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Summary:

Updated: The Federal Communications Commission voted unanimously this morning to review innovation in the wireless industry, a commitment it signaled when it interceded in the banning of the Google Voice application from Apple’s iPhone.  The agency will also take a detailed look at competition in the […]

12Updated: The Federal Communications Commission voted unanimously this morning to review innovation in the wireless industry, a commitment it signaled when it interceded in the banning of the Google Voice application from Apple’s iPhone.  The agency will also take a detailed look at competition in the wireless industry as part of a separate agenda item.

FCC Chairman Julius Genachowski said the wireless industry is an important source of economic growth for the country and expressed hope that the U.S. would soon have ubiquitous mobile broadband. Given the wireless industry’s importance to the economy, he said, the FCC should be “relentless about developing policies” to promote innovation. Those policies may include restricting exclusive agreements between carriers and handset makers. It could also focus on special access charges by carriers, which can raise prices for middle-mile access, as well as roaming agreements that can increase charges for consumers overseas as well as prohibit smaller cellular players from offering nationwide coverage.

However, the FCC’s ability to regulate companies such as Apple, which are not directly involved in radio aspects of the telecommunications industry, remains uncertain. A report issued Monday from Stifel Nicolaus noted that, “In the absence of an AT&T role, the FCC’s legal authority to intervene in Apple’s decisions of what to include in its App Store is not apparent.”

The FCC is charged with “regulating interstate and international communications by radio, television, wire, satellite and cable,” according to its web site, which means that if Apple feels too much heat from the agency it may seek to kick it out of the kitchen.

Update: In the wake of the FCC announcing its review, several organizations have emailed me their perspective.

An FCC official said the chairman isn’t pondering regulatory steps, but is instead trying to gather a “business-like” overview of what has worked and what hasn’t in terms of innovation in the industry, with the idea of encouraging both new entrants and new ways of thinking about wireless broadband. “In short, at times the Commission has gotten it right, and at times it has gotten it wrong,” Genachowski said this morning. “The purpose of initiating today’s inquiry is to make sure that we get it right as we move into the brave new world of wireless broadband.”

So far, consumer groups have largely praised the move. They’ve also offered up their own recommendations of items they feel should fall under FCC scrutiny, such as carriers blocking certain text messages and high roaming charges.

Sprint, the nation’s third-largest wireless carrier, said it will participate in the review and hopes the FCC will address the issue of high pricing for middle-mile access. Vonya B. McCann, vice president, government affairs, at Sprint Nextel Corp., said in a statement, “We are hopeful that, as part of this inquiry, the Commission will examine the impact vertically integrated telecommunications companies have on the wireless industry, particularly with regards to special access pricing.”

The CTIA said it wasn’t interested in setting a policy agenda, but that it welcomes the chance to show off how innovative the wireless industry is today. AT&T referred me to the industry association’s official statement in lieu of offering up its own.

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  1. Handset exclusivity promotes innovation by providing the funding required for research and development. Likewise, application exclusivity promotes competition, as we have seen in the video game console industry (where platforms vie for the hottest new games and all apps must be approved by the platform manufacturer). There are plenty of neat phones like the iPhone; there’s no need to kill competition by banning the business model that made the iPhone possible.

    The only situations in which the government must regulate are those in which there is clear anticompetitive behavior and/or market failure. This is the case in the so-called “special access” market, where price gouging threatens to extinguish competition. (In fact, if something is not done, we are likely to see a cellular duopoly in our country — which currently has more competitive cellular options than any other.)

    In short, we must save regulation as a took to be used only when appropriate.

    1. @ Brett: “There are plenty of neat phones like the iPhone; there’s no need to kill competition by banning the business model that made the iPhone possible.”

      Pure garbage. The iPhone is head and shoulders above the competition from both a mobile app store and form factor perspective. Period. Apple knows it, that’s why they pull these shenanigans (see additional Slingplayer example below). AT&T knows it, that’s why they can charge ridiculous prices for their data plans. The Android app store opportunity is compelling and growing as recent AdMob data shows, but most Android phones are weak and uninspiring. The only other strong contender in my mind for iPhone in terms of phone form factor and software UI is the Pre, and we all know how well their app store is going…

      The iPhone business model has been trail-blazing, so not all of this Apple criticism is justified. But, clearly their culture of secrecy, lack of transparency and reactive PR (since when is Phil Schiller reaching out to bloggers weeks after the fact about app store rejections a communications strategy??) is what got them into this FCC mess in the first place. The previous banning of video-streaming app Slingplayer while paid, partner apps like ESPN mobile are allowed is yet another case of Apple playing by their own rules.

      I hope the FCC won’t give up this easily.

  2. Maybe I woke up in a parallel universe this morning but (to borrow Barney Frank’s recent town hall rejoinder), on the planet I spend most of my time, governments play no role in innovation. Innovation has been the result of venture capital firms investing in entrepreneurial startups seeking to become the next Microsoft, Apple, or Google. In fact, these innovative companies are generally most successful (and most innovative) in markets exhibiting the least government interference.

    Don’t get me wrong, the FCC has a legitimate role to play. But a government agency “promoting innovation” is an oxymoron.

  3. Simply passing the latest draft of Net Neutrality would address all this.

    P.S.

    @Brett Glass, @Kevin Walsh

    Gentlemen, go back to reading Atlas Shrugged :P

    If Microsoft started blocking apps from being installed on Windows computers because they competed with one of their apps, they’d be instantly sued for anti-trust.

    Why are you giving Apple a free pass?

    1. @ Todd

      Awesome comparison!

  4. I’m amazed at the amount of people thrilled that the FCC is sticking their nose in business decisions…in a capitalistic society. So what’s next, FCC walks into Best Buy and says “we don’t care if you don’t want to sell that product, we’re telling you that you must”????? That’s where this is all heading folks. If you don’t like the way a company does business, voice your opinion with your purchase patterns (buy a competing brand). But nobody is doing that. They continue to buy Apple and then complain…but still won’t put the Apple device down. Apple has always been proprietary. No government agency should be telling them they “have to be open or accept any app”! Guess what…IT’S THEIR PRODUCT, just like the iPod and the iPhone, and last time I checked we lived in a capitalistic society that rewards innovation and risk with money. Government has no right getting involved in Apple or AT&T business. If Apple did not have exclusivity agreements with telcos, they wouldn’t be able to guarantee a return on their investment. For the record, I’m not a fan of Apple or At&T. But, Apple took a huge risk and spent a huge amount of money on developing the iPhone. It succeeded. Now they deserve to reap the rewards. I notice alot people on here complaining but still using an iPod or iPhone. Why is that? Because Apple got it right. And if they wouldn’t have gotten it right Palm WebOS, Google Android, and a revamp of Windows Mobile would never happen. Apple products have spawned outstanding competitor products. You don’t like how Apple does business, stop using their products and stop your whining. We’re all sick of it. By the way, does anyone realize the horrible precedent that FCC involvement is setting here. Once government dictates how a business is supposed to be run, what’s next? We’re heading down a horrible path here… and over what? A phone or iPod????

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  6. The good news is that the device makers, big Internet companies and carriers are in a competitive (and hugely funded) race to deliver the best subscriber experience to extract the most subs and $$ from the mobile Internet revolution. This will drive significant innovation without any intervention and in fact already has. (look at the JIL initiative for example) And ironically enough in this broken love triangle, they all need each other for this phenom to reach its full potential so it will get more interesting soon…getcha popcorn ready….

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