Airwave auction rules let you bring your own beach ball, but the sand still belongs to the same old cellular service providers
The government is preparing to auction a swath of the public airwaves described as beachfront wireless property because of the way these radio frequencies penetrate walls and provide great indoor reception.
This beachfront metaphor is even more apt now that the auction rules ensure less fun in the sun for everyone but the nation's big cellular companies.
Most beaches, even private ones, don't have bouncers stationed at the entrance to check that you've brought only a beach ball sold by the beach's owner, filled with special air they sell at inflated prices. They also don't tend to dictate which games you can play with the ball, nor puncture your ball and send you home if you refuse to abide the sanctioned list of games.
But that's the situation that faces all users of U.S. cellular networks today. That's a far cry from the controlled anarchy that reigns in the Wi-Fi realm, where diversity and competition ensure beach balls in every color and size, and a thousand other beach toys as well.
The FCC's Two Cents
For a moment, it seemed the government might shield us from getting even more of this cellular sand kicked in our faces. The FCC briefly considered auction rules that would have opened one set of national licenses in a way that would encourage a proliferation of service providers, services, and hardware—the sort of beach where, in place of an exclusive clubhouse, there'd be a raucous boardwalk littered with carnival barkers hawking their diverse amusements.
Instead, the FCC opted for rules that largely ensure that existing carriers will win the auctions, preventing a Wi-Fi-like Cambrian explosion of equipment and services. Yes, the rules add some of the new openness urged by Google (GOOG), Skype (EBAY), and a host of public interest groups: The winning bidder for about a third of the spectrum being auctioned will be required to provide a network on which customers can use any phone and access any service created by any third party.
While this concession means you'll be able to bring any beach ball you want and play any game you like, the beach owner will still be allowed to kick you out if he decides you're staying too long or spreading out too many blankets. It's his beach, not yours.
Sadly, the FCC declined to mandate that the owner be required to let a third party lease capacity on the network to sell its own package of services under its own brand, no matter how exotic. With such a requirement in place, micro-providers would have sprung up by the thousands.
I see Wi-Fi as a prime example of what can be done with the sort of open forum that a wholesale requirement in the FCC auction might have created. Wi-Fi uses unlicensed spectrum, often called a "junk" band for the variety of purposes that have been tossed into it, from cordless phones to microwave ovens.
These junk bands are public beaches, and rather messy ones. Imagine circus elephants, dune buggies, nude bathers, and a dense crush of people all sharing the same beach. It's noisy, chaotic, and the line for sno-cones is sometimes not worth the wait. But the fabulous success of that beach is evinced by the 3,500 different devices that are now certified to connect with Wi-Fi networks. And the FCC has certified thousands more devices that belong to the same 802.11 family of wireless specifications as Wi-Fi, or that use entirely different, incompatible standards but work on the same spectrum.
These thousands of devices include cameras, smartphones, organizers, gaming systems—even a dancing bunny that wiggles its ears and speaks to you based on the Wi-Fi signals it receives, the Nabaztag (www.nabaztag.com).
Part of the reason for the sheer number of Wi-Fi devices is the lower production cost that comes with an open network and open standards coupled with the assurance of a mass audience. SmartSynch, a Mississippi company that makes "smart" utility meters that can transmit their readings using either cellular or Wi-Fi networks, spends more than $150,000 to obtain device certification from a cellular operator to connect with its network. By contrast, all they need for a Wi-Fi-style network attachment is FCC certification, which runs about $10,000.
That said, because the signal from a single Wi-Fi transmitter can only travel hundreds of feet, it's harder to use the technology to provide the sort of blanket wireless reception you get with a cellular network. In addition, the signals can be too weak to reach indoors if there aren't enough transmitters.
It's here where the 700MHz licenses in question become quite attractive. First, network operators will be able to transmit with 1,000 times the signal power of Wi-Fi, allowing far fewer transmitters. Second, 700MHz radio waves travel further than higher-frequency signals. A single 700MHz base station covers four times the area as the same signal power from one of the 2,500MHz base stations used by Sprint Nextel (S) and Clearwire (CLWR) to build a new national network.
But while the propagation of radio waves is of interest to the big cell carriers, Wi-Fi's carnival-like inclusion is not. The carriers are most interested in keeping tight control over their networks and the devices that connect to them.
Take Verizon Wireless (the joint venture of Verizon Communications (VZ) and Vodafone (VOD)), which limits its customers to perhaps 100 phones and devices, such as computer cards for wireless Internet access. Using those phones, customers can buy ringtones, songs, videos, and games only from Verizon's authorized partners. Even with a $60 "unlimited" wireless data plan for a computer, Verizon's terms of service only allow customers to check e-mail, surf the Web, and use certain business applications—to a point. (Seriously, read the fine print of the company's terms and conditions.) Dare to use more than 5GB of data a month, and you'll receive a summary "buh-bye" letter from the carrier despite the "unlimited" label on its service.
Under the auction terms for the slice of the airwaves that will come with new strings attached, no carrier will be allowed to impose conditions on handsets or activities. But they will still be allowed to restrict your bandwidth and deny access to devices that "harm" the network. Since Verizon already treats streaming video or more than 5GB of data per month as harmful to its network, there's no reason to suspect they wouldn't make the same case in the so-called open 700 MHz band if they win the licenses.
It's absurd to say that the conditions urged by Google and others would have ushered the creation of a third broadband alternative on par with high-speed DSL and cable modem connections. It's also naive to think that Google's motives are all pure. But the cold, hard fact is that this auction represents the last chance to exploit a substantial hunk of spectrum that we may see for 10 to 20 years.
We could have had dancing rabbits; instead, we'll have more of the same.