Net Neutrality and Open Access at D6: FCC Chairman Kevin Martin & Verizon Wireless CEO Lowell McAdam
Well, this should be interesting. Because of scheduling issues, Kevin Martin and Lowell McAdam will be interviewed at the same time. Will the two hit it off on issues of Net neutrality, early termination fees, open access or none of the above?
Kevin J. Martin is chairman of the Federal Communications Commission, where he has served as a commissioner since 2001 and as chairman since 2005. During his term, he has conducted a balancing act between the interests of the technology and telecommunications industries. He mostly sided with Google (GOOG) in the effort to impose new openness rules on a large chunk of spectrum the FCC recently auctioned, and he has been publicly critical of the cable TV companies. He could be an important player in the battle over Net neutrality.
Lowell McAdam is president and CEO of Verizon Wireless (VZ), the nation’s second-largest wireless voice and data provider, and is chairman of the board of directors of CTIA, the wireless industry’s trade association and lobbying group. An engineer by training, Mr. McAdam has been an outspoken defender of the wireless industry’s practices, even when they have been criticized by the technology industry. However, he has recently launched an initiative to create a parallel “open” system at Verizon, which the company claims will allow any device and any application to operate on its network without interference from Verizon.
- Pulling up a chart that showcases the lousy broadband situation in the states, Walt kicks the conversation off with a hardball question for Martin: “You’re the chairman of the FCC,” says Walt. “How did you allow this to happen?” Big applause.
- Martin tries to dodge a bit, suggesting that the chart shows penetration. Walt corrects him, noting that what it actually shows are broadband speeds that are abysmal.
- Martin says he feels it’s important that we improve both penetration and speed. Walt is not letting him off that easy, jumping back in to point out that not only do broadband speeds in the states stink, but that we also pay as much as four times what people in other countries pay for better, faster broadband.
- Martin says we need a new and better definition for broadband.
- Kara asks about the political side to this issue. Should we treat broadband the same as we treat public highways? Martin says it’s something to consider, adding that we need to switch the system from a voice-grade one to a broadband-grade one. We should be subsidizing ONLY broadband services, not voice. (Hmm. Haven’t we subsidized them enough already? To the tune of $200 billion. See Nothing That a Two-Tiered Internet Couldn’t Fix, Right?)
- McAdam jumps in, noting the barriers that are delaying forward movement here. Martin parries, claiming that the FCC is working actively to remove these barriers.
- Walt asks if Martin has the statutory authority to streamline this process. Martin says he doesn’t know. Decisions like these are all in court right now.
- McAdam says there’s a tendency to think that carriers don’t want to deploy better services. We do, he says, but often, we’re held up by local government, which doesn’t like the location we’ve chosen for a tower, and whatnot.
- Moving on to spectrum auction and open access, Martin says open access is important, and that he’s heard that from not just entrepreneurs, but consumers as well. Martin talks about the open-access provision placed on the spectrum Verizon just won at the recent 700 MHz auction. Many advances this year: Sprint divesting spectrum to Clearwire. T-Mobile (DT) opening up, etc. “There’s been a significant change in the wireless industry just this year,” says Martin. “It’s embracing openness.”
- Kara asks if this isn’t in part due to Google and its efforts in the auction. McAdam: “Well, let’s not give them too much credit …” (Apparently, open access was really Verizon’s idea …)
- McAdam says Verizon has fully open devices in its labs right now. Walt asks when we’ll see them. McAdam: A few weeks. Walt asks why these devices are in Verzion’s lab at all. McAdam says Verizon needs to make sure they work on its network and don’t impact its customers.
- Walt brings up the pricing issue. You’ll essentially be running two pricing systems: the company-store system, which subsidizes handset purchases made with a long-term contracts, and the open system. Will consumers who use non-Verizon phones on Verizon’s network get the same level of support as those who use Verizon-subsidized ones? Walt asks. McAdam says yes. There’s no reason not to do any differently.
- Moving on to termination fees, Walt mentions recent class-action suits against wireless carriers. How do you justify charging people $200 for canceling their contracts early? Apparently, McAdam doesn’t need to: “We don’t do that anymore.” Verizon says it now pro-rates its phone subsidies and also offers customers the option of purchasing phones at a higher price, without a subsidy.
- But isn’t the subsidy just an artifact, something you did to increase cellphone penetration? McAdam agrees that it is and says he’d dump subsidies tomorrow if Martin and Co. made them illegal.
- Martin’s take on this issue? He feels consumers should have a window during which they can cancel their contract without penalty. Enough time to evaluate the service … say, a month or so.
- What’s the impact of changing to a model like this? Martin notes that these subsidies extend to other platforms like cable, and need to be carefully thought out.
- Kara: What’s the most significant technology issue the FCC will face after the next election? Martin replies that the transition from analog to digital TV will certainly be among them. He talks about the need to educate the public about the transition. Walt notes that there’s an enormous amount of public confusion around this. Martin agrees, but says it will dissipate when the public has been better educated.
- Another big issue is Net neutrality, says Martin. Kara: Well, you know what this crowd thinks about that, don’t you? Martin deadpans, notes that the FCC does have complaints before it about the issue. The commission needs to address in a constructive way the right of the consumer to have unfettered access to the Net. That said, he adds, broadband providers do need to be able to manage their networks.
- Walt asks McAdam about Verizon’s EVDO service and if Verizon is concerned about AT&T’s claim that it can double the speed of its offering with a simple software change. Walt recalls that AT&T (T) once told him Verizon and other carriers like it are stuck because they committed to CDMA. McAdam dismisses such assertions, claiming that there are a whole host of issues at play here. Deployment, devices, etc. He seems to feel CDMA has quite a bit of road left ahead of it.
- Kara asks Martin about innovation. Martin says he’s been walking a very careful line between innovation and regulation: We need to encourage investment in infrastructure and innovation, he says, but we also need to ensure that its fruits are regulated in such a way that they remain in consumers’ best interest.
- Moving on to the audience Q&A … Question about misleading coverage maps. McAdam notes that every carrier has a different metric for what constitutes wireless coverage. He’d love for there to be a standard that everyone can agree to, so that carriers could offer accurate coverage maps.
- Q: Shouldn’t fees for open-access customers be cheaper since they don’t require carriers to offer subsidies? McAdam says he’ll let the market decide that.
For more coverage, see The Wall Street Journal.
A note about our coverage: This live blog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations expeditiously written and posted to the Web as quickly as we were able. It was not intended as a transcript and should not be interpreted as one.