Senators Examine Relationship Between Wireless Carriers, Consumers

WASHINGTON, June 18, 2009 – Wireless carriers deals with equipment vendors and their commitment to rural coverage came under the microscope as executives and industry analysts testified before the Senate Commerce Committee hearing on Wednesday.

A total lack of wireless broadband coverage in rural areas “resonates very, very deeply” with Chairman Jay Rockefeller, D-W.V. Rockefeller – who claimed to have never before used a chart on the Senate floor – displayed a map of wireless broadband coverage which showed a total absence of service for consumers in places like his home state of West Virginia.

“There’s nothing there,” he complained. “[Rural states] may have beauty, but they also have people,” he said.

Rockefeller expressed some frustration with Government Accountability Office Director of Physical Infrastructure Mark Goldstein, who presented results of a GAO survey on wireless customer satisfaction.

The survey was based on a random sample and showed dissatisfaction among a sizable percentage of consumers with wireless carriers’ billing practices, as well as a lack of knowledge regarding the Federal Communications Commission’s role as a mediator between consumers and wireless providers.

The GAO should have undertaken a “more specified” survey that took into account factors such as income and location, Rockefeller said.

Results of such efforts are “incredibly important…for telling the American people what they need to know.” He was especially annoyed with the report’s lack of specificity with respect to rural consumers. “It’s not rocket science,” he said.

Goldstein said the FCC is at fault for not properly educating consumers about its’ statutory role as a mediator in disputes between customers and carriers.  “There are mixed messages about what it is consumers can expect [from the FCC],” he said. But Rockefeller was not buying the GAO’s argument: “You are asking if [consumers] know they should call [the FCC]: that’s not your job.”

The real “heart” of the consumer experience comes down to whether or not carriers should have exclusive control over handsets, said Sen. John Kerry, D-Mass.

Kerry, who chairs the subcommittee on communications, took the gavel during the latter part of the hearing which focused on agreements for handset exclusivity between manufacturers and carriers.

In his opening statement, Kerry made reference to the FCC’s Carterfone decision, which allowed consumers to connect devices like fax machines and modems to the landline telephone network. He compared Carterfone to today’s internet, which does not require a consumer to own a specific type of computer to gain access – and to European and Asian handset markets, in which users purchase a handset separate from their wireless service.

Kerry also made note of a letter he sent Monday to acting FCC chairman Michael Copps, which was also signed by Sens. Byron Dorgan, D-N.D., Amy Klobuchar, D-Minn., and Lowell Wicker, D-Miss.

The letter asked Copps to examine handset exclusivity agreements and their effect on consumers. And while representatives from several wireless carriers were present, Kerry noted invitations for many major handset manufacturers to testify had been turned down.

But Paul Roth, AT&T president for retail sales and support, defended the agreements – such as the one AT&T has sold Apple’s iPhone under – as allowing device manufactures and carriers to “share risks to develop the most compelling devices, and “ensure innovation, lower price, and choice.”

Competition in the wireless sector is “white hot,” he said. And deployment of next-generation networks and technologies would be hampered if the government were to reverse “pro-competition polices and impose intrusive restrictions” on carriers, he warned.

But Penn State University Professor Rob Friedan cautioned Senators against allowing carriers too much control over wireless handsets, which he said are becoming a “Swiss Army Knife” of features that make up a “third screen” for consumers, after television and personal computers.

If the FCC were to adopt a Carterfone-like set of rules for wireless handsets, it would spur the same kind of innovation that has taken place in the computer and consumer electronics markets, he said: “I see no basis for concluding that the upside benefits accruing from the wired Carterfone policy somehow will not apply to wireless networks.”