carterfone

[m.clizzle]

http://www.usatoday.com/tech/columnist/k...fone_x.htm

FCC ruling changed phone industry in 1968; it could happen again today
Maybe U.S. consumers need another Carterfone to bust open the cellphone industry.

No, this is not referring to some hotline on Jimmy Carter's White House desk. ("Mr. President, Brezhnev's on the Carterfone yet again. Something about Prince Albert in a can.")

The landmark 1968 Carterfone Decision is a "neat historical analogy" to a couple of current conflagrations in technology, says J.P. Auffret, professor at George Mason University's business school.

One should alter cable TV this year. The other might result in cellphones that work with any wireless carrier — the way any telephone works no matter what company you use for landline service.

Kevin Martin, chairman of the Federal Communications Commission, sounds gung-ho about pushing for both transformations. "There would be some real consumer savings on the wireless (cellphone) side," he told me earlier this month. "On the cable TV side, it would allow more innovation."

Back in 1959, an otherwise obscure inventor named Thomas Carter built an electronic box to pull in radio transmissions and connect them to the regular telephone network. The main customers were on oil rigs. You could get on a radio, patch into a Carterfone on land, connect to the phone line and complete a call.

AT&T hated this and shut it down. Then a monopoly, AT&T declared that any device that it didn't make could potentially harm the network, even though about the only way to damage that era's network of copper wires and electromechanical switches would've been with an ax.

Carter sued, eventually provoking the FCC in 1968 to rule that anyone could make devices to attach to the network. That's one reason we're not all stuck renting chunky black desktop phones from a telecom monopoly for $25 a month. The Carterfone Decision made way for multitudes of cheap phones, answering machines, fax machines and modems.

In short, it unbundled the telephone system and opened up innovation and price competition.

Fast-forward to today's cable TV industry. Cable companies have had an attitude not unlike that of the 1950s era AT&T. They have long kept anyone except officially sanctioned partners — these days, mostly Motorola and Scientific-Atlanta — from getting the software that decodes cable signals. You have to get a cable box from the cable company to see programs. You can't buy a TiVo or Media Center PC with the descrambling capabilities built in.

This year, a provision in the 1996 Telecommunications Act is likely to finally get enforced by Martin. Cable companies will have to unbundle the cable system by sharing the descrambling code with other device makers. The cable industry has gotten deadline extensions ever since 1996, but the current extension runs out on July 1, and Martin says he doesn't want to allow another one.

"Theoretically, this could be good for everyone, especially the consumer," says Andy Paff, CEO of Cedar Point Communications, a communications equipment maker.

One certain outcome: A TiVo or Microsoft will be able to sell a box that connects to the cable line and the Internet. It will pull in cable channels, Web-based video and downloadable movies, mix them all together and present them on screen in a single menu. (Cable companies despise that because they lose control of the viewing experience.)

"TV will change forever in 2007," says Danny Briere, CEO of market analyst firm TeleChoice. "The ones to watch here are gaming consoles," he adds. When Xbox, Wii and PlayStation 3 also become TV hubs, the mixture of gaming, TV, two-way communications and 3D graphics should get really interesting.

In the same way, the cellphone industry needs to be unbundled. Consumer advocates want it. The FCC's Martin apparently wants it. Cellphone makers want it, though they don't like to say so and risk offending their wireless carrier partners.

Cellphones and other wireless devices (such as cellular modem cards for laptops) are set up to work with one carrier.

The latest blatant example: Millions of customers of Verizon Wireless or Sprint or T-Mobile would probably like to buy an Apple iPhone to replace their current phones, and just plug in a little chip and make it work on their existing calling plans. Can't happen. The iPhone will work only on AT&T's Cingular wireless network.

Which, by the way, mostly benefits Cingular, though Apple probably made a pretty penny by selling the exclusive rights to Cingular.

"Cingular's … exclusive deal with Apple is an absolute killer to the (wireless carrier) competition," Briere says. But he says it's a sign that the whole arrangement between cellphone makers and carriers is "a mess."

It's like having pots that work on only one brand of stove. Or cereal that must be used with milk from one kind of cow. Or printers that work with only one kind of ink cartridge … oh, wait, that one is actually true.

But in general, these bundling arrangements are an unnatural levee set up to hold back market forces.

"Bundling is probably limiting innovation in the U.S. market" in cellphones, professor Auffret says.

If any cellphone could work on any network, wireless devices would compete on their own merits, separate from the networks. That would increase competition among device makers and free them, for instance, to more easily make phones that work over Wi-Fi when in range of a Wi-Fi signal and switch to a cellular network other times.

But the only way cellphones will get unbundled from the networks is if the government makes it happen. When Martin and I talked, he didn't come right out and say he will do that. But it was clear that he's thought about the issue, and I bet he or the next FCC chairman tackles it. As happened after Carterfone, innovation would doubtlessly flourish.

Too bad Martin doesn't have jurisdiction over printers.

E-mail kmaney@usatoday.com

could be even better news for us then yeah?

[allsighs]

First reaction, I'll believe it when i see it. However, if i see it my wife is going to hate me because I will spend whatever it takes on new tuners to get digital/HD multituning, comskiping goodness on my HTPC.

Ill keep my fingers crossed.

[nitrogen_widget]

I'll believe it when I see it also.
Unfortunatly the lobyists of today are a much different breed of the lobyists of the 60's.