designed to promote
competition comes at a time when America will soon have only three big wireless
operators -- Verizon Communications, Inc. (VZ); Sprint Nextel
Corp. (S); and the merged
AT&T, Inc. (T)/T-Mobile (DTE). These
players tend to make decisions, including pricing in mass, forming a virtual oligopoly
or triopoly -- depending on your preferred term.
The decision to force them to relinquish part of
their chokehold on America's communications services isn't news that they took
kindly to. But it represents the latest step in a long
and reoccurring federal effort to try to break the large wireless carriers that the
feds allowed, and even promoted the formation of.
I. Opening the Lines -- A Brief History
The year was 1956 and it was an important time in
pop culture. Icon Jackson Pollock died in a tragic car crash; Elvis
Presley introduced the controversial burner "Hound Dog"; and Bob
Barker made his debut on the game show circuit. But for the corporate
world it was also a landmark year.
The first major event was the passage of the Federal
Highway Aid Highway Act, which gave birth to the Interstate Highway System
(today known as the National Highway System).
Many conservatives viewed the move at the time as an inordinate and
burdensome expansion of government, but Republican President Dwight D.
Eisenhower's decision to break ranks left a lasting legacy that is today an
integral part of our society.
Equally important was the year's U.S. Supreme
Court decision in the case Hush-a-Phone
v. United States, in which the court ruled that third parties could
legally connect their devices to the telephones of the American Telephone and
Telegraph company. That decision opened the doors to the possibility of
competition at a time when AT&T held a monopolistic death grip on the U.S.
A following decision in a 1968 Cartfone case
allowed third parties to directly attach equipment like phones to AT&T
wires. And just like that, small players could enter the market, without
having to worry about gathering billions in capital to build wires. The
decision also somewhat lessened AT&T's ability to locally undercut nascent
operators in prices in a bid to force them out of the market.
Then in 1976 the U.S. Department of Justice
decided to break up AT&T (known as "Ma Bell" at the time) into
seven smaller companies -- regional "Baby Bells". This approach
worked -- somewhat. The resulting companies were small enough to offer
some competition on a national scale. But at a local scale they were
still big enough to use their power to try to force would-be competitors out of
Thus many of the areas of the U.S. were still
stuck with a monopoly/duopoly.
In 1996, under Democratic President Bill Clinton,
the Federal government yet again tried to do something about the lack of
competition. It passed the Telecommunications Act of 1996 that forced the
phone giants to clear the way for smaller third party operators to interconnect
with their networks.
Before, the burden was on the carriers to figure
out how to connect their devices -- now it was on the networks. And the
bill gave a legislative backbone to the 1968 Cartfone decision, which had
served as an early mandate for interconnectedness.
But for all that work, the efforts were largely
washed down the drain. By the turn of the twenty-first century cell
phones were fast
looking to surpass landlines and early implementations of mobile data networks were
All those rules mandating interconnectedness for landlines
did not apply to cell phone towers. In other words, it was virtually
impossible for a small player to enter the market and provide a decent service
Meanwhile, the wireless operators began
consolidating. By 2005 there was only four players in the market --
Verizon, Sprint (who acquired
Nextel and Boost Mobile), AT&T, and T-Mobile. Now it looks like there
will only be three.
And the market has hardly become more open to new
II. Trying (Again) to Break the Monopoly
Much like the T-1000 in the film Terminator
2, the communications companies have an uncanny ability to remerge and find
new ways to escape federal mandates and block any hope of true competition in
The FCC hopes to change that. The new
measure will force cell phone operators to allow third parties to improve their
It is also expected to strengthen the quality of
service, even for subscribers to major networks. For example, Verizon
could use AT&T's strong data network and AT&T could leverage Verizon's
stronger voice network.
While some such provisions of inter-use (otherwise
known as "roaming") were in place, they were typically expensive and
rare. States FCC Chairman Julius Genachowski [profile],
"Roaming deals are simply not being widely offered."
The plan would force telecoms to reach a mutually
acceptable roaming agreement with third-parties. If an agreement were not
reached, the FCC would step in and play moderator, likely deciding on a cheaper
service rate than the big carriers would want.
The Republican Party has backed communications
monopolies both on a federal and a state scale. Republican Party
John McCain (R-Ariz.) accepted millions
in campaign donations from AT&T and free
service to his ranch.
In North Carolina, Arkansas, and South Carolina,
state legislators have received
thousands in campaign donations from communications firms looking to maintain their
local monopolies. These states are contemplating bills
that would block funding or approval of municipal projects that might offer
competition to the local monopoly/duopoly. In the process they look to
essentially block local governments' right to self-governance.
Thus it is perhaps not a surprise that the two
Republicans on the five-member FCC board dissented. They argued that the
provision was unfair and that the FCC lacked the authority to regulate it.
