In 1968, the FCC ruled that AT&T and other telephone networks could not forbid third-party devices that were deemed to be both harmless and needed. Particulars of the case:
- 1959: Thomas Carter's Texas-based company releases the Carterfone, which couples callers using wireless radio and wired phone networks.
- AT&T and other companies warn customers not to use the device, adding that using a third-party device is subject to penalty.
- 1966: Carter brings anti-trust proceedings against AT&T et al.
- 1966: District Court rules that the case is the jurisdiction of the FCC; an Appeals Court concurs.
- An FCC examiner found "that there was a need and demand for a device to connect the telephone landline system with mobile radio systems" — and that the device did not harm the system.
- 1968: The FCC adopts the examiner's findings, noting that banning a device that did not harm the network was "unreasonable, unlawful and unreasonably discriminatory."
- 1975: The FCC adopts Part 68 to its rules, allowing consumers to attach any devices to a network, as long as they adhere to technical standards.
- With customers able to choose their own telephones, a range of new features become available, and prices drop.
- 2007: Voice Over Internet Protocol firm Skype files a petition with the FCC, urging it to include VOIP devices in the Carterfone rules.
The FCC is being urged to include rules that would ease the way for open, flexible cell-phone networks when it sets the rules for an upcoming auction of the wireless spectrum. Consumer groups, and some businesses, say the change would benefit users.
Advocates say that requiring winning bidders to open their networks to all devices would lead to an explosion of innovation. But wireless companies who oppose open networks say the change could disrupt service and devalue the spectrum.
The case isn't the first time phone companies have had a say over what phones people can use. For those old enough to remember, before 1968, you had to get your phone from Ma Bell — and she didn't offer many choices.
But as Google's head of special initiatives Chris Sacca says, "The FCC passed some rules called the Carterfone principles, which allowed you to bring any phone which complied with the jack standard to go ahead and plug that in. And all of a sudden, you saw a boon of innovation. We saw the cordless phones come into our houses, fax machines; we saw dial-up modems invented."
Sacca thinks there could be just as much innovation in the cell phone market if only the wireless company's didn't have to approve. He's not alone.
Dr. Amol Sarva is the CEO and founder of Textible, a start-up that is trying to build an inexpensive mobile device for e-mail. But he needs approval from one of the big phone companies, or he won't be able to sell it.
"I've got a big hurdle I've got to get over if I want to bring a device like mine to the market," Sarva said. "I need to prove to the networks that I won't steal their business. I've got to prove I'm big enough to be worth their time."
Sarva thinks customers, not corporations, should decide if they like his device. He is a member of the Wireless Founders Coalition, which, along with Google and several consumer rights organizations, is asking the FCC to require winning bidders in an upcoming auction of wireless spectrum to open up their networks to all devices.
The commission is expected to announce the rules for bidders Tuesday. The auction will take place early in 2008.
But many phone companies who are likely to bid at the auction think that kind of openness is a bad idea. John Walls of CTIA, a wireless industry trade group, says that a company like Sprint has to be able to approve devices that use its network.
"If I have an application that's running on my device that causes an iota of disruption or interference," Walls said, "I very likely run the risk of interfering with or disrupting the service of tens or hundreds of people in my immediate vicinity — or maybe even more down the line."
Consumer groups disagree. After all, they say, back in 1968, the phone company claimed that using unauthorized phones would disrupt their network — a claim that proved to be false.
Apart from opening networks to more types of phones and devices, Google and consumer groups are pushing to open the industry so that more than the big four in the market — Verizon, T-Mobile, Sprint and AT&T — can compete.
To do that, they are urging the FCC to require winning bidders to rent parts of their networks to competitors.
"We're saying, on this chunk of spectrum we want openness," Gigi Sohn, president of the consumer rights group Public Knowledge, said. "Openness of every kind — and the ability for competitors no matter how big or how small to come in, lease capacity at wholesale rates, and provide a variety of services."
Walls, of the wireless industry group, says that kind of competition already exists — and that the auction is an opportunity for more companies to enter the market.
"The wireless broadband space, as far as a competitive space is concerned, is alive and will be doing quite, quite, well in the very near future," Walls said.
If wireless carriers are forced to open up their networks, Walls said, they aren't likely to bid as much for them — and taxpayers will make less from the auction.
To counter that argument, Google has offered to bid at least $4.6 billion if the FCC requires open networks.
Chris Sacca of Google admits that his company has its own motives for taking part and urging change in wireless. After all, he says, Google doesn't want to have to go to a wireless company for approval if they want to reach customers on their cell phones and PDAs.
"What we fear is that in an uncompetitive environment where the carriers control the destination sites that you, the user, chose, you won't have the opportunity to choose us," Sacca said. "In that situation, we suffer and you suffer."