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The Meaning of the FCC's Investigation of Apple

by Steve Augustino on 08/02/09 08:00:00 am   Expert Blogs   Featured Blogs

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Julius Genachowski has been chairman of the FCC for only a month, but already he is wading into the sticky issue of the relations between application providers and mobile carriers.  Reacting to reports earlier this week that Apple refused to approve the Google Voice app for the iPhone, the FCC quickly shot off letters to Apple, Google and AT&T.  For convenience, I uploaded the letters here:

Apple

Google

AT&T

To me, this is welcome news.  In my discussions with game developers, I have heard many frustrations with the state of the mobile market for games.  There are plenty of reasons why mobile gaming has not reached its potential, even with the undeniably positive influence of the iPhone and its app store.  This action signals that the FCC can be a forum to address some of those problems.  The Wall Street Journal quoted Chairman Genachowski as saying that the FCC  "has a mission to foster a competitive wireless marketplace, protect and empower consumers, and promote innovation and investment."

On the substance, I am skeptical that the FCC will take any action.  If this is solely about whether Apple chooses to allow an application from a competitor, there is little that is within the FCC's jurisdiction (despite Genachowski's broad statement).   On the other hand, since it is a voice application that was rejected, the FCC's suspicion that Apple is explicitly or implicitly acting to protect AT&T's core service seems plausible.  The key will be whether AT&T is linked to the rejection of Google Voice.  (AT&T quickly denied involvement yesterday).

The most surprising thing about the FCC letters is that they appear to be entirely unprompted.  I am not aware of any complaints filed with the FCC about Apple's rejection.  And, the two pending proceedings mentioned only tell part of the story.  One, the wireless open access proceeding, was initiated two years ago by VoIP provider Skype.  The previous FCC chairman, Chairman Martin, circulated an order in 2008 denying the petition, but that failed to garner support among his fellow commissioners.  The proceeding has languished with almost no activity in a year -- until now, apparently.  

The second proceeding deals with exclusive handset arrangements, such as AT&T's exclusive deal to sell the iPhone.   This proceeding primarily is about the impact that these deals have on smaller carriers and carriers serving markets where the big carriers lack coverage.  These carriers allege that exclusive handset deals are distorting competition among large and small carriers.  Applications have not been a significant topic in that proceeding.

So, why is the FCC suddenly interested?  This development says a lot about the new chairman, Julius Genachowski.  Genachowski worked at the FCC in the mid 1990s, at a time when the Commission was opening the local telephone market to competition.  After he left the FCC he worked for IAC, Barry Diller's conglomerate of websites, including ticketmaster, hotels.com, match.com and ask.com.  Genachowski is said to be a strong proponent of "edge" innovation and the idea that government policy should protect the freedom of "edge" providers to use networks in ways that are privately beneficial so long as they do not harm the network.  These letters are the first indicator that Genachowski will be leading the FCC down that path.

BONUS ITEM:  Game developers should watch for Apple's answer to the fifth question posed by the FCC:  "What other applications have been rejected for use on the iPhone and for what reasons?  Is there a list of prohibited applications or of categories of applications that is provided to potential vendors/developers?"  Depending upon how Apple responds, we may learn something from that one.  


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