Crunch Time for Wireless Innovation

The FCC has a chance to unleash the entrepreneurial creativity consumers deserve and the U.S. needs to compete globally. Here's how not to blow it

A decision expected from the Federal Communications Commission on July 31 could affect the lives of millions, particularly those of us who use the Internet and mobile phones—and it's important that the public be up to speed.

The decision centers on how the FCC will sell licenses to use the public airwaves for wireless phones and Internet access. The outcome will determine whether the U.S. creates a competitive market that spurs innovation, bridges the digital divide, and catches us up with the rest of the world in broadband access, or continues with business as usual—handing sweetheart deals to politically connected mega-corporations.

FCC Chairman Kevin Martin shocked many when he publicly espoused a principle known as "open access," the idea that consumers should be able to buy a phone and use it on any network. This simple consumer protection would, for example, ensure that the Apple (AAPL) iPhone is available to all consumers, not just customers of AT&T (T). It seems revolutionary in a market dominated by a cartel of carriers. Martin's support for open access suggested to some that perhaps the political tide in Washington has turned further in favor of competition.

But as savvy telco lobbyists know, details matter. Martin's proposal—with last-minute backing from AT&T and Verizon (VZ)—is more a poison pill than a panacea. In fact, Martin could fatally undermine true openness if he embraces an any-device concept while ignoring other essential provisions, such as ensuring open access to networks and imposing build-out requirements on winning bidders.

Walled Gardens

Without such elements, the FCC will preserve a wireless-industry business model that is stuck somewhere between the Middle Ages and the 1990s—all walled gardens and no freedom to innovate. At Virgin Mobile, where I was part of the team early on, we spent almost two years trying to find a carrier that would let us onto its network. Only by focusing on lower-value customers the big carriers didn't want did we achieve success—and this with the backing of Richard Branson's Virgin Group. The chances for true upstarts—think a young Steve Jobs in his Palo Alto garage—are next to nil.

Fabrice Grinda is the founder of Zingy, the first U.S. ringtone company. Even though his is a success story, after his battles with the U.S. mobile market, he told me: "I won't touch wireless again—only Internet for me." On the Web or in the software and biotech industries, Silicon Valley blazes the trail. But in wireless, the U.S. follows Finland and Korea.

True open access would change that. A wholesale open-access license for a major chunk of the 700 MHz band would dramatically expand the number of competitors offering mobile voice and Internet access. This would be a huge public policy breakthrough for American broadband. Like the Internet, wireless would have a sandbox for innovation. Small entrepreneurs with novel ideas could bring products to market and get direct consumer feedback. No more groveling to the marketing departments of the cellular carriers for an opening. If you have a good idea, build it. "Let the market decide" would mean let consumers, not some telco executive, decide.

Four Principles

To achieve this vision of a healthy, competitive wireless industry, open access must include four basic principles: open devices, open services, open applications, and—crucially—open networks. We must open a portion of the 700 MHz band to a wholesale operator with the incentive to sell affordable access to this valuable spectrum to all third-party service providers.

Founders of companies like Txtbl and Skydeck have joined Silicon Valley champs like Google (GOOG) and eBay's (EBAY) Skype and public-interest groups like Public Knowledge and Free Press to ask the FCC to apply these four basic principles to any definition of open access.

We're in the 11th hour. The FCC can still do the right thing and jump-start a new era of innovation. But without true, wholesale open access, there will be little reason for innovators to go near wireless again.

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