Solutions to help your business Sign up for our newsletters Join our Community
  • Share

Keeping an open mind

In the upcoming 700 MHz auction, the FCC is mandating that 22 MHz of spectrum be allocated to allow, with certain constraints, open access to applications and devices. Google and others lobbied for open access, arguing that without it, the Internet is, and will remain, a dichotomy: a wired Internet to which users can attach any IP device and access any content, and a wireless Internet more constrained in terms of devices and content.

More on this Topic

Industry News


Briefing Room

The CTIA opposes that view, arguing that by encumbering spectrum with open-access mandates, the FCC's ruling may deter potential bidders and reduce spectrum valuations. Major providers, including AT&T Mobility and Verizon Wireless, while initially skeptical about open access, have taken a more neutral position.

Current and potential wireless providers need to consider whether open access offers a new basis for differentiation. At least three reasons suggest it might. First, with market penetration near 80%, churn is the dominant source of gross adds. Open access provides a low-resistance path for subscriber adoption by letting prospects transition with the handset of their choice, giving the open-access provider a potential flow-share advantage.

Second, by enabling device independence, open access reduces handset subsidies and lowers cost per gross add (CPGA). We estimate that a 50% reduction in handset subsidies could lower CPGA by 20% to 25%, raising customer EBITDA margins by up to 5%, assuming churn remains at comparable levels. However, margin improvement diminishes as incremental churn approaches 1%, a risk open-access providers must manage.

Third, WiMAX deployments are on the horizon as a de facto competitor to open access. Designed from the ground up as IP, WiMAX is supported by major equipment providers, including Intel, helping to ensure a wide assortment of interoperable devices. Xohm, for example, Sprint Nextel's planned WiMAX offer, will adopt Wi-Fi's subscription and session-based open-access model, allowing any WiMAX-compatible device to connect to any content or application over the Internet. An open-access counteroffer may be the best response for incumbents.

But providers, especially larger incumbents, have reason for skepticism. Opening their networks puts providers at risk of becoming transport-only dumb pipes, ceding some profits from proprietary content and applications to third parties. Unique knowledge of their own wireless networks, however, positions carriers to develop enhanced, sticky applications that fully leverage their network capabilities, such as location and presence, and to rent value-added network application programming interfaces to third-party content and application providers.

In addition, ensuring device interoperability in a wireless context is not trivial. Today's wireless networks lack a uniform way for devices to plug into more advanced features, making incompatible devices a risk to network performance and customer experience. Also, in the U.S., there is a mix of incompatible CDMA and GSM networks, limiting device interoperability across providers.

Finally, providers are reluctant to open their networks to applications, such as voice over IP, that might cannibalize voice revenue. While IP-based voice seems inevitable, premature erosion of legacy voice revenues would cut off a key source of funding for the 3G and 4G networks needed to make this transition a reality.

The FCC has defined a path forward for open access in the U.S. From the carriers' point of view, the arguments for and against open access are complex and situation-dependent. In light of the likely future competitive environment, however, carriers must determine if and how open access fits into their own strategic plans as the 700 MHz auction approaches.

David Waite is a director for Altman Vilandrie & Co. He can be reached at

Want to use this article? Click here for options!
© 2014 Penton Media Inc.

Learning Library


White Papers

Featured Content

The Latest


From the Blog


Join the Discussion


Get more out of Connected Planet by visiting our related resources below:

Connected Planet highlights the next generation of service providers, as well as how their customers use services in new ways.

Subscribe Now

Back to Top