In an article released yesterday in BusinessWeek, it was disclosed that the Federal Communications Commission is considering paying broadcasters to vacate wireless spectrum, which the agency would use to alleviate network congestion caused by the growing popularity of devices like smartphones.

It was a slow day for news. This isn’t exactly an earth-shattering revelation. The reallocation of under-utilized spectrum has been considered a logical step for use by rapidly growing wireless networks for a long time. With the steady rise of smartphones and their demand for data services, it is clear that wireless service providers will need more than 4G equipment upgrades to deal with the swarm of new subscribers.

The problem is the plan. You see the U.S. government would buy back spectrum from broadcasters, and then turn around and auction the newly acquired spectrum to companies that desperately need more to augment their networks. Networks that are already straining to support the growth of data-intensive devices like the iPhone. Companies like AT&T and Verizon, who will pay dearly for access to more wireless spectrum.

In a recent study submitted to the FCC by The Brattle Group, one likely scenario suggested that the government could acquire wireless spectrum from incumbent broadcasters for $6 billion and auction that spectrum for $48 billion. That’s a tidy $42 billion profit.

Why would broadcasters agree to sell their spectrum assets to the government, only to have the government turn around and auction those assets to the highest bidder?

Considering these sums of money, the FCC will need to sharpen its pencil or prepare for a lengthy legal battle. It will either have to sweeten the deal for the incumbent broadcasters, or claim eminent domain and seize the spectrum.

Either way it will take a lot of time and a lot of lawyers to sort this one out.

I spent a good 4 hours yesterday watching my favorite football team, the Minnesota Vikings, self destruct as only they can. During the frequent commercial breaks, I noticed the over abundance of ads for mobile carriers. There were the usual pudgy Owen Wilson AT&T ads dueling with the Verizon map commercials, along with a few Sprint and Metro PCS spots mixed in. This flurry of activity sparked me to wonder aloud, “How competitive is this market?”

The perception given by all the commercials is that the market is very competitive. Each firm is making its case for why it is the best choice- largest 3G network, fastest downloads, widest selection of phones, least restrictive calling plans, etc- and furiously trying to attract as many customers away from the other providers. Yet, I couldn’t help but think that, while they have offered more services, each successive cell phone plan I have purchased over the last 8 years has only been more expensive than the previous. If this market is that competitive, shouldn’t prices be falling?

If you believe the commercials, it appears as if they are. Verizon and AT&T announced reduced rates for their voice plans. Interestingly enough, they both settled at $69.99 a month, behavior which seems remarkably coordinated. However, as Marguerite Reardon pointed out for CNET, these new plans may actually be more expensive for many users, as they impose higher fees for web and data usage for owners of mid-range phones. 

This is an incredibly complex topic, which we have touched on in the past, but it seems like, at least until now, most carriers have tried to use subsidized phones as their main differentiator. By signing exclusive deals with manufacturers, and then offering phones for reduced upfront fees, operators are able to lure customers based on those phones’ features.  What many consumers may not realize, however, is that they are probably paying more in the long run than users of the same phones in other countries. Telecommunications tends to be a naturally oligopolistic market, and the U.S. mobile market is no exception. The high barrier to entry associated with owning large networks leads to only a small number of firms owning virtually the whole market. But what is most important (and what the FCC will probably be looking into) is if this arrangement is beneficial to consumers. I don’t have an answer to this question, but I do have a nagging feeling that I should be getting more for less.

I believe that this week’s news about Google’s threat to pull out of the Chinese market has far reaching implications for the ultimate opportunity to provide more openness.  David Drummond, Google’s Chief Legal Officer was interviewed earlier this week on CNBC (my apologies in advance for the really lame graphics, sound effects and screaming reporter):

Although Gmail was not yet a service available on google.cn, it was a service that many Chinese used on gmail.com.  And email is only one of the beneficial services available on Gmail.  Gmail (and its tightly associated Gtalk) is one of the leading providers of HD Voice.  Local Chinese Internet service providers Baidu and TenCent also offer HD Voice, but their ability to interconnect Chinese with international callers may not ultimately be as powerful as Google’s capability to do so.

During graduate school at UC Berkeley’s Haas School of Business, I participated in a two week seminar in China on the ins and outs of doing business there.  Besides being very impressed with what I saw and the companies that I visited, it was very clear that there were a multitude of challenges to succeeding and that the effort was not for the faint of heart.  In many of the articles that I have read in the last week, I was surprised to read the speculation that Google’s true motivation for its actions was the second place ranking of its search engine.  Considering the challenges involved, I think that Google has accomplished a lot in the short time that it has been engaged in China.

