Verizon Makes Federal Case of FCC’s Open Access Rules

Verizon Wireless is suing the Federal Communications Commission (FCC), asking a court to overturn the agency’s rules that require the winner of an upcoming wireless spectrum auction to ensure at least part of that spectrum remains compatible with all mobile devices and services.

Verizon Wireless filed the action earlier this week in the U.S. Court of the Appeals for the District of Columbia, seeking to overturn the FCC conditions requiring that the auction winner let consumers connect over the spectrum using any device or software.

The auction is scheduled to take place on Jan. 16, and carriers and others are expected to pay as much as US$10 billion to $15 billion for the right to control spectrum reclaimed from outmoded analog television signals.

FCC Overstepped Its Authority?

Made available for digital use for the first time, the 700 megahertz band is seen as being capable of having a host of uses, with its ability to travel long distances making it valuable for connecting rural users and its capacity for penetrating thick walls making it ideal in urban settings.

In essence, Verizon Wireless is seeking to strike a blow against concessions the FCC made at the behest of some parties, most notably Google, who want to ensure the new airwaves remain as open as possible.

In a brief filing, Verizon asked the court to find that the FCC overstepped its authority by adopting the open access rules, which were put in place in July. The FCC’s order violates the U.S. Constitution, the Administrative Procedure Act and is “arbitrary, capricious, unsupported by substantial evidence and otherwise contrary to law,” Verizon argues.

Partial Victories

When it voted over the summer, the FCC stopped short of granting the full open access being sought by Google and others. Instead, it said it would require that a third of the spectrum being sold remain freely accessible.

“It’s regrettable that Verizon has decided to use the court system to try to prevent consumers from having any choice of innovative services,” Chris Sacca, head of special initiatives at Google, wrote in a post to the official Google blog. “Apparently, one of the nation’s major existing wireless carriers doesn’t think consumers deserve more choices.”

Google has long argued that the spectrum ought to remain open and available because it is the property of the American people. “The airwaves are not the birthright of any one company,” Sacca said. Google had offered to pony up the $4.6 billion required to take part in the auction if the FCC had promised to keep the spectrum open to all.

Having a deep-pocketed party such as Google in the auction could significantly boost the total price paid for the airwaves.

Google has already begun to stake its claim on some mobile broadband turf, partnering with Sprint on the nationwide rollout of that carrier’s WiMax network.

Buying Time?

FCC Chairman Kevin Martin has said the spectrum has the potential to become a key part of a next-generation high-speed wireless network, one that could pave the way for services such as mobile TV.

In recent days, rumors have begun to circulate that Apple would make a bid for some of the spectrum as well, ensuring that its iPhone and future generation products would have room to grow without interference.

Courts often defer to so-called expert agencies such as the FCC, but not always, Stifel Nicolaus analyst Rebecca Arbogast told the E-Commerce Times.

If nothing else, the court could step in and delay the auction until the matter is resolved — though Verizon did not request a stay on the sale moving forward. Such a delay would enable more time for maneuvering by all sides and, possibly, the involvement of Congress, where the idea of keeping at least some spectrum.

“This auction is the last of the large-scale spectrum sales for a long time to come, so it’s very important to the industry,” she added.

The legal action is somewhat surprising because it puts Verizon in the position of having to take a stand against what many see as progress toward more open and vigorous competition, said Cardoza Law School professor Susan Crawford.

“We’re in for some delay,” Crawford told the E-Commerce Times. Even though the FCC took “much-less-than-halfway measures” to ensure open access, incumbent carriers are showing they are not going to take risks with their traditional business models, which allow for exclusivity and given them powerful control over what devices and services are used on their networks.