New America Foundation and Consumers Union Discuss Wireless Interoperability

WASHINGTON April 18, 2011 – The New America Foundation, in cooperation with the Consumers Union, gathered representatives from the leading wireless services providers and consumers groups on Wednesday to discuss how requiring mobile broadband service providers to interoperate would affect consumer choice and pricing.

Currently, most mobile phones work with only a single network provider. After consumers end their contracts with a network provider, they are unable to use the phone on competing networks, even if the competitor uses the same mobile technology.

“As the mobile industry becomes increasingly consolidated, interoperability between technologies will allow consumers to more freely move amongst the providers,” said Parul Desai, Communications Policy Counsel at the Consumers Union.

Desai cited a recent survey conducted by the Consumers Union that found more than 80 percent of respondents wanted to be able to change their networks but keep their devices.

Consumer groups, along with the wireless company Sprint have urged the Federal Communications Commission to mandate fourth generation wireless devices, which use the same band of spectrum to broadcast, be interoperable with each other. This would allow consumers to use a single device across different carriers as long as they use the same transmission technology, be it Long Term Evolution (LTE) or WiMax.

Lawrence Krevor, Vice President of Government Affairs at Sprint Nextel, supported the notion of interoperability, saying that the issue is not only of concern for consumers but also for the public safety community. Currently public safety entities must buy expensive specialty devices made to work only within a specific band.

“If these devices were able to roam across the public safety and commercial networks then public safety groups would be able to enter into agreements with the commercial networks to use the commercial networks if necessary,” Krevor said. “Also, the devices could be used by different groups across the country, decreasing their cost.”

Krevor then warned against the impending merger between AT&T and T-Mobile saying that the merger will decrease competition and slow down innovation.

“By forcing us to include extra radios in our devices, battery life will be decreased while the price and size of these devices will be increased,” said AT&T’s Vice President Regulatory Policy Joan Marsh in disagreement. “The devices are already quite complex and must deal with serious interference issues. If forced to include extraneous radios these problems will increase.”

Currently mobile handsets include a number of different radios, including global positioning system radios, CDMA or GSM radios to transmit voice and a separate radio for Internet connectivity.

Marsh voiced opposition over the recent broadband roaming order, claiming that instead of spurring investment in mobile broadband infrastructure, the order will cause smaller operators to rely on larger firms to build towers rather than expanding their own networks.

The order mandates larger carriers to enter into roaming agreements to carry mobile broadband similar to the voice agreements.

Phoenix Center President Lawrence Spiwak, echoed Marsh’s claims that interoperability will increase the price of handsets.

“The rise of the Android platform can be linked to the fact that consumers did not want to join the AT&T network but wanted a phone similar to the iPhone,” Spiwak said. “The handset and the service are complements and when sold together the providers are willing to subsidize the cost of the handset. If consumers can easily jump from network to network then network providers will not see the economic sense in subsidizing the handsets.”

Currently consumers can purchase unlocked handsets directly from manufacturers, but these handsets are often expensive. Spiwak also warned against increasing the level of regulation saying that it will lead to higher prices for consumers. He balked at the claim that the market was not competitive enough.

“No market is ever in perfect competition, but the mobile market is workably competitive. There are a number of firms offering similar products at differing price points,” Spiwak said.

Steven Berry, President & CEO of the Rural Cellular Association (RCA) presented a unique view of interoperability.

“As we seem to be entering into a national duopoly, the ability for consumers to cross networks is vitally important,” Berry said. “Many of our carriers are willing to build out networks in areas where the major players are not willing to, but these small carriers cannot get hold of the devices that consumers want.”

According to Berry, if the FCC mandated interoperability across a single cellular technology consumers would purchase unlocked handsets directly from manufacturers and use them on their choice of networks.

Desai agreed with Berry about the eventual transition in the way consumers would purchase their mobile handsets.

“Currently consumers pay low prices for handsets since the mobile providers provide subsidies,” Desai said. “However if consumers were able to purchase handsets that worked on any of the networks directly from the manufacturer competition amongst the manufacturers would cause prices to decline.”