Ultimately, voice and video over IP has the power to connect people in ways that aren’t fully possible via email or other more static information technologies.  This ability to connect and exchange ideas is an opportunity that all nations benefit from.  Hopefully, the Chinese government and Google can come to a mutually beneficial arrangement to provide the Chinese with the ability to reach out and connect with the rest of the world.  They have a lot to learn from us, and we have a lot to learn from them.

In anticipation of the FCC unveiling a national broadband plan at its February 17 meeting, both the U.S. Department of Justice and the Obama administration have recently made public recommendations that could signal a meaningful change in the wireless broadband market.

First, in a report filed on January 4 that analyzed the state of competition for broadband Internet access, the Antitrust Division of the U.S. Department of Justice said that the best way to promote wireless broadband competition was to free up more radio spectrum.

 “The scarcity of spectrum is a fundamental obstacle that the commission should address,” the Justice Department said. “Reallocating spectrum that is being underutilized would encourage the deployment of wireless services and could help to make such services more competitive with wireline offerings.”

The potential increase in wireless spectrum is significant. The FCC could feasibly auction a sizable slice of the available spectrum; increasing the current 500 MHz to 1300 MHz over the next few years.

The DoJ went on to recommend that the FCC should organize any spectrum auctions so big wireless providers in any given geographical area cannot easily win these auctions. In other words, the FCC should foster a competitive wireless broadband market.

The Obama administration then released its recommendations the following day (January 5).  In a letter to the Chairman of the FCC, NTIA chief Lawrence Strickling said the administration also felt that additional measures were needed to ensure competition in markets where customers have little to no choice of broadband providers.

Let’s see: Both the Justice Department and the Department of Commerce are tasking the FCC with a national broadband plan that will dramatically expand the available wireless spectrum and insure that a competitive market is preserved.  Excellent.

As a consumer of both wireless and wireline broadband services, I am anxious to see what the FCC delivers on February 17.

As a frequent consumer of pop culture criticism, I am well aware that it is almost 2010 thanks to all the “Best of 2009” (or now “Best of Decade”) lists. While sometimes predictable and cliché, I look forward to reading about the albums, books, movies and band names  that unite or divide critics. It’s a good way to discover music or movies that I had previously overlooked (this year’s winner: the Dirty Projectors) and it’s nice to take a look back at the year that was.

So, in that spirit, here are some of the most relevant stories in the telecom/VoIP/tech industry in 2009:

Net Neutrality Picks up Steam

With the new administration in Washington, the regulatory climate was noticeably different than the previous 8 years. The FCC began to look into possible monopolistic behavior in the mobile telecom market and the exclusive agreements between handset manufacturers and carriers. In addition, Congress offered proposals which would set actual rules around the regulation of the Internet. Major companies like Google, Apple and AT&T were all in the mix, and should be for the foreseeable future.

Android Offers iPhone Alternative

For all of us who were searching for a smartphone with iPhone-like functionality, but with a physical keyboard, a better network and an open platform, the Droid was the answer to our prayers. Perhaps that’s why Time Magazine named the Droid the “Device of the Year”. Subsequent news of a Google branded phone only fanned the competitive flames between Google and Apple.

Mobile VoIP Makes Waves

For years, pundits have been speculating about the arrival of mobile VoIP (I am sure at least blog or article in the next 14 days will proclaim that 2010 is the year). While I wouldn’t argue that mobile VoIP is here, or that it will soon be, it was a major component of the previous 2 storylines. One of the motivating factors behind the FCC looking into mobile operator behavior is carriers’ ability to block certain types of traffic (e.g. VoIP). In addition, Google Voice, while not technically a VoIP service, drew the ire of the FCC under allegations that it was blocking calls to rural areas. Also, the recent rumors surrounding the Google Phone indicate it may be an unlocked phone that will be sold without carrier subsidy, and configured to offer free VoIP calls. While mobile VoIP may not be mainstream, it sure is having an impact on the industry.

HD Voice Goes Mainstream

GIPS has been trumpeting the cause of wideband speech since the company’s inception. While the technology saw a great deal of adoption with the launch of PC-based calling services, it wasn’t until the marketing-friendly name “HD Voice” came along that it really took off. The number of companies announcing HD voice solutions, combined with industry organizations pushing for adoption of the technology, point to a potential for mass acceptance of a new standard of voice quality.

