Today’s Verizon Wireless announcement that it will open its network to third party devices represents a major shift with tremendous potential to spur innovation. The likely eventual result is a wide variety of new devices taking advantage of wireless connectivity over Verizon’s mobile network — and not just phones with cool new features or designs, but potentially devices with entirely novel functions, like, say, networked automobiles, shipping packages, or even refrigerators. Combining the ubiquitous nature of the wireless network with the creativity and imagination of the broad technology developer community may yield any number of innovative ways to incorporate network-based functions into non-telephone devices. In response to a question during a press briefing, a Verizon Wireless official expressly said that if an innovator in his garage can develop a device that meets the basic technical specs, the device can connect to the Verizon network. This is precisely the kind of openness that’s allowed small innovators to turn the Internet into such a dynamic platform, but has been lacking on U.S. mobile networks to date.

What prompted the groundbreaking announcement? I suspect it was partly competition with AT&T and Apple’s iPhone. The iPhone, available in the U.S. only on AT&T’s network, is showing that people will switch carriers to get a cool new device. Verizon Wireless may have decided that the best way to compete with AT&T’s iPhone advantage is not to try to build a new blockbuster phone of its own in-house, but rather to let a thousand flowers bloom — and let innovators across the country create applications and devices that Verizon hopes will drive users to its network.

But Verizon’s decision was also likely related to the recent policy debate over openness. Early in 2007, Columbia law professor Tim Wu released a paper highlighting problems with the more closed model the mobile phone companies were following. VoIP provider Skype filed a petition with the FCC advocating the application of “Carterfone” rules — the rules that decades ago forced AT&T to allow use of third party phone equipment with the traditional telephone system — to mobile carriers. A major fight also erupted about whether to include openness requirements as part of the usage rules for key 700 MHz spectrum soon up for auction, and the FCC did in fact choose to include some openness provisions. There were congressional rumblings as well, including a hearing on wireless innovation and competition prompted by AT&T’s exclusive iPhone deal with Apple. All of this shined a major spotlight on questions about innovation in the wireless marketplace, increased public awareness of the limits of mobile phones and mobile services, and very likely played a significant role in prompting Verizon Wireless executives to consider a different policy.

There are some outstanding questions about the details of the new Verizon Wireless policy. Pricing for customers using third-party devices has not been announced. In addition, Verizon Wireless says it will need to test and certify devices to ensure that they comply with technical specs. The ease, cost, and duration of the certification process remain to be seen. Finally, Verizon Wireless representatives were not asked at today’s press conference whether the company plans to carry all traffic on a nondiscriminatory basis, without regard to what device or application the sender or recipient may be using.

Pricing, the certification process, or differential transmission quality could all, in theory, enable Verizon Wireless to discriminate against devices or applications from unaffiliated providers. But while it is worth keeping an eye out for that kind of mischief, there is no early indication that such problems are likely. Indeed, all of Verizon’s news conference answers today pointed in the opposite direction. Verizon’s motivation appears to be to attract more customers to its network by enhancing the variety of devices available for use with it. Having decided that the benefits of embracing innovative third-party devices outweigh the benefits of keeping customers tethered to Verizon’s own products, it would make little sense to undermine the third-party products in an effort to funnel customers back to the Verizon ones.

A more interesting question is what this all means for the Internet neutrality debate outside the specific context of wireless.

At a general level, this Verizon Wireless experiment may help confirm the benefits of open platforms. It presents an opportunity to demonstrate that openness can be a successful business strategy not just for independent providers of content, applications, and devices, but for network carriers as well.

But it is also true that the openness/neutrality debate is a bit different in the traditional Internet context than in wireless. For Internet providers, allowing different devices is standard practice, and the main unsettled question is whether and to what extent carriers should be free to discriminate by helping traffic of affiliated or otherwise favored applications or content run faster or more reliably than traffic of from unaffiliated or disfavored sources.

Still, the Verizon Wireless announcement may affect that debate in at least one significant respect. A major argument of neutrality opponents has been that discrimination is necessary to deal with users or applications who are bandwidth hogs. But when asked today how Verizon Wireless would deal with the bandwidth hog problems that its new policy could pose, a company official gave a simple answer: usage-based pricing. In other words, bandwidth hogs will be controlled by having them pay more.

This is precisely what CDT has suggested in the Internet context. The way to deal with capacity limitations is not to discriminate against particular applications or otherwise play favorites. It is to have generally applicable pricing rules that force true bandwidth hogs to pay for the burdens they place on the network. If Verizon Wireless implements its new plan without discriminating in transmission of traffic — and relies instead on usage-based pricing to control bandwidth hogs and ensure that revenues keep pace with growing demand for traffic throughput — it will demonstrate the feasibility of addressing traffic volume issues without discriminating on an application-by-application basis. CDT would very much like to see Verizon’s wireline Internet business take the same approach for its FIOS and DSL services, in the interest of maximizing innovation and user choice.

Looking ahead, we may one day look back on today’s announcement as a key turning point for the wireless industry. Other wireless carriers obviously have not said anything yet about whether they will follow Verizon’s lead, and it may be that none will do so immediately. But in the long run, it is hard to see how they will be able to deny their customers access to the myriad devices and features that Verizon’s more open policy is likely to yield. This could be the harbinger of a welcome sea change that goes well beyond just Verizon Wireless itself.

This entry was posted on Tuesday, November 27th, 2007 at 5:25 pm and is filed under CDT, Internet Neutrality. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.