Carterfone for Cellphones

Sorry I'm behind on the news, but I’m working on two papers to send off to conferences this week. Last week brought a potentially huge development in the communications industry, one that largely went unnoticed. (No, I don’t mean the XM-Sirius merger).

On Tuesday, Skype asked the FCC to prevent cell phone carriers from blocking its VoIP service. Compared to the satellite radio orgy, it barely brought a ripple of coverage. But it did bring the predictable cellphone carriers’ preventive blitz.

Some have likened Skype’s petition to the Carterfone decision, which allowed third party answering machines, fax machines and modems — but most of all allowed Radio Shack to sell everyone a $10 handset. I think it’s more similar to the Execunet decision, in that it allows others to provide services over the telco lines. For those who are not rabid telecom historians (like you know who), below are the key decisions increasing AT&T’s competition, which I compiled for my planned mobile phone dissertation from two excellent books (by Brooke Tunstall and Peter Temin) on the end of the old Ma Bell:

Decision	Title	Applicant	Decided by	Competition Authorized
Jan. 1956	Final Judgment (1956 Consent Decree)		AT&T, Justice Department	AT&T limited to common carrier services and equipment sales to own subsidiaries
July 1959	Above 890 Mc.	Motorola	FCC	Private lines operated by users
June 1968	Carterfone	Carter Electronics	FCC	Third party terminal equipment
Aug. 1969	MCI	MCI	FCC	Private lines for resale
June 1971	Specialized Common Carriers	(none)	FCC	Common carriers providing private line service
July 1977	Execunet	MCI	Circuit Court	Switched long distance service

Beyond the effect on the 2½ remaining Baby Bells, Skype’s petition will have implications far beyond the US. The same action could be brought in the UK and Japan, the two large countries whose telecommunications liberalization during the 1970s and 1980s most closely resembled the US. It’s also possible that one of the smaller markets — Australia, Canada or one of the Scandinavian countries — might take the lead.

This may get wrapped in the larger US debate over “net neutrality,” which has elicited strong pro and con arguments — as with many policy debates, a combination of philosophical and self-interested arguments. Some carriers are hoping this will go away, but that seems merely a bad case of denial.

Compared to fixed line “net neutrality,” there are important practical and philosophical questions raised by mobile VoIP. At least in the US, the landline voice and IP services are separate (usually separate carriers), so voice traffic over the IP network benefits the IP carrier — and (at least with cable modems or fixed wireless) the IP carrier has an incentive to both open the network and support the VoIP effort. On mobile phones, the same carrier controls both the IP network and the voice business that would be cannibalized by it. Smaller carriers (who have more to gain) are embracing the possibilities, but the major carriers fear the downside.

The old Baby Bells were among the nastiest scorched earth lobbyists around, and today the two largest U.S. cellphone carriers are Baby Bells. But eventually MCI won and AT&T lost. The idea that carriers can block traffic because it competes with them seems like an unwinnable battle. Who knows, since the Cato Institute has opposed VoIP regulation, maybe they’ll back Skype.

Photo credit: BradDye.com

Technorati Tags: Internet, mobile phones, Skype, VoIP