As Barack Obama and the Democrats swept to victory in yesterday’s US election, the country’s wireless landscape had already started to shift, with a marathon session of voting at the FCC ‘ with key decisions opening up the broadband wireless market and promising a host of new services. A Democrat-controlled Congress and FCC may spell further liberalization and more aggressive support for open access and new entrants, but FCC chair Kevin Martin left his mark, particularly with a unanimous vote to free up the white space spectrum in the TV bands for unlicensed broadband wireless applications.
Another significant vote was to approve the merger of Clearwire with Sprint’s Xohm unit to form the company with the best chance of building a nationwide mobile broadband network for open access, 4G-style services ‘ putting new pressure on Verizon and AT&T into the bargain. Verizon also scored a win, with its takeover of Alltel being cleared by the FCC, though only after four hours of debate. And a less noticed FCC decision a few days earlier was also significant for WiMAX and increased broadband wireless coverage, with satellite provider Globalstar being cleared to offer hybrid satellite/WiMAX services for rural areas.
The FCC had been forced to delay votes on some other significant issues, notably intercarrier compensation and the structure of the Universal Service Fund, though it hopes to address these next month, and it now says it will begin a review of pricing policies at the cablecos and Verizon (but not, for some reason, Martin’s friends at AT&T). Much of this work will fall to a new FCC line-up after the agency changes hands early next year, as will seeing through the controversial auctions of 2.1GHz AWS-3 spectrum (earmarked for a national free wireless services) and the 700MHz D Band (designated for a public/private public safety network).
Democrat control of the White House and Congress will spell broader policy changes in wireless and telecoms too, of course. In particular, the new administration will be expected to take a more aggressive stance on open access and net neutrality. Although the established wireless interests scored some major victories under Democrat president Bill Clinton, and came under more pressure during Michael Powell’s reign at the FCC in the first half of the current presidency, the past three years under FCC chair Kevin Martin have been the kindest for years towards the big carriers. Martin has been publicly in favor of major market shifts such as open access, increased broadband competition and more freely or lightly licensed spectrum options; but in reality has made few really decisive actions, rubber stamping massive consolidation around the largest players and leaving progress largely down to the operators’ own agendas.
A Democrat at the helm would be likely to step up the pace on open access ‘ Martin’s main contribution so far has been to mandate open access options within the national 700MHz license won by Verizon Wireless, but the Democrats are heavily in favour of openness and its cousin, net neutrality, and would be expected to increase state intervention to ensure rapid progress and encourage new players.
However, Martin is determined to show his open access and pro-competition teeth more aggressively in his final months at the FCC helm, and the November 4 votes certainly set the stage for a revolution in open, competitive and universal mobile broadband services, that the Democrats can build upon.
In particular, the white spaces vote is a huge victory for a group of powerful companies, led by Google, Motorola, Microsoft and Philips, which has been campaigning to open up this wasted spectrum for six years. Despite protests from broadcasters and some other camps, the FCC approved rules for devices in the 300MHz-400MHz of prime spectrum, which has strong ability to penetrate walls.
“As an engineer, I was really gratified to see that the FCC decided to put science over politics,” Larry Page, co-founder of Google, said on his blog. “For years the broadcasting lobby and others have tried to spread fear and confusion about this technology, rather than allow the FCC’s engineers to simply do their work.” A report from the FCC engineering department recently found that, given suitable anti-interference safeguards ‘ a combination of sensing and geolocation – devices in the white spaces did not affect broadcasts or other systems like wireless microphones.
Page argued the FCC move would spur significant new services and support new providers, as well as sparking technological innovation around various devices that could use the spaces. The unlicensed nature of the bands could create a market on the same scale as Wi-Fi, which is likely to be included in one billion chips this year
The new rules will require fixed and portable unlicensed devices to include geolocation technology in addition to spectrum sensing technology. For some low power devices that do not incorporate geolocation, there will be a far more rigorous approval process. All white space devices must be tested and certified by the FCC Laboratory, like cellphones.
The Clearwire approval is also important in creating a significant disruptive force in US telecoms, and following the positive FCC vote, the deal is likely to be finalized, as hoped, by year end. Ben Wolff, CEO of the current Clearwire, said last week: ‘Everyone understands it’s a pro-competitive deal. It creates a new nationwide broadband network. It’s not a partisan issue. It’s just good policy.’ Clearwire shareholders will vote on November 19, the last major hurdle to cross.
The main objections had come from AT&T, and some other telcos, which argued the deal, and especially the huge spectrum base it concentrates in the hands of one operator, should be scrutinized more closely. The transaction involves a $3.2bn capital injection from Intel, Google and three cablecos (Comcast, Time Warner Cable and New House).
Both halves of the deal, Xohm and Clearwire, are rolling out Mobile WiMAX networks, but clearly their business model hardly makes sense without the increased capital of the new stakeholders. While legal requirements mean they have to appear to be acting very separately, Wolff said in his interview that they were coordinating as closely as the law allowed, so as to gain maximum efficiencies once they become a single entity. He said: ‘If we have this deal closed by the end of the year, it would clearly make sense for us to have everything from back office preparation to branding and marketing on the same page.’
