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Will Wireless Spectrum Expansion be a Byproduct of the Net Neutrality Debate?

Without a doubt, last week's war of words between the Federal Communications Commission (FCC) and the telecom service providers placed the SUPERCOMM 2009 show at the epicenter of an ongoing debate that mixes network neutrality with the vexing governmental question on how to expand broadband service in costly rural locations.

One answer may be emerging this week, though, as the FCC's Chairman, Julius Genachowski signaled a willingness to discuss additional ways to expand broadband reach beyond just putting stimulus dollars on the table.

"What we did yesterday [in passing net neutrality policy] was launch a rule-making process where over the months ahead, we will be getting a lot of public input on what are fair, common-sense rules of the road," said Genachowski on Sunday in an interview with BusinessWeek. "We did this to ensure that any small business, any entrepreneur, any speaker engaging in a lawful activity can have access to the Internet and the ability to reach an audience."

Yet, he says that spectrum and innovation are the key drivers for content such as video on wireless devices.

"Wired networks and wireless networks are different," said Genachowski, when asked by BusinessWeek whether net neutrality policies might affect broadband mobile devices and networks the same way the FCC envisions they will affect the wireline world. "There are different congestion issues, different network-management issues, and what different types of companies ought to be able to do—and what ought to be considered reasonable network management—will probably differ depending on the kinds of networks that are being operated."

Genachowski's new comments about the challenges of the use of mobile content—video and otherwise—somewhat echoed the call by AT&T's John Stankey, CEO of AT&T Operations, when he noted at last week's SUPERCOMM that the iPhone has brought about significant broadband wireless challenges.

"We are just learning how customers want to use this world," said Stankey, referring to the mobile broadband world. "Innovation needs to occur at the physical layer, not just the application layer. Thinking everything can be fixed with software is really a dangerous position to get in."

Even Verizon Wireless, during its third-quarter conference call on Monday, October 26, acknowledged that one of their competitive advantages will be the rollout of the 4th generation (4G) Long Term Evolution (LTE) network that will rely heavily on data subscriptions to recoup the cost.

"Data revenue opportunity come from so many different places," said Seidenberg. "With LTE, there are substantial options ahead of us. Our view is to lay the groundwork of a very broad array of devices for data growth, and sophisticated data applications."

Yet, with recent reports showing the Apple iPhone's data services now account for almost 10 percent of all mobile data traffic, Verizon wasn't willing to miss an opportunity to pitch the new 4G LTE network in Apple's direction.

"We obviously would be interested at any point in the future that they would be interested in having us as a partner," said Verizon Wireless CEO Ivan Seidenberg. "This is a decision that is exclusively in Apple’s court."

The pertinent issue with Verizon's 4G LTE is, not surprisingly, the use of a wide swath of spectrum that had recently been freed up in the move from analog to digital television transmission. While Verizon will deploy approximately 30 markets in 2010, encompassing approximately 100 million users, its approach to the rural areas will require the use of the 700 Mhz spectrum to reach rural areas still lacking mobile broadband capability.

During a panel on the future of broadband on which I was also a panelist, Scott Sleek, editor for The Pipe newsletter, said that he expects the tie between spectrum and network neutrality will continue as a bit of gamesmanship; in other words, carriers may use the call for increased spectrum as a way to create a set of concessions for their adherence to newly passed network neutrality policy standards.

"The stimulus dollars, approximated at $7.2 billion for rural broadband deployment," said Sleek, "have been refused by the same carriers that are now calling for an expansion of available spectrum."

For his part, Genachowski acknowledges the initial $7.2 billion is only to prime the investment pump.

"We're looking at potential innovations in spectrum policy, such as secondary licensing for spectrum, and other, more creative ideas for unlicensed spectrum," said Genachowski. "In addition, we've tried to lay out some cost estimates for what it would take to achieve different goals for the country. But how that investment gets made, over what time period, toward what end, and by whom is something we haven't tackled yet. That is the next phase of the process we are in."

"In each of the areas we have been pursuing—the broadband plan, mobile, open Internet—the focus is always on promoting investment, competition, and consumer choice," said Genachowski. "None of this is easy, but I think there is a path that really does make sense for the country. "

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