Small Carrier CEOs Say 700 MHz Interoperability Mandate Critical to Survival

"It’s very rare that you die in the marketplace from a silver bullet to the head,” said Jonathan Foxman, CEO of MTPCS, formerly Cellular One. “It’s a lot of little wounds accumulating over time. To the extent you can’t keep pace with technology, you risk losing some customers and dissatisfying your customers. To the extent you can’t be efficient with your network, margins go down and that impacts the rest of your business."

Competing as a smaller carrier is more difficult than ever, Foxman said. “We're competing against much larger national carriers with much more advanced systems,” he said. “The advertising spend[ing] that a lot of us are up against, the bar has continually been raised.” The big players keep getting bigger, he said. “That puts more and more pressure on the rest of us to figure out how to be effective competitors."

"We were very pleased to see the FCC action on that, but it’s not enough, fast enough,” RCA President Steve Berry said of the 700 MHz NPRM. “Spectrum pressures, deployment of new devices, competitive forces from the duopoly require getting a marketplace with a 4G ecosystem, i.e. device and a network, sooner rather than later. That’s going to be key. What we have had is a bifurcated, balkanized 700 MHz slice of spectrum that was supposed to be the convergence platform."

C-Spire had to line up funding with its banks to buy 700 MHz spectrum, but saw the investments as critical, said Hu Meena, CEO of the company formerly called Cellular South. “We knew from having been in the business for 25 years … that keeping up with your Gs is very important,” he said. “We'd been through 1G, 2G and 3G. … Because we were not able to get the interoperable devices, we still have not rolled out services. Historically, the FCC has promoted competition,” Meena said. “But in 4G they have allowed the balkanization of certain spectrum and the big guys to get out front,” he said. “We don’t have an open ecosystem in which we can fully participate.” Small carriers hold licenses to use the 700 MHz band, Meena said. “We ought to be able to use it fully to bring the best services and products to our customers, including the best devices,” he said. “It’s just unfortunate that there are those out there who can control the marketplace."

Foxman told of his company’s experience with one handset. “We went through the selection process, identified a handset that was offered by a distributor,” he said. “A couple of weeks later we got a phone call back saying that device is going under exclusivity with a major carrier and so it wouldn’t be available to us.” The example raises questions about one of the central arguments in favor of handset exclusivity -- that it encourages device makers to experiment and develop devices tailored to a specific carrier, he said. “The device was done. It was made,” Foxman said. “It was being offered to others but then a big carrier says, ‘I want that and I don’t want anyone else to have it.’ That’s not how the industry should function."

The carrier CEOs all said they are interested in the iPhone, though deploying the Apple phone is not simple for smaller players. While AT&T, Verizon and Sprint Nextel all offer the iPhone, few smaller carriers do so far.

"We tried for a long time to get Apple engaged with our members and once they get engaged they can’t talk to us about it,” Berry said. The discussion over the iPhone gets back to 700 MHz interoperability, he said. “We're for more than the iPhone,” he said. “The thing that gets me upset is the iPhone was not exclusive, as you remember, but it took four years for any other carrier to even get access to it the first time.” Berry said the iPhone is “a good example” of why the FCC needs to approve 700 MHz interoperability rules.

"There’s a t-shirt out there that says I've been to Apple’s campus in Cupertino [Calif.] and I can’t talk about it, and I own that t-shirt,” Meena said. “We're very happy that we have it. It’s a fine device. Our customers love it.” Atlantic Tele-Network is interested in the iPhone, CEO Michael Prior said. “I have a t-shirt that says ‘I may or may not have been to Cupertino, but if I did go there it’s awesome,'” he said. “It’s clearly a device that consumers are very attracted to. Everybody has to make a cost-benefit decision, both the operators and the vendor too. But I think Apple wants more iPhones out there."

Foxman said MTPCS would like to have the iPhone, but getting it is a real challenge for smaller carriers. “We all have to manage our financials and our bank covenants and that sort of thing,” he said. “It’s obviously been accepted on a mass scale by an awful lot of consumers. It’s a great product.”

The CEOs also discussed the importance of getting more spectrum on the market, in a manner allowing smaller carriers to play in future auctions. “More spectrum is better for all,” Prior said. “Everybody needs more spectrum.” Questions remain about future auctions, he said. “If a new band is freed up, what are the rules going to be … who’s going to deploy in it,” Prior said. “Is there interoperability if it’s sliced into a couple of chunks?” AT&T and Verizon are the only carriers “who can afford to buy spectrum anywhere and sit on it,” he said. “In the rural areas they typically have excess spectrum.”