Politics & Policy

Dialing for Regulation

Tim Wu's war on wireless.

Wireless phones — cell phones to most of us — are practically ubiquitous in American life. Their constant rings and vibrations, once seen as unspeakable intrusions, now punctuate meals and conversations on a regular basis. The plots of television shows like 24 could not exist without them, and their use figures prominently in many movies. They are customizable fashion items, all-purpose boredom relievers, and permanent lifelines to our friends and family.

Yet for all our societal infatuation with the devices, we are not always thrilled with them. Surveys regularly report widespread dissatisfaction with the industry. Health experts have questioned their safety. The out-of-service-area or battery depleted cell phone has become a staple of popular entertainment. Stephen King wrote a horror novel in which cell-phone users become zombies. Cell phones have become an integral part of our lives, yet they irritate us to no end.

It is against this backdrop of both widespread use and generalized discontent with the wireless industry that we find Columbia University law professor Tim Wu’s new paper, “Wireless Net Neutrality: Cellular Carterphone on Mobile Networks.” For good and for ill, cell phones have been integrated into modern life, and, as such, Wu believes that it’s time they’re subject to “increased public scrutiny.” His paper gives an overview of the state of the industry and asks what, if anything, government intervention might be able to do to improve it.

Not surprisingly, Wu, a leader in the fight to regulate the Internet (he coined the phrase “net neutrality”), thinks the wireless industry could benefit from greater regulation too. He makes several major recommendations, including applying neutrality rules to wireless networks, and enacting a “wireless Carterphone” policy that would prohibit wireless operators from approving the devices attached to their networks. The paper offers some useful coverage of the complexities and weaknesses of the wireless industry, but his major recommendations — all predicated on the notion that the wireless industry is essentially uncompetitive — don’t seem warranted. At best, Wu offers solid suggestions to the wireless industry about how it might improve its service offerings, but too often his report reads like a list of consumer gripes designed to prod telecom bureaucrats into various regulatory moves.

One of his major complaints is that cell-phone design isn’t as varied as he thinks it should be. He claims the phones are “crippled” and that the market doesn’t show adequate “product diversity.” The reason is that, by maintaining veto powers over what phones are allowed to connect to their networks, wireless carriers control the device market. This leads Wu to ask, “[W]hy? Why can’t you just buy a cell phone and use it on any network, like a normal phone?”

His solution is to implement what he calls “Wireless Carterphone” — a wireless version of the 1968 court ruling that required landline phone companies to allow any safe device to attach to their networks. He believes that this will spur device development by creating more opportunity for manufacturers to develop wireless devices without carrier oversight.

The original Carterphone decision, though, doesn’t really translate to today’s wireless world. It’s far easier to switch wireless phone carriers today that it was to switch telephone service providers at the time of the case. Moreover, current limitations on phone connectivity can actually spur competition. Wu laments that Apple’s soon-to-be-released iPhone will only work with one carrier. But isn’t that an incentive for other carriers to develop competing devices? These restrictions force each carrier to develop their own models and feature sets. Forced openness would allow them to coast on the innovations of others.

Wu also believes that feature and application design on phones has been stalled, and for this he recommends implementing neutrality rules on cell networks. Wireless carriers currently place restrictions on what content and features can be accessed. Currently, some providers ban bandwidth-heavy services such as video and audio downloading (although the actual enforcement of these bans seems to vary). Neutrality would require carriers to open up these services. But why should these carriers be forced to relinquish control over the networks they’ve spent massive sums of money to develop? And if there’s such a great demand for freer access, doesn’t that create a market opening for a competitor? If there’s value in the idea, smaller, local carriers seeking to differentiate themselves could certainly take advantage of the restrictions enforced by the majors.

Not all of his proposals are as problematic. After explaining how wireless companies advertise their broadband Internet services as “unlimited use” and then impose secret bandwidth limits anyway, Wu says these companies should be required to accurately, plainly disclose what services they offer. In this, he’s certainly correct: When companies engage in deceptive advertising, they’re spinning the signposts that consumers rely on to make effective decisions, a practice that hurts both consumers and market players.

All of this is premised on the notion that wireless is, as Wu puts is, a “spectrum-based oligopoly, not the ‘fiercely competitive’ market that is sometimes portrayed.” He admits that it may be “relatively competitive by the standards of the telecommunications industry” but stubbornly insists it’s “nothing like the market for blue jeans or vodka, and it is a mistake to so pretend.” Well of course it’s not. Nor is it like the market for 18 wheelers or ice tongs, but this tells us nothing. His comparison is fundamentally unhelpful. Yes, entry into the market is expensive, but, by providing an opening to any competitor who, through service or technological innovations, can bring down costs, that expense acts as an incentive to develop cheaper, more efficient business models. And if Wu’s proposals were to be enacted, it would, as with most regulatory controls, likely stifle investment in the industry.

Somewhat strangely, Wu has expressed distress that his paper has been taken as a call for regulation. In a comment on the blog Tech Liberation Front, he wrote:

I think my main problem with the criticism so far is this: my paper has been misinterpreted as a call to regulate the industry. And since its the most familiar thing to do everyone is bringing out their favorite “don’t regulate” arguments. [sic]

To his credit, he does write that “regulation should be a last resort.” Yet his paper plainly recommends enacting Carterphone and neutrality rules for wireless carriers. How else to take it except as advocacy for regulation?

Wu is right to point out the many ways in which the wireless market has not yet satisfied all demand, and he’s right to look skeptically at the overstatements of those who claim the market is some sort of consumer utopia. But even he concedes that “in many respects, the market is and remains a wonder.” Markets evolve based on trial and error, and one company’s mistakes leave openings for motivated, innovative competitors. Over the last two decades, wireless phones have morphed from awkward, brick-sized contraptions with laughably poor reception into slim, sleek fashion accessories with impressive feature sets. Meanwhile, wireless service has gone from novelty to convenience to necessity. Society may not always love the cell-phone industry, but consumers have integrated its products into daily life to a remarkable degree. If these trends are any indication, the wireless industry will continue to adapt to the demands of consumers all on its own — somewhat fitfully and frustratingly for sure — but without any need for government meddling, no matter how well intentioned.

–Peter Suderman is managing editor of National Review Online.

Members of the National Review editorial and operational teams are included under the umbrella “NR Staff.”

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