Stated Robert McDowell [profile],
a Republican commissioner, "The commission simply does not have the legal
authority [to back these rules]."
Mr. McDowell had worked as a telephone lobbyist
and policy brain at America's Carriers Telecommunications Association
(ACTA), before his appointment to the FCC.
The telecoms are also ardently opposed to the
measure. Both AT&T and Verizon have banded together to fight it.
Tauke, Verizon executive vice president of public affairs, policy and
communications to BusinessWeek, "[The decision] is a defeat
for both consumers and the innovation fostered by true competition [and brings]
a new level of unwarranted government intervention in the wireless
AT&T's chief privacy officer and senior
vice president of federal regulatory, Robert Quinn, similarly comments, "A
data-roaming mandate is unwarranted and will discourage investment. Proponents
of a roaming mandate were seeking government intervention, not to obtain
agreements -- which are plentiful -- but rather to regulate rates
Sprint Nextel, the smallest of the wireless
"Big Three", did not comment. Analysts say it may actually
approve of the measure, as it lags behind Verizon and AT&T in
infrastructure, nationally. The new rules could help it to catch up in
service quality, making its unlimited data plans even more attractive to
III. What's Next
For Verizon and AT&T this will be a bitter
pill to swallow. The unspoken truth here is that while some roaming
arrangements do occur, they're typically expensive and rare. What the
telecoms won't say outright, but Mr. Quinn's statements indicate that
infrastructure is expensive, so they don't want to share it.
Temporarily the telecoms may be right -- the
measure may slow the expansion of wireless networks, as the big players drag
their feet on new infrastructure spending, complaining about the burdens of
licensing their towers to competitors.
Ultimately consumer pressure will likely
eventually force them to adjust and continue deployment, though. If they
don't, their newfound competitors will.
But that scenario is still uncertain. The
legality of the FCC rules will likely be challenged. There are two places
that the FCC could get that authority officially confirmed from -- the U.S.
Supreme Court or the U.S. Congress.
Congress is currently divided with Republicans
controlling the House and Democrats controlling the Senate. The Supreme
Court is also considered relatively conservative. Thus the FCC may find
its ambitious effort to break big wireless's monopolies futile, as the courts
may rule, like they did with its efforts to block internet throttling, that it
does not have the authority to enforce its rules.
If that happens the nation -- and its wireless
consumers -- are back to square one. As they say, history has a tendency
to repeat itself.
quote: Do you really want all that extra radiation floating around the airwaves?
quote: smaller regional carriers just have to pay it or have a small network. This stifles competition.
quote: Errr...so basically what you're saying is screw Verizon and AT&T for building/buying those cell towers when they saw opportunity in mobile communication?
quote: That said, there needs to be SOME sort of solution.
quote: Doing just fine? Really? No one thinks that they're being taken advantage of, or even outright abused, by their cellular provider?
quote: Daily Tech is still a den of retards, leftists, and children devoid of near all intellectual ability.
quote: whats the major difference between a libertarian and a retard?
quote: I disagree with R77 that we don't need to watch these companies on our own as vigilant consumers/citizens (if that is what he thinks, as I didn't suppose btw).
quote: (if that is what he thinks, as I didn't suppose btw).
quote: I am on your side retard.
quote: I am suspect of anyone that volunteers up that they are a libertarian in passing conversation to somehow lend credence to what they are saying and to identify themselves separate from the two parties.
quote: Most of what i have seen from libertarians platform and those that fly the "don't tread on me flag"(can't come up with their own flag so they stole one from history) I don’t care for; enough to consider them part of the mushy middle and not part of the conservative movement.
quote: Well I'm a libertarian, all for economic and personal freedom and I am with you at least 75% of the way here. But we should still be vigilant that there might be problem that could arise from unfettered growth by corporate entities (and the gov't BTW!)
quote: Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.
quote: I'm just pointing out that your claim that millions of people are perfectly happy with their cellular service is ridiculous, and providing proof points as to why.
quote: You need to point out to me where I said I think it's OK for the government to take their towers.
quote: But then, ST can afford to sell that VERY SAME SERVICE to consumers at a price considerably less than HALF of what Verizon itself charges. That is the biggest point to take away here...if ST can pay Verizon to use it's infrastructure, turn around and sell that service to consumers for less than half of Verizon's own rates, and still turn a profit (they are) - what does that say about Verizon to start with? And by proxy, AT&T and the other major carriers?
quote: Someone who's got rental property isn't going to charge less in rent than what it takes them to pay their own mortgage on the property. There's no "already absorbed" anything - it's all in the mortgage the landlord has, and he has to charge enough rent to cover his mortgage.
