The Blog

I arrived in DC in the middle of last night without a phone charger, having left mine in Manhattan last weekend. So this morning my first stop was a Verizon Wireless store downtown. Right in the store, in a corner, I plugged in my phone and called back someone who had a lot of questions about yesterday’s kerfuffle. Sitting on the floor, I tried to explain why this story matters.

[The convenience of the VZ store downtown (and in fact the ubiquitousness of those stores in most cities in the US) is a telling sign, so although I certainly recognize that it might seem like abusing their hospitality and electricity to rail about them from their own sales floor I decided to use it as an element in this story. Thanks, Verizon Wireless.]

Did VZ act illegally? No. Although the regulatory story here is tricky, the bottom line is that although the FCC could require that short codes be offered on a nondiscriminatory basis, they don’t. The Communications Act says that commercial cellular providers have to act in a nondiscriminatory fashion to the extent they are providing “commercial mobile services.” But “commercial mobile telephone services” are defined as services that are interconnected with the traditional phone network – reachable via dialing a phone number. Arguably, the short codes that the carriers allow people to subscribe to (“send me weather reports daily for $2.99 a month!”) are not “phone number” services. They’re private numbers controlled by the carrier. So they’re not covered by this nondiscrimination mandate. And VZ and all the rest of the carriers have many rules about who gets allocated a short code – I linked to those rules yesterday.

If VZ didn’t act illegally, why should we care? The shock of the public in learning that wireless carriers don’t act like common carriers should tell us something. From the consumer’s perspective, a communication (for data, to a person, using any device, whatever) is a communication. We assume that communications that feel just like phone calls are supposed to be provided on a common carriage, nondiscriminatory basis. We think of communications as a utility, like electricity or water, that is regulated by the government. It’s alarming to find out that these gigantic wireless carriers think of themselves as providing a private service within which they can discriminate for any reason or no reason at all.

But isn’t the wireless market competitive? Why would we need government intervention? Here’s where the long view is important. Wireless prices have been steadily rising since 1999, at the same time that the industry has been concentrating: twelve wireless carriers that were independent as of 1999 have combined (through merger, spinoff, or joint venture) into these four large wireless carriers – Verizon, AT&T, Sprint, and T-Mobile. Verizon and AT&T already control 51% of the wireless market in the US and are growing very quickly. Verizon ($22.6 billion operating cash flow) and AT&T ($17.8 billion operating cash flow) combined have 64% of the net additions to wireless subscriptions and 120 million subscribers. These are rich networks that are getting richer.

But the salient marketplace isn’t necessarily the market for wireless phone calls. These same two companies, Verizon and AT&T, control DSL internet access through regional monopolies across the country, and offer these wireless services as part of packages that tie together traditional phone services, “IPTV” access, and internet access. Everything is bundled. The elements of these bundles don’t compete against each other, really. And, as readers of this blog are tired of hearing, we don’t have real competition for highspeed internet access.

But this issue is all about wireless phone calls. So what? This issue matters because Verizon and AT&T see the wireless future – and we should too. These phone companies are making their key revenue in the wireless area, and they like the control that they have there. They understand that we’ll all be accessing all data/interaction/people using mobile handsets, and they’d like to wrest control of these communications from the PC arena – which is traditionally more open. They’d like to have mobile phone standards, which allow network providers to charge for every transaction we do using a handset, apply to all of our interactions. They’d like all applications to have to ask permission before they can be accessed – because that will allow the carrier to charge. So they’re hoping to move away from the traditional phone-common-carriage model to the “future” wireless-carrier-private-actor model as both a regulatory matter and as a business imperative, and they have the market power to do this.

That’s why this story matters. More than a billion handsets will be bought around the world next year. We’ll all be going online using mobile devices. If the wireless “we get to discriminate” model of regulation applies to handsets in the U.S., the mobile carriers will be able to act as gatekeepers in the marketplace of ideas, choosing winners and losers. The fact that a Verizon lawyer was empowered to say NARAL’s texts were “unsavory” as a matter of company policy
is hugely important – Verizon may have withdrawn this particular decision (smart move), but that’s just the tip of the iceberg.

We have to decide what model for communications regulation we want. Do we want the carriers to decide what we do online, or do we want the carriers just to be carriers? “Online,” “cell phone,” “telephone,” and “cable” all feel the same to the consumer. It’s all just data traveling fast. The regulatory reluctance of the FCC and the weirdly out-of-date structure of the Communications Act are allowing for differential treatment of the same kinds of transactions — the FCC knows this, and so it is strongly leaning in the deregulatory direction. “We’ll treat everything the same way and everything will be a private network. The market will be victorious!” But as a matter of social policy and our own future, we should sharply question that direction. We don’t have enough competition or enough enlightened, nondiscriminatory communications companies to allow us to be confident that the market will be able to do anything. We should move back towards common carriage for telecommunications – which will require that control over transport be separated from content.

So Verizon Wireless stores are everywhere, and incredibly convenient, because we’re addicted to these devices. They’ll be even more important in the years to come. But we shouldn’t be addicted to the regulatory model that currently governs our use of these devices. This will take leadership to change.