Handset Makers Oppose Carterfone Rules for Wireless

Two major manufacturers of handsets weighed in against a Skype petition asking the FCC to impose Carterfone rules on wireless carriers. Motorola and LG Electronics sided with carriers in opposing the petition. Industry sources said this opposition may reflect pressure from wireless carriers, on an issue that has become a CTIA priority (CD May 1 p1).

“Carriers control 95% of the handset market and, clearly, opposing them is a complicated thing,” said a wireless industry source. “Carriers are very capable of passing on your devices. The carriers have obviously made this a major issue.”

“Most of handset manufacturers have relationships with the major wireless providers,” said a wireline source who follows net neutrality issues: “Rather than harm that relationship, in the short term it’s in their economic interest to maintain that relationship.” The source said equipment makers with ties to the Bells similarly sided with them in the broadband regulatory classification proceeding.

A CTIA spokesman said the filings speak for themselves. “Every filer places their good name and trusted brand behind their comments and should therefore be taken at their word,” the spokesman said.

The equipment makers’ arguments are similar to CTIA’s and the carriers’. “Unlike the wireline monopoly that existed at the time of Carterfone,… the wireless market is vibrantly competitive,” said market leader Motorola: “Such competition makes the imposition of a Carterfone-like regulatory regime on the wireless industry unnecessary… Today’s market for wireless services, devices and applications is thriving and no need exists for the Commission to intervene by imposing Carterfone-like requirements on the wireless industry.”

LG said: “The purpose of the Carterfone decision was to prevent extension of legacy AT&T’s monopoly power into the end-user equipment market through its vertically integrated manufacturing arm, Western Electric. Given the highly competitive nature of today’s wireless handset and services markets, a Carterfone policy is not needed.” Nokia’s E61 handset -- recast in the U.S. market and stripped of its Wi- Fi connectivity by Cingular (CD Feb 22 p6) -- was cited by Skype as a prime example of why the FCC should impose Carterfone rules. Nokia didn’t file on the petition.

CEA, which represents equipment makers among its more than 2,000 members, said adoption of Carterfone rules for wireless would be “premature… Rather, we suggest that the Commission consider a full examination of the marketplace and technical restraints related to consumers’ ability to attach nonharmful devices to wireless broadband Internet access services.”

Carriers lined up in support of CTIA and against Skype. “By all accounts, nothing in this thriving marketplace is broken,” T-Mobile said: “Even Skype acknowledges the ‘unquestioned success’ of today’s wireless marketplace -- yet it urges regulators to ‘do better’ still through unprecedented regulatory intervention into the workings of the wireless industry.”

But NASUCA said Carterfone rules should be extended to wireless. “It will certainly be argued that Carterfone arose in a monopolistic environment, in stark contrast to wireless, which was ostensibly competitive at the outset, somehow justifying cellphone locking,” the group said: “But the wireless market, like many other markets in telecom, is becoming more consolidated, not more competitive.”

The American Petroleum Institute, which represents oil companies, said its members believe the Skype petition is “long over due… Large business customers clearly desire the flexibility to maintain the use of wireless devices as they migrate from one wireless carrier to another… Increasingly sophisticated devices, including PDAs, enable not only voice service and related features, but also Internet search and e- mail capabilities, and provide useful calendaring and contact list functions. The embedded technology and durability of these devices have useful lives that exceed the typical two- year service agreement terms that are common in both the consumer and business marketplace.”