This afternoon, I find myself pondering my life as an AT&T/iPhone customer and the future of IP Communications in the United States. Today’s technology news is dominated by Ralph de la Vega comments made at a UBS investor conference in New York. De la Vega, head of AT&T Wireless, acknowledges the challenges faced by AT&T in response to the onslaught of data generated by iPhone and other smartphone users. He reports that just 3% of AT&T customers generate 40% of their wireless network data traffic, and in regions with high iPhone usage, i.e. New York and San Francisco, the network is not meeting current customer demand. As an iPhone user in San Francisco, I can personally attest to AT&T’s findings and I welcome their effort to improve their local 3G network. I will even help by providing real-time feedback through their recently released iPhone App “AT&T Mark the Spot.”

What troubles me is AT&T’s desire to “educate” smartphone users on how much data traffic they generate with the purpose of curtailing usage, and if usage is not curtailed, AT&T will then provide “incentives” to alleviate the “problem”. To me this feels like a typical carrier approach to the issue; create demand, provide poor service, spend millions on advertising boasting the best network, and then strategize to curtail customer usage. Wouldn’t upgrading the network be a better solution? Personally, I could be willing to pay more for a better service with higher bandwidth. Let the market decide!

Beyond their perceived need to educate users and encourage rationed data traffic, what worries me even more is AT&T taking a more direct approach by employing techniques to limit bandwidth or throttle throughput based on usage or class of traffic. I am ready for real-time, two-way video communication on mobile devices. It would be a shame if the infrastructure or regulatory climate limits the advancement of this technology. This is where the Federal Communication Commission can influence and shape the future of communications.

As the year winds down and Washington remains mired in the health care reform, the FCC charges forward towards the goal of delivering the “National Broadband Plan” to Congress on February 17, 2010. The plan as authorized in the American Recovery and Reinvestment Act of 2009 promises “to ensure that all people of the United States have access to broadband capability and shall establish benchmarks for meeting that goal.” Judging from the activities of FCC Chairmen, Julius Genachowski, the FCC is tackling some major issues that will have significant impact on the communications industry. Stacey Higgnbotham of GigaOM reports on efforts by the FCC to create an environment to promote an all-IP communications network. Additionally, the FCC began their technical inquiry into Net Neutrality.  The implications are obviously huge for service providers such as AT&T and their customers.

The FCC is taking a much greater role in influencing the future of communications and it is my hope that they can create an environment that will allow AT&T to continue to generate profit for their shareholders, yet provide an open IP network that fosters growth and innovation.

Updating Mike’s post last week, the FCC voted on Thursday to investigate regulating the Internet. This is certainly an issue which will continue to get news coverage as the FCC begins to formulate its agenda. However, what I will be particularly interested in is how the media covers the topic, and how major industry players influence the decision making process.

Already, quite a few Members of Congress are getting into the mix, introducing legislation which would either codify rules for Internet regulation, or keep the Internet totally unregulated. While in the past I have questioned  the motives of each side of the debate, I think it is useful to note who is most active in lobbying for, or (mainly) against net neutrality. The Daily Show on Monday did a great job of pointing out the connection between large campaign contributions, and John McCain’s stance on the issue.

As the debate moves forward, I hope the “real” news media will do as thorough a job reporting such facts as the “fake” news media, so that citizens are engaged and informed enough to promote fair policy which benefits the American people.

What could be a key moment in the on-going debate for net neutrality is coming up on Thursday of this week. The Federal Communications Commission (FCC) will be holding an Open Commission Meeting on October 22. It will consider a Notice of Proposed Rulemaking (NPRM) on policies to preserve the open Internet.

The stated purpose of this meeting is to ensure that both wireline and wireless carriers can’t discriminate against traffic traversing their networks based on the type of traffic or the application.

For a little background, dial the ‘way back’ machine to 2005, when the FCC created a set of four principles that were intended to govern net neutrality. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet:

1)      Consumers are entitled to access the lawful Internet content of their choice.

2)      Consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement.

3)      Consumers are entitled to connect their choice of legal devices that do not harm the network.

4)      Consumers are entitled to competition among network providers, application and service providers, and content providers.

However, these four principles weren’t codified into law through a formal rulemaking process. Meanwhile, Comcast was implementing a network management plan that was expressly designed to slow connections for P2P video traffic. The FCC interpreted this as a violation of Principle #2.

The FCC decided to call Comcast out. To quote the FCC decision regarding the issue, “Comcast did not practice network management; they had arbitrarily picked an application and blocked [consumers'] access to it.”

The ensuing legal battle between the FCC and Comcast resulted in a warning issued by the FCC directing Comcast to change its network management practices. Unfortunately, the warning didn’t have any teeth and stopped short of imposing a penalty or fine.

