Net Neutrality Battle Spills Into Wireless World

A battle is brewing between wireless carriers and the feds--and caught in the crossfire are the smartphones, netbooks, and bandwidth-hungry mobile applications that users are increasingly enjoying. Both camps claim to be doing what's right for consumers: One side says that it is heading off a mobile meltdown by enforcing rules on the types of devices and services that can access networks, while the other says that giving users unfettered access to the wireless Web should be the priority.

Depending on which side wins, if you're an AT&T Mobility customer, in the future you might be prohibited from visiting certain Web sites or using competing voice and television services on your iPhone or on a 3G-enabled netbook. Or, in an alternate scenario, the Federal Communications Commission might be able to force Verizon Wireless to allow its customers to stress its cellular network through downloads of mammoth files via BitTorrent.

The fight, in a nutshell, is about who controls the wireless pipes of tomorrow, and whether emerging wireless services will bloom or wither as a result. In other words, the conflict concerns network neutrality--the idea that carriers must give equal treatment to all uses of the Internet--as it might be applied to the wireless industry. And just as network neutrality has caused a ruckus this week in Washington with a bevy of tech firms calling for stronger neutrality measures, in the wireless industry the debate is heating up.

Wireless Comes With Warnings

Illustration: Jeffrey Pelo
The problem, wireless providers such as AT&T say, is that wireless bandwidth is a finite resource. That has forced AT&T and other carriers to restrict bandwidth-hungry services--such as a mobile version of the video-streaming service for Slingbox--from running on their networks. AT&T says that if everyone could stream SlingPlayer data over AT&T's 3G network, the network would grind to a halt. Currently, users can run SlingPlayer, which streams content from a Slingbox device, only over Wi-Fi. 3G is off-limits.

AT&T says that it wants to keep a tight grip on its biggest bandwidth hogs. At the CTIA wireless-industry trade show earlier this month, AT&T Mobility president and chief executive officer Ralph de la Vega remarked that AT&T needs to manage its network's most-intensive users, alluding to the iPhone subscriber base.

De la Vega claims AT&T research shows that 3 percent of AT&T's smartphone customers (likely iPhone owners) use 40 percent of all the smartphone data on its network. He estimates that this 3 percent consumes 13 times the data of "the average smartphone customer" yet represents less than 1 percent of AT&T's total postpaid customer base. Is this disproportionate usage a harbinger of problems to come for other wireless carriers?

AT&T, Sprint, and Verizon all deal with bandwidth hogs by limiting the total amount of data that a customer can use each month to around 5GB for the 3G data service offered to laptop users. AT&T doesn't cap data usage for iPhone customers. If you go beyond the 5GB cap, the carriers either throttle your network speeds or charge overage fees. What's less clear is how they manage specific uses of their mobile networks before customers reach that bandwidth limit.

Things are even less straightforward when it comes to services that could be competitive with wireless carriers. "The number one concern any telecom has is about seeing their margins get eroded by new entrants with a different cost structure," says Joshua King, a wireless-industry veteran who has worked for AT&T Wireless and Clearwire. That new entrant might be a service like Google Voice or Skype, piggybacking on AT&T's own network. And the pricing for Google Voice or Skype is, in many cases, free.

Recently, with Apple's rejection of Google Voice on the iPhone, AT&T has found itself at the center of this issue. Though Apple has taken complete responsibility for rejecting the app, it's not hard to see how Google Voice's free text messaging and cheap international calls could ruffle AT&T's feathers. AT&T has shown a change of heart on Skype and other VoIP services, allowing them to run over 3G on the iPhone in exchange for AT&T talk-time voice minutes--but even so, using Skype over 3G as an alternative to traditional cell phone minutes isn't possible. All of this could change in an open wireless network, says King, who sees a proliferation of VoIP services in an age of regulated wireless Internet.

Is AT&T really worried about bandwidth, or is it just trying to keep a lid on competitive services? That remains the subject of debate.

Bring in the Feds

FCC Chairman Julius Genachowski
Enter Julius Genachowski, chairman of the Federal Communications Commission. In a speech to the wireless industry at the CTIA show, he acknowledged that one size doesn't fit all when it comes to regulation, but he reaffirmed his commitment to an open Internet, regardless of how people access it.

