Democracy & Technology Blog Skype petitions FCC to regulate cellphone carriers

Skype’s petition seeking wireless net neutrality regulation lists a couple specific “abuses” the company claims justify FCC intervention. The first one is handset subsidies. All of the leading cellphone carriers heavily subsidize cellphones, because up-to-date handsets utilize spectrum more efficiently. The carriers recoup the subsidies via two-year service contracts. Criticized for discouraging consumers from switching providers, these arrangements nevertheless do help hold down the cost of service. Skype doesn’t like the fact that the subsidies put the carriers in a position to control the software that can be loaded onto the phones. Cellphones will soon roam seamlessly between 3G, Wi-Fi and DSL. Skype would like to cut deals with manufacturers to embed its software as a default setting. According to Skype:

as innovative “smart phones” marry the versatility of computers with the convenience of mobile equipment, manufacturers are poised to equip handsets with Skype features but are reluctant to do so if such features threaten wireless carriers’ established business model….
The Nokia E61, a high-end e-mail device and phone seen as a competitor to the BlackBerry and Palm’s Treo, was released in Europe in the summer of 2006 and received favorable reviews. In the United States, however, Cingular (now AT&T) was the exclusive vendor of a stripped-down model known as the E62 — a crippled model which lacked, among other features, Wi-Fi connectivity, a feature that is increasingly popular among on-the-go consumers….
Intentionally removing Wi-Fi functionality from the Nokia E62 interferes with a consumer’s ability to place Internet calls, thereby harming innovation and price competition.

Sure, Skype could save some time and money if it could bypass Cingular altogether and cut distribution deals directly with Nokia, LG, Motorola, Samsung and so on. But there’s no consumer benefit in that. Preventing Cingular from benefitting in any way from advertising and distribution deals would force the carrier to recover all of its network costs from subscribers.
There is a free market solution to the “problem” in which Skype finds itself. Skype could become a carrier itself and qualify for roaming privileges. Companies like Netgear and Belkin already produce Wi-Fi-enabled mobile phones. These phones could be made compatible with the GSM networks operated by Cingular and T-Mobile, for instance. Both of these carriers operate their own Wi-Fi hot-spots, incidentally, and have an interest in facilitating cellular-Wi-Fi roaming. Skype is seeking a regulated advantage over its competitors and should be rebuffed. The FCC should reject this petition and let the market sort this out.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.