More on Skype’s Petition to Regulate Cellphone Carriers

by on February 22, 2007 · 6 comments

Skype’s petition seeking wireless net neutrality regulation lists a couple specific “abuses” the company claims justify FCC intervention. The first one is handset subsidies. All of the leading cellphone carriers heavily subsidize cellphones, because up-to-date handsets utilize spectrum more efficiently. The carriers recoup the subsidies via two-year service contracts. Criticized for discouraging consumers from switching providers, these arrangements nevertheless do help hold down the cost of service. Skype doesn’t like the fact that the subsidies put the carriers in a position to control the software that can be loaded onto the phones. Cellphones will soon roam seamlessly between 3G, Wi-Fi and DSL. Skype would like to cut deals with manufacturers to embed its software as a default setting.


According to Skype:

as innovative “smart phones” marry the versatility of computers with the convenience of mobile equipment, manufacturers are poised to equip handsets with Skype features but are reluctant to do so if such features threaten wireless carriers’ established business model….

The Nokia E61, a high-end e-mail device and phone seen as a competitor to the BlackBerry and Palm’s Treo, was released in Europe in the summer of 2006 and received favorable reviews. In the United States, however, Cingular (now AT&T) was the exclusive vendor of a stripped-down model known as the E62–a crippled model which lacked, among other features, Wi-Fi connectivity, a feature that is increasingly popular among on-the-go consumers….

Intentionally removing Wi-Fi functionality from the Nokia E62 interferes with a consumer’s ability to place Internet calls, thereby harming innovation and price competition.

Sure, Skype could save some time and money if it could bypass Cingular altogether and cut distribution deals directly with Nokia, LG, Motorola, Samsung and so on. But there’s no consumer benefit in that. Preventing Cingular from benefitting in any way from advertising and distribution deals would force the carrier to recover all of its network costs from subscribers.

There is a free market solution to the “problem” in which Skype finds itself. Skype could become a carrier itself and qualify for roaming privileges. Companies like Netgear and Belkin already produce Wi-Fi-enabled mobile phones. These phones could be made compatible with the GSM networks operated by Cingular and T-Mobile, for instance. Both of these carriers operate their own Wi-Fi hot-spots, incidentally, and have an interest in facilitating cellular-Wi-Fi roaming. Skype is seeking a regulated advantage over its competitors and should be rebuffed. The FCC should reject this petition and let the market sort this out.

  • http://t1-lines.net Mark Tomin

    Skype hasn’t even released the client for the symbian phones but already petitioning FCC? I have Nokia E60 and I am still waiting for the client. One of the reasons I bought the phone was to make VOIP calls. Interestingly enough, this phone, and E61 (both are WI-fi enabled) isn’t sold in US, so I had to get it from Europe.

    T1 Lines

  • http://t1-lines.net Mark Tomin

    Skype hasn’t even released the client for the symbian phones but already petitioning FCC? I have Nokia E60 and I am still waiting for the client. One of the reasons I bought the phone was to make VOIP calls. Interestingly enough, this phone, and E61 (both are WI-fi enabled) isn’t sold in US, so I had to get it from Europe.

    T1 Lines

  • dimitris

    Sorry Hance, but I have to call BS

    All of the leading cellphone carriers heavily subsidize cellphones, because up-to-date handsets utilize spectrum more efficiently.

    Whatwhatwhat? OK, the shift from GSM to 3G (and equivalent shift out of IS-95 for Verizon and Sprint) certainly has an element of spectrum efficiency, but handset subsidy and lock in have featured in US carriers’ plans for many years before the 3G networks became a reality.

    By the way, what spectrum savings could be realized by T-Mobile US, who is not even operating a 3G network yet? And yet they do subsidize handsets.

    Handset “subsidies” (which they aren’t – try getting a discount on service if you bring your own handset to the table) are a lock-in feature, pure and simple. For an illustration, see Verizon’s customers’ adventures with Bluetooth.

    If I were cynical I’d think I’m witnessing PR dollars flowing across Lake Washington…

  • dimitris

    Sorry Hance, but I have to call BS

    All of the leading cellphone carriers heavily subsidize cellphones, because up-to-date handsets utilize spectrum more efficiently.

    Whatwhatwhat? OK, the shift from GSM to 3G (and equivalent shift out of IS-95 for Verizon and Sprint) certainly has an element of spectrum efficiency, but handset subsidy and lock in have featured in US carriers’ plans for many years before the 3G networks became a reality.

    By the way, what spectrum savings could be realized by T-Mobile US, who is not even operating a 3G network yet? And yet they do subsidize handsets.

    Handset “subsidies” (which they aren’t – try getting a discount on service if you bring your own handset to the table) are a lock-in feature, pure and simple. For an illustration, see Verizon’s customers’ adventures with Bluetooth.

    If I were cynical I’d think I’m witnessing PR dollars flowing across Lake Washington…

  • fishbane

    It never ceases to amuse me when self-styled libertarians defend telecom.

    Sure, there are neat policy questions. Telecom nearly always wins those, and not on philosophical grounds, but on lobbying grounds. Next? Wake me when you start disputing the silly taxes on phone usage.

  • fishbane

    It never ceases to amuse me when self-styled libertarians defend telecom.

    Sure, there are neat policy questions. Telecom nearly always wins those, and not on philosophical grounds, but on lobbying grounds. Next? Wake me when you start disputing the silly taxes on phone usage.

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