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Not ‘Substitutable Service’

Wi-Fi Not Yet Competitive With Carriers, Wireless Bureau Chief Kaplan Says

Wi-Fi, including that available from cable operators, isn’t competitive yet with wireless carriers’ offerings, FCC Wireless Bureau Chief Rick Kaplan said Monday. Unlicensed broadband could yet pose a competitive threat, and shows there are ways to offload traffic onto other networks, he said at a Practising Law Institute seminar in New York. But the current state of the technology’s deployment in the U.S. means the frequencies it uses are not suitable to be included in the spectrum screen the FCC uses to review deals, Kaplan said.

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The commission needs the statutory flexibility to ensure it can encourage competition among carriers and continued deployment of Wi-Fi and other unlicensed spectrum, Kaplan said. The spectrum screen has raised ire among legislators, including House Communications Subcommittee Chairman Greg Walden, R-Ore. (CD Dec 8 p2), concerned about giving away for free spectrum used for Wi-Fi. Kaplan, who said he’s not telling Congress how to do its job, pointed to the long-term economic benefits of Wi-Fi, even though those radiowaves won’t raise money for the U.S. Treasury because the commission doesn’t auction them.

"You have to be careful of overweighting the short-term gain of the economic value of spectrum” sold at auction, Kaplan said: “Every time we've gone for the short-term hit, we've done things that are damaging” in spectrum decisions. “Unlicensed spectrum can lead to some major gains for the U.S. economy over time … but not a quick hit” to federal coffers, he continued. “If you had sort of manageable, smaller swaths that could be of great value, that in the long-run seems like the better plan” to be able to possibly use that for unlicensed service, Kaplan said.

Kaplan also sought legislative leeway so the FCC can ensure carriers of all sizes get a fair chance at buying spectrum. “If one or two carriers get all of it, that’s a problem,” he said. “We recognize that every carrier needs spectrum,” from the “smallest” to the “biggest” companies, he said. “We want to make sure that carriers of every size have the opportunity to bid.” He hopes legislators “don’t change the law to prevent us or discourage us from doing that."

Wi-Fi could eventually become a rival to licensed spectrum, but “when talked” about now it “isn’t talked about as a competitive service,” Kaplan said. “That’s not to say … there couldn’t be something competitive that happens to unlicensed” spectrum, he said. “We're not even remotely near that point yet” where those frequencies could be part of the spectrum screen, Kaplan said. Wi-Fi’s ability to offload traffic from other networks “demonstrates there are other ways to handle traffic,” he said. “Right now we're in the experimental phase.” No one has “made the claim yet” that Wi-Fi is a “substitutable service,” Kaplan said.

Cable operators on the East Coast and elsewhere have set up Wi-Fi hotspots for their broadband subscribers to use, cable lawyers said at PLI. The offerings will be competitive in the sense that a customer of one cable company can roam on the Wi-Fi network of another operator, panel moderator Howard Symons of Mintz Levin said. He cited the roaming deal between Cablevision, which his firm represents, Comcast and Time Warner Cable. “That’s at least in theory an alternative to the 3G, 4G networks offered by the wireless carriers” and also offloading network traffic, Symons said: “It’s sort of begun to nibble at the competitive edges."

The three cable operators have tens of thousands of Wi-Fi hotspots combined, said Michael Pryor of Dow Lohnes. “Potentially even broader roaming agreements with the cable companies” may be next, he predicted. There could be “potentially seamless handoffs” so cable broadband subscribers don’t have to re-authenticate their devices as they move from hotspot to hotspot. “There is backhaul potential there as well,” Pryor said. Cablevision for example has mentioned it’s thinking about partnering with wireless companies to augment its Wi-Fi service, he noted. The question has arisen whether commission’s jurisdiction extends to matters such as reviewing joint marketing agreements between Verizon Wireless and four cable operators selling AWS spectrum to the carrier, said Michele Farquhar of Hogan Lovells. “One fallout of the failed AT&T/T-Mobile merger is regulators are increasingly looking at this as a national market,” she said of spectrum, not the local market some carriers would prefer.