59 Pages Posted: 7 Jan 2008
Date Written: January 2008
Wireless operators in most nations qualify for streamlined regulation when providing telecommunications services and even less government oversight when providing information services, entertainment and electronic publishing. In the United States, Congressional legislation, real or perceived competition and regulator discomfort with ventures that provide both regulated and largely unregulated services contribute to the view that the Federal Communications Commission ("FCC") has no significant regulatory mandate to safeguard the public interest. Such a hands off approach made sense when cellular telephone carriers primarily offered voice and text messaging services in a marketplace with six or more facilities-based competitors in most metropolitan areas.
However the wireless industry has become significantly more concentrated even as wireless networking increasingly serves as a key medium for accessing a broad array of information, communications and entertainment ("ICE") services. As wireless ventures plan and install next generation networks ("NGNs"), these carriers expect to offer a diverse array of ICE services, including Internet access, free from common carrier regulatory responsibilities that still apply to telecommunications services. Wireless carrier managers reject the need for governments to ensure consumers safeguards such as nondiscriminatory access and separating the sale of radiotelephone handsets from carrier services. Critics of wireless regulation claim that government-imposed obligations would create disincentives for NGN investment and have no place in a competitive marketplace.
This article will examine the costs and benefits of government-imposed rules that would require wireless carriers to separate sales of handsets from service subscriptions and to comply with network neutrality rules designed to ensure nondiscriminatory access to content. The article will assess the rights of both wireless subscribers and carriers to control how handsets attach to networks and what services the handsets can access. The article will consider whether wireless network access should parallel long established rules for wired networks and will compare wireless network neutrality issues with a preexisting debate about neutral Internet access via wired networks. For example, wireless network neutrality includes consideration of separating Internet access equipment from Internet services, an unbundling principle established for wired networks decades ago. Because wireless carriers package subsidized handset sales often with a blend of ICE services and consumers welcome the opportunity to use and replace increasingly sophisticated handsets, regulators have refrained from ordering handset unbundling. But for other services, such as cable television, the FCC has pursued public safeguards that attempt to allow consumers the opportunity to access only desired content using least cost equipment options.
The article also examines why wireless carriers could avoid becoming involved in a network neutrality debate for several years, despite the fact that their common carrier status, vis a vis voice services, provides a statutorily supported basis for imposing nondiscrimination responsibilities. The article concludes that the rising importance of wireless networking for most ICE services and growing consumer disenchantment with carrier-imposed restrictions on handset versatility and wireless network access will trigger closer regulatory scrutiny of the public interest benefits accruing from wireless network neutrality.
Keywords: wireless, unbundling, Carterfone policy, network neutrality
JEL Classification: K23, L96, O33
Suggested Citation: Suggested Citation
Frieden, Rob, Hold the Phone: Assessing the Rights of Wireless Handset Owners and Carriers (January 2008). Available at SSRN: https://ssrn.com/abstract=1081345 or http://dx.doi.org/10.2139/ssrn.1081345