More on Wireless Carterfone

Tom Coseven left a comment making some good points about last week’s podcast and wireless Carterfone. I also got an email raising some of the same objections, so let me see if I can address them.

First, in response to Tom’s first point, I didn’t mean to give the impression that Carterfone was an antitrust decision. My point was simply that the policy rationale for regulatory intervention is much stronger when you have a single, government-protected monopoly than it is when there are four (relatively) lightly regulated incumbents. Whether or not you want to call them an “oligopoly,” it’s clearly more likely that market competition will discipline network operators in a 4-firm industry than in a 1=firm industry. And on the margin, that makes the case for regulatory intervention weaker.

Here’s Tom again:

On the subject of implementation of an open access requirement, it could be done quite easily. The GSM and CDMA standards allow for very transparent connectivity at the device level with no affect on your visual voice feature you use as an example. Those kind of widgets sit at a higher layer on the phone. Either the phone has the software or it doesn’t (sort of like a downloaded game).

Part of the problem here is that I have yet to see a specific explanation of what a “Wireless Carterfone” rule would actually say. If we’re just talking about a rule that says “network operators must allow any GSM or CDMA (as the case may be) phone to connect to their network,” that’s certainly a pretty clear rule, and it may not lead to any problems. However, I have the impression that two of the four carriers (the GSM ones) already respect this rule. So if that’s all we’re talking about, the rule seems kind of superfluous. Anyone who wants the freedom to attach the phone of their choice can sign up with T-Mobile or AT&T.

However, I have the impression that Wu is talking about something more ambitious than that. One problem is suggested by the visual voicemail example. Right now, visual voicemail is only available as a proprietary feature of iPhones. The question is: if another phone vendor wants to implement visual voicemail on its phones, will a wireless Carterfone rule compel AT&T to open up its visual voicemail APIs to support other phone vendors? If the answer is no, then third-party phones will still be second-class citizens in some sense (although maybe a clever phone vendor will be able to reverse-engineer the VV protocol). If the answer is yes, then the FCC is going to have to get into messy questions about what the API has to look like, how much AT&T is allowed to charge for the service, etc.

At some points, however, Wu hints that what he’s proposing is much more ambitious than a simple “don’t discriminate among GSM phones” rule. For example, he gives the example of a fob that will tell you where your keys are regardless of where they are on the planet. Now, it’s not likely that a consumer is going to want to pay the $30/month it costs for a cell phone plan in order to obtain connectivity for his key fob. Which seems to suggest that under Wu’s plan, the FCC would have to get involved in dictating what kind of data plans the wireless carriers would have to offer and how much they can charge for them.

Now, again, this is all speculation on my part. Maybe I’m misunderstanding Wu and he’s got all these details worked out in a way that I haven’t thought of. But from what I’ve been able to find so far, I’m having trouble seeing how the rule could be as simple as Wu claims.

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