Wireless Carterfone on the Way?

Despite all the attention that will be paid to the $7.2 billion "broadband stimulus" provisions of the American Recovery and Reinvestment Act of 2009, it is a sideshow compared to the much more important activities now building at the Federal Communications Commission, which is conducting an inquiry into national broadband policy, and a new inquiry that could radically change the way consumers and businesses buy their handsets and mobile service.

Mandatory bans on bundling of handsets with wireless service—referred to by many as “wireless Carterfone”—could be the result of a new proceeding the Federal Communications Commission already has directed staffers to open.

Acting FCC Chairman Michael Copps, in fact, says he already has authorized FCC staffers to open an inquiry into the handset subsidy issue, and that the commission will "take action if required."

Many warn that the result will be higher upfront device costs for all consumers, as the trade off for service without contracts. But others say the rules will spur innovation and free consumers from contracts that tie them to their service providers.

And though some praise wireless Carterfone (unlocked devices) as a way to spur innovation, some think the opposite could happen, as higher phone costs lead to less-frequent handset replacements. And since higher-functionality handsets are a spur to innovation and new services, slower diffusion of new handsets actually will retard innovation.

The FCC national broadband policy also could radically change the way the communications business operates, instituting strong forms of "network neutrality" that some say would radically affect the profitability of the broadband business, minimize techniques for managing network congestion and drastically affect the equity values, borrowing capability and retail strategies service providers could contemplate.

In some cases, the ability to offer higher quality of service might be limited or impossible because no packets could be offered higher priority than any others.

Depending on one's point of view, will drag the entire industry backwards into old regulatory models that will stifle continued investment, or alleviate what Acting FCC Chairman Michael Copps is the problem of "all of America being an under-served area" in terms of broadband.

The coming debates over the shape of national broadband policy,  and possible wireless Carterfone rules, will dwarf the broadband stimulus in impact.