Comcast went on to implement a network management plan that slows connections for “heavy bandwidth users when the network gets crowded”. It said that the plan was protocol-agnostic, implying that it wasn’t overtly targeting P2P video traffic. In short, Comcast said its network management procedures would not change. Take that, FCC.

Let’s fast-forward to the present day. After four years of lawsuits, counter-suits, and legal maneuvering, the FCC has added two additional principles to the original four. They are:

5)      Internet access providers are prevented from discriminating against particular Internet content or applications,

6)      Internet access providers must be transparent about their network management practices.

This coming Thursday they’re proposing to start the process of turning these “principles” into formal law, with penalties and fines for non-compliance.

This meeting promises to be interesting. The carriers and service providers are going to make a lot of noise. We should hear plenty of discussion over which network management practices are reasonable, what service providers must divulge about their network management plans, and how the proposed rules will apply to both wireline and mobile Internet access services.

Just how free and open is the Internet?  Not nearly as open as it was a few years ago, according to a report by Arbor Networks. Instead of a landscape in which thousands of firms are scattered about, about 150 companies are responsible for half of Internet traffic. 

When I read this statistic I thought, “so what?” It certainly doesn’t sound like anything close to monopolistic or oligopolistic behavior. I definitely can’t think of any other industry in which 150 companies compete for half the market. However, the trend toward concentration, and the quickness with which it is happening, is actually quite startling. Just 2 years ago 5,000 companies were responsible for 50% of worldwide net traffic- 33 times more firms than today.

Google alone accounts for 7% of all web traffic, more than any other company. Not only do they hold a larger share of traffic than anyone else, but the nature of their traffic can be quite important. This is not just some funny Twitter page or blog that draws a large number of visitors. Google is in the business of organizing information, some of it very personal and valuable. In addition, offshoots like Google Voice provide services that some would consider pretty essential (phone calls) for modern life. 

Which brings me to the news that the recently invigorated FCC may investigate allegations that Google Voice is blocking calls to rural areas. This issue really brings the discussion to a head for me. I don’t have any idea what an appropriate level of competition is for web-based business. The trend toward concentration could just be like any other market in which stronger, more competitive players end up gaining significant market share, while others fall behind and eventually die out. People may only rely on the Internet to do a few things, and will seek out a handful of providers to allow them to do so. Who knows, the search market may even be a natural monopoly, and will be controlled by 1 or 2 providers. I don’t even have a real grasp on all the angles of net neutrality and its possible implications. However, it does seem to me that the “underdogs” that people seem to root for in the advocating of net neutrality, and issues like the “Pulver Order”, aren’t the benevolent actors they are made out to be. They are businesses and will seek to make a profit just like the big telcos. Just because they have a different business model doesn’t mean they are exempt from the same potential abuses in the quest for profit that other companies are guilty of.  In fact, it is this very type of behavior- discriminating against certain types of traffic- that I thought was supposed to be prohibited under net neutrality. But it sounds like Google, and potentially any other company that claims that VoIP is not subject to the same rules as PSTN communications, is trying to have their cake and eat it too. They want the Internet to be free and open, but only in a narrowly defined way. Once that openness means regulating activity to protect consumers and discourage anti-competitive behavior, the rules no longer apply to them.

It is still too early to tell if Google is in fact violating net neutrality principles, let alone doing anything illegal. However, it seems pretty clear to me that we need some common sense regulations to make sure that all consumers receive the same level of service, while encouraging competition in the marketplace.

While it’s a little further away, I just wanted to alert you to a conference that GIPS is sponsoring in the autumn. eComm Amsterdam will take place October 28-30. It’s a conference that was designed to promote and accelerate communications innovation, which is why GIPS is taking part in the event again.

Lee Dryburgh, the founder of the event has done a good job of styling the event to echo the style of the TED events. Similarly, the conference is broad-reaching and has the right people in the room to discuss the telecom industry and the opportunities that are growing as drastic changes further impact the multi-billion dollar a year industry.

The show also got me thinking about connecting and communicating. My computer and mobile phone are the devices I rely most upon – in fact too much sometimes. Having the ability to send email via a phone saves me lugging around my laptop and I can respond far quicker. The downside of course as many of us know, is that we’re never off those damn devices – like a child playing with their favorite toy.

However, all these devices are rendered less-capable if the bandwidth to support them is not there.  A study released yesterday of real-time internet connection speeds shows the United States still lags behind other advanced nations. According to Communications Workers of America, the average download internet speed is 5.1 mbps in 2009.

I’m pretty lucky though as you can see in the image below, my speed is above average but still below average speeds in Sweden, South Korea and Japan.

Try it out and find out what is your upload and download speed here.