quote: By that same token, I can assure you that Verizon isn't charging ST a fee that doesn't cover all their invested and ongoing costs in their infrastructure - to do otherwise would be financial suicide. All their research, marketing, R&D, everything you mention, I can assure you, has been accounted for in the rates that Verizon charges ST. If it didn't make economic sense for Verizon to sell ST bandwidth on it's infrastructure, including ALL costs, they wouldn't do it. Are you honestly stupid enough to believe that Verizon, VOLUNTARILY (as no one is forcing them to allow ST on their infrastructure) would let a 3rd party use their infrastructure at a rate below what would support their own costs?
quote: You're a catastrophic fool - and have proven it, once again, beyond the shadow of a doubt.
quote: I would part with you by recommending maybe you take a break from greasing your sweet Italian hair and attend some classes on economics and business - maybe there's a slim chance you'll come to understand capitalism some day. I doubt it...but maybe.
quote: If Sprint Nextel goes bankrupt/gets acquired, both of which seem very possible, given the company's financial struggles there will be TWO major players in the whole country.
quote: Both AT&T and Verizon make decisions, including pricing nearly simultaneously. Is this a violation of laws against collusion (e.g. the Sherman Antitrust Act)? Perhaps.
quote: Now the topic on hand this measure. Do I think it's a good measure? No, not really. I think the idea may be good, but I agree with the Republican commissioner to the extent that the FCC lacks the regulatory authority to enforce this.
quote: That said, there needs to be SOME sort of solution. I hear a lot of criticism of this solution, but so far the only real argument of an alternative (build your own towers!) has been a poor one for the competitive barrier reasons outlined above. I think its a topic that needs to be talked about and debated.
quote: This isn't a sub shop. This is a super-high tech venture that requires massive investment to even put your foot in the door.
quote: I guess if you build a tennis court in your back yard, I should be able to get the local government to force you to let me and anyone else pay you a fee to use it. Never mind if you don't want me using it because it's your property and you don't want strangers on it. I have a right to use a tennis court without spending the capitol to build one myself.
quote: OH right, your analogy makes no sense in this context.
quote: Logic. a form of reasoning in which one thing is inferred to be similar to another thing in a certain respect, on the basis of the known similarity between the things in other respects.
quote: If the cell companies can't afford to build cell towers then it's freaking game over, dude! What are you expecting here? You need capital to break into an existing market. It's not the job of the government to go around and police enterprise to allow for everyone who can't afford it to jump into that market.
quote: If so, have the tax breaks ceased and can't be taken advantage of now? I'm not familiar with them so I'm just asking.
quote: Good question. Apparently they were given the "Big Boy Monopoly Only" tax break that smaller carriers now can't take advantage of? Doubt it.
quote: Are you just naive on life? If you take money from someone, free money... Ultimately they will want something for that money.
quote: Wow, dude, your ignorant ravings are not relevant to the matter at hand. You obviously can't draw parallels which he clearly outlined in his comment.
quote: In any other way, it has the same rights as any person including the right to not have the government illegally seize its property. Which is, in effect, what the FCC would be doing. It would be stating that they no longer own their property and must give it out to others for a fee even if they don't want to.
quote: Secondly do you really want every company to have its own towers? Do you really want to see 8 cell towers every 20 miles or so?
quote: They should ensure that it is used to the maximum benefit of the people, not to maximize the bottom line of a corporation.
quote: Really I thought we are talking about waves and particles. The likely hood of them hitting each other in this amount of EM saturation is unlikely.
quote: Of course there are Physical limits before the electromagnetic spectrum becomes too staturated for any meaningful signals to be distingished.
quote: He can't. He's a moron.
quote: There is no monopoly here. Anyone can build a cell network in the US. You just have to have the money to do it.
quote: are narrow minded enough to believe the government is here to help you... You are the bigger fool.
quote: $200/month 4 year contracts with 500MB data caps to come.
quote: These companies can only charge what we are willing and able to pay.
quote: Clearly we are no where near this "cannot afford it" point..
quote: What motivation was there for your medium sized corporation to improve their product or provide additional benefit to their customer?
quote: By allowing for competition, the customer gets better service, better pricing, more innovation.
quote: However, contracts, exclusive contracts, vices that corporations come up with to eliminate competition make that very costly for the customer.
quote: That's not a fair comparison at all. You can pretty much put a restaurant anywhere, including your own home or a truck. The possibilities are endless.
quote: if bread was ... allocated by the government
quote: I eat children's brains
quote: The only reason there is no competition is strangle hold Government has on Frequencies.
quote: The U.S. Federal Communications Commission has approved a measure that could force wireless operators to open their towers to competitors, including small operators, for the first time.
quote: Then in 1976 the U.S. Department of Justice decided to break up AT&T...
quote: Equally important was the year's U.S. Supreme Court decision in the case Hush-a-Phone v. United States, in which the court ruled that third parties could legally connect their devices to the telephones of the American Telephone and Telegraph company. That decision opened the doors to the possibility of competition at a time when AT&T held a monopolistic death grip on the U.S. phone market.
quote: "Build Your Own Towers? .......Seriously?"