Wolff will remain CEO of Clearwire after the deal closes, while Xohm chief Barry West will become president. Despite the new investors, the company is expected to seek to raise an additional $2bn-$2.3bn in funding fairly quickly, global markets allowing ‘ the $3.2bn infusion will take it through to 2010.
So Clearwire should be free, from the start of 2009, to start achieving its goal of offering true wireless broadband on a nationwide scale. But of course, ‘nationwide service’ rarely means that in the US, so another, less publicized, FCC decision could be highly significant too, for rural US citizens and for the WiMAX platform. This is the clearance for mobile satellite giant Globalstar to run WiMAX in its spectrum, creating hybrid satellite/terrestrial networks that are cost effective for rural coverage, and could bring mobile broadband to the people that Clearwire misses.
One huge problem for any wireless business model is the difficulty of making a profit from rural networks, built in areas of sparse population ‘ especially when the carrier is working in 2.5GHz, a high frequency geared to small cells and urban build-out, not the long ranges required for rural networks to be cost effective. The problems of delivering data and broadband services to far-flung regions has created an opportunity over the years for mobile satellite providers, but they have their own profitability challenges, because of the high cost of their infrastructure, devices and services. Combining the relatively low costs of wireless networks and standardized handsets with the huge reach of satellite seems like an ideal solution, and one supported by the FCC when it awarded spectrum two years ago to several operators specifically to support hybrid services.
One of these is ICO, which is controlled by Craig McCaw, the founder of Clearwire, so a partnership between these two entities ‘ which are already trialing equipment ‘ is certainly a possibility on the US WiMAX horizon. Also bringing WiMAX to this satellite/terrestrial landscape is Globalstar, which had been fighting for the right to support ATC (Advanced Terrestrial Component), the key technology underpinning hybrid services. This was previously only permitted in the special spectrum granted to the ATC operators ICO, MSV and Terrestar, but Globalstar can now support the system in its own frequencies.
This, said the operator, will enable it to offer WiMAX to over 500 underserved rural communities in the US, working with its spectrum lessee Open Range Communications. Globalstar and Open Range, as well as having their license terms modified to allow the WiMAX build-out, will also gain a $267m loan from the Department of Agriculture’s Rural Development Utilities Program (contingent on FCC conditions and government approval).
“We are very pleased that the FCC has authorized Globalstar and our WiMAX partner to proceed with adding WiMAX service to our mobile satellite service in rural communities throughout America beginning next year,” said Jay Monroe, CEO of Globalstar. ‘Today’s FCC action is an important step in closing the digital divide in America. We expect our partner to initially deploy infrastructure in more than 500 rural communities with the ability to expand the relationship over the next six years to additional markets covering 50m people or about 15% of the US population.” Globalstar said it plans to pursue discussions with other possible wireless partners in the US and other countries.
Despite the progress made this week at the FCC, some key debates were postponed and other issues, such as federal pre-emption, have hardly been addressed, and will largely be left to the next administration. Martin was forced to delay decisions on intercarrier compensation – how phone companies pay one another for long distance calls that traverse their networks ‘ and the workings of the Universal Service Fund, which helps telcos in rural areas. Martin favors a radically different and simplified system, with uniform charges nationwide, and also a change in how fees are assessed for the USF. Both issues are highly controversial, but could be revisited as early as December 18.
“I am disappointed that we will miss the opportunity for comprehensive reform,” Martin said. “I would like to be encouraged by my colleagues’ commitment that they will truly be ready to complete this much needed reform on December 18. The nature of the questions they would like to include makes me doubt they will have found their answers with an additional seven weeks.’ Martin’s proposals were largely seen as beneficial to the large telcos and were opposed by consumer advocates, smaller carriers and state regulators.
One area where the wireless industry will want more progress from a new FCC will be federal pre-emption, which the carriers want adopted as part of a national policy, bringing uniformity to regulations and consumer protection nationwide. So far, limited moves by Congress and the FCC have been stalled by opposition from states and consumer groups. The aim is a national set of wireless consumer standards, covering areas like termination fees and billing, that would be enforceable by states but would prevent individual states pursuing their own regulations, an approach that has left carriers vulnerable to consumer lawsuits.
Over at the FCC, even if Martin achieves his goal of finalizing rules on the 700MHz reauction (the basis of the planned public safety network), and the AWS-3 sale (which would support a free wireless broadband service nationwide), this week, his successor would still have to see through the decisions, since Martin will leave early next year. Other regulatory changes that will be on the early agenda for a new FCC chair will be voice and data roaming, E-911 location accuracy, and use of the white spaces in the TV spectrum (another issue Martin had hoped to address on November 4, but which is likely to prove too controversial for a fast track vote).
Another important issue for early 2009 will be the rulemaking, which has just begun at the FCC, on the Rural Cellular Association’s request to investigate carrier exclusives with handset makers; and the Rural Telecommunications Group’s petition to impose on wireless providers a per-market spectrum aggregation limit of 110MHz below the 2.3GHz band. Both demands are likely to be favoured by a Democrat dominated FCC and are heavily opposed by the big four cellcos.