FCC's Sternly Worded Letter to Apple

So the empire strikes back. The semi capricious nature of the Apple (AAPL) Application Store has stoked the ire of more than a few developers as well as anxious customers in the past. With the recent booting of Google's (GOOG) VOIP application off the Apple Store, AT&T (T) might have gone one bridge too far.

In the past, AT&T (through Apple) has argued that severe bandwidth justify keeping applications off the network. Because AT&T has had limited competition and internet application growth has been impaired by backward usage and control policies, they haven't had to worry about actually keeping their network in the 21st century until recently. The iPhone opened the door just a little bit in terms of what these devices can do and customers want to actually use them which has strained AT&T's backward and poorly engineered network.

In this particular case, using the argument that it taxes a still "developing" network is nonsense. VoIP applications are relatively non bandwidth intensive. Voice is nothing compared to video that one might get on the MLB app that streams live baseball games to your iPhone.

The interesting dynamic here is that the issue really isn't with Apple, it's Apple's partner AT&T that is trying to either get applications modified or removed entirely. Usually the modification is designed to push the data onto WiFI and subscribers typically play a game of installing one of the various commonly available hacks to trick the iPhone into thinking that 3G is WiFI.

There is a little bit of an interesting irony in all of this. Namely, it's Apple's choice of establishing an "App Store" that is really causing this problem since it serves as a gateway for approval for all applications. For example, if you look at other devices that don't have App Stores, many of these same applications are available on AT&T just on other devices (for example Sling Player which is exceedingly data intensive).

The existence of the App Store allows AT&T to use it as a conduit to prevent apps that it either doesn't like or doesn't want on its network from being installed on the iPhone.

What's going to save us all here? A migration to LTE for all the competing networks as soon as possible. Verizon (VZ) is rushing its build out out for next year. With T-Mobile, AT&T and Verizon all on the same network, there will be more competition as the same devices leverage the same air interface.

While I am a free market guy, the hoarding of wireless licenses by four dominant wireless carriers makes regulation of those licenses essential and the FCC is doing what should have been done years ago. There used to be a somewhat constraining cap on the amount of licenses carriers could hold but this regulation was essentially gutted. Carriers need more than the old rule specified for 4g to provide voice, fixed data and mobile data and video but right now several carriers are holding licenses just to keep out competition.

The real answer here is to liberate one nationwide license from Verizon (they are not going to do anything good with it) and auction off at least one more nationwide footprint to a new entrant. Two new and nationwide broadband competitors with fixed and mobile data offerings will allow for more innovation to a still stagnating and backward industry.

FCC Letter below.

Catherine A. Novelli, Vice President
Worldwide Government Affairs
Apple Inc.
901 15th Street, NW, Suite 1000
Washington, DC 20005

RE: Google Voice and related iPhone applications

Dear Ms. Novelli:

Recent press reports indicate that Apple has declined to approve the Google Voice application for the iPhone and has removed related (and previously approved) third-party applications from the iPhone App Store. In light of pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497), we are interested in a more complete understanding of this situation.

To that end, please provide answers to the following questions by close of business on Friday, August 21, 2009.

1. Why did Apple reject the Google Voice application for iPhone and remove related third-party applications from its App Store? In addition to Google Voice, which related third-party applications were removed or have been rejected? Please provide the specific name of each application and the contact information for the developer.
2. Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications? If the latter, please describe the communications between Apple and AT&T in connection with the decision to reject Google Voice. Are there any contractual conditions or non-contractual understandings with AT&T that affected Apple’s decision in this matter?
3. Does AT&T have any role in the approval of iPhone applications generally (or in certain cases)? If so, under what circumstances, and what role does it play? What roles are specified in the contractual provisions between Apple and AT&T (or any non-contractual understandings) regarding the consideration of particular iPhone applications?
4. Please explain any differences between the Google Voice iPhone application and any Voice over Internet Protocol (VoIP) applications that Apple has approved for the iPhone. Are any of the approved VoIP applications allowed to operate on AT&T’s 3G network?
5. 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? If so, is this posted on the iTunes website or otherwise disclosed to consumers?
6. What are the standards for considering and approving iPhone applications? What is the approval process for such applications (timing, reasons for rejection, appeal process, etc.)? What is the percentage of applications that are rejected? What are the major reasons for rejecting an application?

