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More on 700 MHz Block C Hits Reserve Price

This is big - Blair Levin’s Stifel Nicolaus report is saying that the reserve price of $4.6 billion has been met for the C Block.

For the upper band C Block, the FCC mandated that any winning licensee have in place “no locking” and “no blocking” provisions conditioning its use of this spectrum:

Licensees offering service on spectrum subject to this section shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice on the licensee’s C Block network, except:

(1) Insofar as such use would not be compliant with published technical standards reasonably necessary for the management or protection of the licensee’s network, or

(2) As required to comply with statute or applicable government regulation.

The no-locking, no-blocking requirements were hedged in by substantial limitations: the winning licensee would be able to lock and block devices and applications as long as they could show that their actions were related to “reasonable network management and protection,” or “compliance with applicable regulatory requirements.” The license winner would not be required to adhere to open-platform requirements on its other spectrum bands, would be allowed to continue to use its own (non-standardized) certification standards and processes to approve uses of devices and applications on their networks, would be allowed to protect the “safety and integrity” of their networks against non-carrier applications and devices, and would be permitted to restrict use of its network to devices “compatible with [the carrier’s] network control features.” Additionally, carriers would have the ability to deny interconnection to handsets and applications that were unable to provide location-information via the carrier’s E911 system (a system that is controlled by the carrier itself). In other words, as long as the discrimination could be shown to be connected (however indirectly) to some vision of “network management,” it would be permitted. These exceptions arguably provide any incumbent carrier that wins this C Block auction with ample slow-roll capability.

But it’s still important—very important—that this has happened. Particularly if Google is the winning bidder, something we may not know for a month or so.

Even without a wholesale access requirement, the incremental change to the wireless ecosystem made by these limitations is important. It’s important as a signal, it’s important as a stake in the ground, and it’s important in connection with the Skype petition—perhaps that will be viewed more favorably now by the FCC. It’s a victory for the public interest groups and for Google that any limitations at all were placed on this auction. It’s a victory for the legislators who pushed the FCC at the iPhone hearing. It means that we value, as a country, more interoperable wireless uses, the ability to use devices of our choice, and the ability to access applications we care about.

By Susan Crawford, Professor, Cardozo Law School in New York City

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Daniel T. Dreymann  –  Feb 1, 2008 3:12 PM

Dear Prof. Crawford:

In what way is this different than the situation TODAY on AT&T, T-Mobile, or any international GSM provider?

I’m an AT&T customer and Palm Treo user, so I’ll use them as an example:

Freedom of choice, devices:
I can purchase any GSM device I want, including devices that the folks at AT&T have never heard of. I pop in AT&T’s SIM card, and, voila, I’m using the device of my choice, on AT&T’s network, without requiring their prior blessing or permission.

Freedom of choice, applications:
AT&T provides me with a flat rate TCP/IP connection. I purchased a Palm Treo and I can install and use any application that I want. As a matter of fact, I’m using a bunch of internet applications from independent software vendors, including a nifty shareware that allows me to check flights status, written by… a high-school student.

Now granted, to buy an UNSUBSIDIZED, unlocked Treo, I had to pay more. I could have chosen to buy a subsidized, locked, Treo from AT&T’s store and it would have worked only on AT&T’s network. The choice was mine: want flexibility: pay more; want subsidies: accept restrictions.

Palm has chosen to offer unlocked devices. Apple has decided (in return for AT&T commitments) not to. Will this 700 MHz regulation apply to the next iPhones? Can Apple be forced to manufacture devices that would work on just any network? Or is it only AT&T that can’t prevent other devices from working on their network. It’s the latter, isn’t it?

So, apparently, what this regulation will do is limit consumer choice. Would a carrier subsidize devices if there is no guarantee they will generate operational revenues? Probably not. Most consumers will pay more for the handsets they purchase. Will they pay less for the service? Maybe.


Daniel Dreymann

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