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Talk is Cheap…And Getting Cheaper

-- By DonnaAckermann - 05 Nov 2009

Background

Over the past decades, after the local and long-distance phone service industries collapsed, AT&T and Verizon transitioned to cellular phones to find a new market. And now, the cell phone industry itself faces collapse because of voice-over-IP (VoIP) competition and emerging technology. To understand why the cell phone companies face extinction, it is important first to understand how a cell phone call works, how VoIP technology differs, and the role of the electromagnetic spectrum.

A cell phone call represents a service provided over a proprietary network, whereas VoIP conversations utilize public internet bandwidth. The cell phone uses radio waves, a portion of the electromagnetic spectrum. The spectrum is considered to be the property of all humankind; yet the government regulates it to prevent signals from interfering with each other by being simultaneously broadcast on the same frequency. The government therefore designates some portion of the spectrum as a station, and whoever wants to use that station needs a government license.

Despite current practices, there is no longer any technical need for the government to divide the spectrum on our behalf because cell phones are sophisticated enough to avoid interference on their own (“cognitive radio”). The government does not regulate VoIP technology because VoIP functions through the internet, a part of the electromagnetic spectrum that requires no usage license, since it was originally assumed that internet would use an insignificant amount of power and therefore would not require regulation.

What VoIP Can Do For You

It is technically possible just by using public bandwidth to route cell phone calls over the internet, instead of relying on spectrum that is licensed to the cell phone companies. Mesh routing, using cooperative routing to allow a large number of people to have services connected through a small number of ports, uses unregulated portions of the public electromagnetic spectrum. Once a wireless mesh network is created as individuals and businesses join it and expand it, VoIP technology will make cell phone companies unnecessary.

An example of a VoIP program is Asterisk, which can do everything that a telephone can do, but it does it all for free over the internet. Asterisk’s open source software allows users to talk through computers and telephone landlines. OpenBTS is a free software and hardware package that allows Asterisk to work with cell phone handsets by turning any computer into a cell phone base station. Thus, Asterisk and OpenBTS make cell phone companies superfluous, as those companies only provide access to licensed spectrum, which is now unnecessary because bandwidth is available for free through the internet.

Cell Phone Industry Fights VoIP...

Another example of VoIP technology, which is less sophisticated than Asterisk and is proprietary, is Skype, which allows calls to be placed from one computer to another, for free. The cell phone companies’ initial refusal to allow Skype and other VoIP technology on their networks sparked a controversy, both in the United States and abroad. Europe recently asserted its opposition to the cell phone industry’s restriction on the use of VoIP technology on mobile phones and threatened to apply new roaming regulation or antitrust rules to support its position.(1)

By comparison, the US Federal Communications Commission (FCC) is sending mixed signals with respect to the use of VoIP technology on cell phones. In March 2008, the FCC held an auction to sell the recently-freed 700 MHz spectrum; AT&T and Verizon were considered the big winners because they each bought a lot of spectrum.(2) The 700 MHz spectrum is considered particularly valuable because of its ability to penetrate buildings and cover all fifty states, including rural areas.(3) One of the conditions of this auction was that the frequency be open access, perhaps indicating the FCC’s desire to allow VoIP technology on cell phones.(4) While the ACLU and others earlier pushed for open access to mean open devices, open applications, open services, and open networks, the FCC only required open devices and open applications.(5) So while the FCC can publicly claim to be supporting open access, which would allow VoIP technology to flourish on cell phones, in reality its support for open access is lukewarm at best.

In April 2008, the FCC further demonstrated its reluctance to allow VoIP technology on cell phones when it turned down Skype’s open access petition, which would have given Skype federal protection to run through cell phone carriers.(6) The FCC claimed to turn down Skype’s petition because the Commission has enough rules requiring open access, including the requirement that the 700 MHz frequency be kept open access.(7) But if the FCC were really in favor of open access, why restrict Skype? The United States may be less willing to fight for VoIP technology on cell phones and open access in general because the government profits from keeping cell phone companies in business; cell phone companies pay the government when spectrum is originally licensed and then pay a second time when taxes are levied on those consumers using telecommunications services.

...And the Industry Loses

In the end, VoIP and free communications endanger the cell phone companies’ survival, but the cell phone companies cannot stop the development or spread of technology, and so the cell phone oligopolists will die. Recently, after significant resistance, AT&T enabled VoIP technology on the iPhone over its 3G wireless network, as it had already allowed VoIP technology on its other wireless devices. (8) This move, which AT&T had to do to appease its customers, is a hopeful sign of the beginning of the end for the cell phone industry. With the technology in place, only time will tell how long it is until the regulatory and political framework changes so that a cell phone call is just another free commodity.

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Notes

1 : See EU battles industry plans to restrict Skype on mobile phones, EurActiv.com, July 16, 2009, http://www.euractiv.com/en/infosociety/eu-battles-industry-plans-restrict-skype-mobile-phones/article-184142; see also EU slashes ‘roaming’ cell phone costs, CNN.com, July 1, 2009, http://edition.cnn.com/2009/BUSINESS/07/01/eu.roaming.cellphones/index.html.

2 : Chris Ziegler, FCC releases 700 MHz auction details, engadget.com, Mar. 20, 2008, http://www.engadget.com/2008/03/20/fcc-releases-700mhz-auction-details-verizon-atandt-big-winners/.

3 : Joshua Topolsky, Open Access: everything you wanted to know but were afraid to ask, engadget.com, Feb. 5, 2008, http://www.engadget.com/2008/02/05/open-access-everything-you-wanted-to-know-but-were-afraid-to-as/.

4 , 5 : Id.

6 : Nancy Gohring, FCC to Turn Down Skype’s Mobile Open Access Plea, pcworld.com, April 1, 2008, http://www.pcworld.com/article/144025/fcc_to_turn_down_skypes_mobile_open_access_plea.html; Paul Miller, FCC Turns Down Skype’s Open Access Petition, engadget.com, April 2, 2008, http://www.engadget.com/2008/04/02/fcc-turns-down-skypes-open-access-petition/.

7 : Gohhring, supra note 6.

8 : Cleve Nettles, Apple, AT&T, the FCC, Google and Skype remark on AT&T opening VoIP over 3G, 9to5mac.com, Oct. 6, 2009, http://www.9to5mac.com/apple-skype-vonage.

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