USA - regulation of mobile

Execs speak out on regulations at U.S. wireless show

Telecommunications executives railed against the prospect of increased regulation of the U.S. wireless industry at a conference this week, complaining about everything from network access rules to taxes that they say could stunt growth.

Their angst comes against the backdrop of a recently completed government airwaves auction, which introduced new requirements for Verizon Wireless, the winner of a big chunk of the airwaves auctioned, to open its network to a wider array of devices.

The specter of the November U.S presidential elections may also be shadowing the discussion, analysts said, as a potential Democratic administration may get tougher on scrutinizing the telecom industry than the Republicans have been.

"The wireless industry has enjoyed and perhaps earned a large degree of freedom from regulation. I think they're seeing themselves losing some of that freedom, the hands-off stance the government has taken," said Stifel Nicolaus analyst Rebecca Arbogast.

While any regulator is expected to look at each issue on a case-by-case basis, "how sharply they react and what they react to could very well differ depending if it's a Republican or Democratic administration," Arbogast said.

At the annual CTIA wireless convention in Las Vegas this week, Federal Communications Commissioner Kevin Martin drew cheers from the audience when he said he was opposed to a petition from Web-based phone service Skype, a unit of eBay Inc, to force open wireless networks.

At the center of Skype's petition were "Carterfone" requirements, named after a decision by the FCC in 1968 that forced the Bell telephone monopoly to allow outside devices to run on formerly closed wired phone networks as long as they did not cause damage to the system.

"On a technical level the proposal made no sense and was unmanageable," Tony Melone, chief technical officer for Verizon Wireless, told Reuters in an interview, arguing that wireless networks were more complex to manage than wired networks.

"It's much too simplistic," he said.

Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc has offered to support any device that works on its network so long as manufacturers go through a certification process to meet its requirements. Verizon made the decision around the time Google Inc successfully lobbied the FCC to make open access a requirement for part of the spectrum sold at the government auction.

Wireless companies such as Verizon Wireless and AT&T Inc are expected to unveil plans for the airwaves they won in the auction after a quiet period ends on Thursday at 6 p.m. EDT.

NET NEUTRALITY

As wireless companies look to offer data services such as Web-surfing on mobile phones, they are starting to come under the same scrutiny faced by wireline broadband companies on the so-called issue of net neutrality.

Proponents of net neutrality seek to force service providers to allow any type of content or service to be transmitted over their networks.

"The net neutrality open access debate has brought wireless companies into the fold in a significant way," said Stifel's Arbogast. "How far it's going to go nobody knows yet."

Verizon Communications and AT&T have said that they support neutrality but argue that they should be able to charge extra for services that use a lot of bandwidth, such as mobile videos offered by sites like Google's YouTube.com.

Nortel Networks Corp Chief Executive Mike Zafirovski agreed with this premise during a panel discussion among network equipment vendors. "You should be able to charge a premium for premium services," he said.

Alcatel-Lucent Chief Executive Patricia Russo said everybody should have access to high-speed Internet services, including free content, but regulation should be light enough to encourage service providers to invest in their networks and purchase equipment from companies like hers.

"There really is no free lunch," Russo said. "There's got to be a capability for the investment to continue to occur."

Soleil Securities analyst Todd Rethemeier said that even without formal rules, operators are likely to be bound to net neutrality in practice as consumers tend to revolt when a popular service is blocked by a carrier.

"Practically or legislatively, it will happen. Either they're forced by consumers or Congress," he said.

While the Republican-led FCC has resisted calls for net neutrality rules, Rethemeier said: "If there is a Democratic administration and FCC, that could change."

Lowell McAdam, the chief executive of Verizon Wireless, also complained about high taxes on cell phone use in the United States, where taxes vary depending on the state.

"These inconsistencies just don't make sense," he said, citing the inclusion in cell phone bills in Chicago of a 20 percent tax rate, about 18 percent of which is a local tax.