Request for Confidential Treatment. If Apple requests that any information or documents responsive to this letter be treated in a confidential manner, it shall submit, along with all responsive information and documents, a statement in accordance with section 0.459 of the Commission’s rules. 47 C.F.R. § 0.459. Requests for confidential treatment must comply with the requirements of section 0.459, including the standards of specificity mandated by section 0.459(b). Accordingly, “blanket” requests for confidentiality of a large set of documents are unacceptable. Pursuant to section 0.459(c), the Bureau will not consider requests that do not comply with the requirements of section 0.459.

Thank you in advance for your anticipated cooperation.

Sincerely,

James D. Schlichting
Acting Chief
Wireless Telecommunications Bureau
Federal Communications Commission

Disclosure: No positions

Comments

[FreeRange:]

How many times are you going to milk this story? This is like the one millionth Seeking Alpha article since last week that regurgitates the same old crap. Find some new news!

Aug 02 08:45 AM

[intoyourhead:]

Proving that the US mail service is the fastest in the world, AT&T has already replied to the FCC's letter!

www.intoyourheadpodcas...

Aug 02 08:51 AM

[jsampson:]

You do not fully understand how networking telcom actually works at all. Cisco and other like companies are as well involved in these communications it isn't as simple as just AT&T and Apple alone making these wireless phones work.

Aug 02 08:56 AM

[jimocarroll:]

> "While I am a free market guy, the hording of wireless licenses by four dominant wireless carriers makes regulation of those licenses essential and the FCC is doing what should have been done years ago."

How long before a studious judge pores thoughtfully over the Constitution and discovers a "right" to own an iPhone and to have the maximum technologically feasible bandwidth, all for free?

Aug 02 09:23 AM

[Azazello:]

To (gladly) repeat myself:
With the iPod Apple had changed the way we listen to music and changed the music (distribution) industry; the iPhone may just change the wireless telecom business. Voice calls were considered privileged and therefore high revenue source. Now that data is just data so this old view and book-keeping practice will, too, have to change.

Aug 02 09:50 AM

[mathue:]

This letter is the most peculiar thing personally. Having had letters from the FCC I don't recall them immediately being posted to the internet. Just where did this letter come from?

Have any real journalists (Not the largely meagre tech press) actually contacted James D. Schlichting for comment?

Aug 02 11:52 AM

[Don Bowey:]

That is NOT a "sternly worded letter," it's a straightforward request for information. Firsthand, I know what a sternly worded letter from the FCC looks like. Your entire blogish article is wrought with attitude and little of value.

Many of your fanciful thoughts deserve corrective comment, but I'll just settle on one: "With T-Mobile, AT&T and Verizon all on the same network, there will be more competition as the same devices leverage the same air interface." They are NOT all on the same network. You apparently understand nothing about cellular service. Spend some time googling.

Aug 02 12:25 PM

[capital pains:]

Useless article..Of no value whatsoever.

Aug 02 01:56 PM

[despicable:]

I'd like to echo Azazello, above, and say that the present conflict is indicative of the Telcos' (realistic) fears about the demise of their business model. Since it's all data now, and the future of bandwith is cheap, cheap, cheap, these fears are justified, but the whole world is facing unprecedented change, so why try to artificially control the market? These short-sighted moves fail to grasp that the companies that provide the services of the future, not the past, will be the ones that thrive in the 21st century.

Aug 02 02:03 PM

[thinkb4uwrite:]

Nothing to be concerned about here as this letter is merely in line with the normal order of business for the FCC. The Commission has no power to legislate; its only mandate is to regulate and enforce communications law as enacted by congress. Reviewe of law must be done in House and Senate telecommunications sub committees). In any case a reconsideration of existing law as a result of this is highly unlikely.

It appears that if the letter to Apple is answered to the satisfaction of the WTB then the matter will be reduced to little more than one of numerous considerations that eventually form more precise language in Part 74 of the Code of Federal Regulations.

In any case, rest assured that the cadre of seasoned attorneys at Apple is more than a match the FCC on any issue and in the absolute worst case the Commission may do no more than issue a fine for the action against any firm holding an FCC license. ATT is the on;y target there.

Apple has handled every kind of issue imaginable. They have lost only a few... one was to Creative and involved outright payment for the scrolling wheel tech on the iPod Threats of lawsuits by consumers and competitors abound but this is only because Apple is king of the mountain and by virtue of that must take all comers.