Under Genachowski, the FCC has been playing a more active role in the mobile industry's business. When Google Voice was rejected on the iPhone, the feds demanded answers from Apple, AT&T, and Google. Though Apple has said that AT&T wasn't involved with the decision, both companies were forced to admit that they have a deal to block VoIP applications (which Google Voice is not, technically).

The FCC then announced a broader probe into the entire wireless industry that will entail an examination of everything from billing to competition to coverage in rural versus urban areas. The probe marks a major shift from the policies of the George W. Bush administration, which took a hands-off approach in enforcing regulations on the wireless industry.

Things really heated up in September, when Genachowski announced his desire to turn existing network-neutrality principles, plus two new ones, into hard-and-fast rules. He added that the Internet should be open however users reach it, subtly suggesting that the wireless industry would come under scrutiny. Still, at the time Genachowski was vague about what wireless network neutrality would look like.

The FCC is slated to convene next week to vote on the net-neutrality rules that Genachowski has proposed. However, what the rules might mean for wireless carriers is still not clear. Speaking at the CTIA conference, Genachowski acknowledged that congestion issues and the competitive landscape of wireless pose "some difficult questions--questions that remain open and will be considered in the FCC's proceeding." He did make it known, however, that wireless carriers won't escape his vision of an open Internet, which allows consumers to decide how to use their smartphones and 3G cards.

What do wireless carriers want from the FCC? First off, they want the ability to manage their networks as they see fit. "We have to manage the network to make sure that the few cannot crowd out the many," said AT&T's de la Vega at the wireless trade association conference.

Secondly, carriers want the government to free up more wireless spectrum, and the CTIA trade group has formally requested that the government provide it. Spectrum, the array of radio frequencies that mobile Internet uses for transmission, is the all-important factor in determining how much data a carrier can handle at a time. Opening spectrum widens the wireless "pipes," allowing more bandwidth-reliant services to flow through. Even Genachowski has acknowledged that without freeing up more spectrum, a crisis looms. At the CTIA conference, he proposed offloading traffic onto Wi-Fi networks through smart antennas or femtocells. He also discussed reallocating unused or obsolete frequencies, though he said that "there are no easy pickings on the spectrum chart."

Max Hailperin, professor of computer science at Gustavus Adolphus College, says that as both sides continue to push for their interests, the definition of wireless network neutrality will become quite narrow. "The FCC will prohibit a few very narrowly defined, egregious behaviors, such as Comcast was found to have engaged in," he says, referring to how Comcast was caught blocking peer-to-peer file sharers over wired Internet.

Where Wireless Is Headed

Some industry watchers, such as Alex Winogradoff, a wireless expert with the market research firm Gartner, see the feds' meddling bringing an end to flat-rate pricing. T-Mobile, for instance, currently charges $25 a month for unlimited wireless data with the T-Mobile MyTouch 3G. As applications become even more bandwidth hungry--and if the FCC forces carriers to offer new applications against their will--carriers will switch to tiered billing to discourage bandwidth hogging, the argument goes.

But Chris Guttman-McCabe, CTIA vice president of regulatory affairs, says that even that won't solve instances where a lot of users are sucking up bandwidth at the same time, causing congestion even though they're within their individual usage limitations. Other experts wonder whether strict bandwidth caps will repel potential customers; Pablo Perez-Fernandez, a senior wireless analyst for MKM Partners, says the reason data has become so popular on smartphones is because users don't have to meter themselves with it as they do with voice minutes.

It's more likely, analysts say, that carriers will get some leniency to throttle down bandwidth-intensive uses. What remains to be determined in the months ahead is how much control carriers will have over specific services, such as VoIP.

Signs of Hope

A few recent developments have seen wireless carriers embracing openness voluntarily. Google and Verizon announced earlier this month that they will collaborate to develop applications on the Verizon network, including Google Voice. As for AT&T, VoIP applications, including Skype and Vonage, are now allowed on the iPhone for use over 3G. "I think that's exciting for consumers," says Michael Tempora, Vonage senior vice president of product management, adding that he fully expects AT&T to become more open on its own.

These are baby steps, but they put AT&T, Verizon, and their competitors in a tough position: They'll either have to continue opening up their networks or face an FCC that isn't shy about imposing regulation. Either way, it seems to be a win for consumers.

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