Dial 0 for Opinion: What's the fallout of the 700Mhz auction?

The FCC this week announced the winners of the 700Mhz auction, giving top prizes for the much sought after C block of the spectrum to Verizon Wireless and AT&T. The two carriers used a strategy of bidding for and winning regional and local licenses instead of bidding on the block as a whole. The question now is, what will the result mean for consumers and the wireless industry?

The most immediate result is that we won't be seeing a major new player in the national wireless industry. Before the auction some had speculated that Google's stated intent to bid on the auction might indicate that they were looking to develop a rival network that would free them from the control of current internet providers. Given that Google is now developing a platform for mobile phones, Android, only intensified that speculation. What most likely happened, however, is that Google made a minimum bid to ensure that the open access provisions attached to the C block of the spectrum would be enforced. These provisions require that anyone operating a network on the new spectrum open it up for devices and applications. If the bidding for the C block had not met the minimum set by the FCC, however, those provisions would have been removed and a new auction held.

As it is those provisions are now in place, how that will work in practice, however, is up in the air. Verizon has secured the largest part of the C block and it has already made much of its recent moves to open up their network. AT&T, which combined with already existing assets in the 700 Mhz spectrum, is the only other major player to be able to deploy a nationwide network on the 700 Mhz spectrum argues that as a GSM carrier you can already use any GSM phone you want on their network. The real kicker here might not be devices, but rather software.

The contracts you sign with your carrier currently place some limitations on the type of software you can use on their network. For example Voice Over IP (VOIP) applications are often disclaimed and limitations are placed on how much data can be transferred regardless of the software you are using. With the open access provisions allowing any software to be used you may think that perhaps such limitations will be a thing of the past, and certainly Google seems to think so, but in reality we could see very little movement in this regard. In particular limitations on the amount of data transferred could seriously truncate the types of applications you can use on the network. Peer to peer applications, VOIP, streaming media and other types use a lot of data and could have de facto limitations placed on them based on hard or soft caps placed on total data usage. Carrier services that provide similar functionality, on the other hand, could be exempt from such limits.

We'll have to wait and see if this actually turns out to be the case, but given carrier's past history on the subject we're sure that both Verizon and AT&T will be looking hard for ways to get around these open access provisions while players like Google will try to have the provisions enforced as strictly as possible.