As an engineer with many years in the telecommunications business and also as a former FCC licensee, I believe the Cable Bureau has the precedence for handling this particular issue or it may at least be looked to for the guiding precedence, as various similar Cable Television issues were resolved over programming control rights for carriers.

Looking over the press releases so far, ATT has apparently already provided answers to questions 2 and 3 of the FCC's letter to Apple. Question 5 in the the letter had to be included as part of the FCC's mandate to protect consumers from any misleading claims by manufacturers of communications devices.

Now wouldnt it be easier we could just go back to the colonial days where the Philadelphia Gazette and Poor Richard's Almanac were all we needed to be a perfectly healthy society?

Aug 02 02:29 PM

[markha:]

I hope that the Apple Lawyers tell the FCC to stick-it to most of their question! While the FCC controls the airwaves, it does not control application development, retail business practices, etc. So questions 1, 2 and a scoped down 4 are within their mandate. But 3, 5 and 6 are not under the control or preview of the FCC.

The Only real Questions is: Does AT&T restrict what applications can use their network. That is ALL the FCC has the legal authority to look at.

Aug 02 02:33 PM

[markha:]

I hope that the Apple Lawyers tell the FCC to stick-it to most of their question! While the FCC controls the airwaves, it does not control application development, retail business practices, etc. So questions 1, 2 and a scoped down 4 are within their mandate. But 3, 5 and 6 are not under the control or preview of the FCC.

The Only real Questions is: Does AT&T restrict what applications can use their network. That is ALL the FCC has the legal authority to look at.

Aug 02 02:34 PM

[James Katt:]

Google made its app too similar to Apple's own cellphone apps.

Google should have made its app simillar to Comcast's app, which does similar things. Then it would have been approved by Apple.

Duh. Google is so stupid.

Aug 02 05:36 PM

[Neil Anderson:]

I'm impressed with the straight forward language of Mr Schlichting.

Aug 02 08:11 PM

[RK:]

The problem with the mobile broadband market is that the frequencies were not free. This is true all over the world. Telcos spent billions of dollars winning the licenses. They have to recoup that money somehow. It seems unlikely that FCC would require ATT to let other voice application vendors to come in to elbow ATT or Verizon out of the way.

I could see one scenario in which telcos would agree to open their mobile data networks to all apps in exchange for guaranteed revenue. This would be the utility model like water and electricity. This model does not work if the telcos have to compete with each other. But technology is changing too fast for this scenario to pan out in next 5-10 years.

Aug 02 10:28 PM

[peter02l:]

"5. What other applications have been rejected for use on the iPhone and for what reasons?"

Are you kidding? There are 65,000 apps out there. God knows how many were rejected and why. Does FCC think Apple has noting else to do than to make give an account of all rejected apps and specific reasons?

Why don't they investigate why netbook manufacturers that were about to unveil new Linux based netbooks all a of a sudden dropped their products and moved to embrace Windows?

Aug 03 01:33 AM

[brewer:]

@peter021:

The government will not bother Microsoft, we saw that when the DOJ dropped it's CONVICTION and just let them skate away like nothing happened.

Aug 03 01:13 PM

[worriedwart:]

Companies should be able to keep out squash destroy the competition UNLESS ITS done via some physical/thuggish rapper like act

If ATT Apple team up and dont let the Obama board sitting Google people in, too bad

Only governments create monopolies ( despite what the msm and schools will teach you) and companies can only corner a market with a product that cant be beat

When did America turn into this big cesspool of whiney wimps?

Aug 03 01:52 PM

[BlindReason:]

No the point of the sentence is that in a few years AT&T, Verizon and T-Mobile will all be using the same technology standard. Namely LTE.

And as far as it not being sternly worded--they launched an investigation and you shouldn't be too shocked if there are some major changes in regulation. And if you read my list of prediction list, an anti trust investigation was one of them.

Thanks for the comment.


On Aug 02 12:25 PM Don Bowey wrote:

> That is NOT a "sternly worded letter," it's a straightforward request
> for information. Firsthand, I know what a sternly worded letter
> from the FCC looks like. Your entire blogish article is wrought
> with attitude and little of value.
>
> Many of your fanciful thoughts deserve corrective comment, but I'll
> just settle on one: "With T-Mobile, AT&T and Verizon all on
> the same network, there will be more competition as the same devices
> leverage the same air interface." They are NOT all on the same network.
> You apparently understand nothing about cellular service. Spend
> some time googling.

Aug 31 02:30 PM