Will Verizon prevail in its FCC appeal?

Will Verizon prevail in its FCC appeal?

Verizon Wireless has decided to use the court system to fight its battle against open access. The wireless carrier yesterday filed an appeal against the FCC stating that the FCC exceeded its authority when it established its rules for the upcoming 700 MHz spectrum auction. Verizon calls the rules "arbitrary, capricious, unsupported by substantial evidence and otherwise contrary to law." Verizon has asked the court to vacate, enjoin or set aside this portion of the auction rules.

Verizon, of course, has an issue with the FCC's decision to allow 22 MHz of the auctioned spectrum be reserved for open access, a concept where service providers won't be allowed to restrict which devices can operate on their band.

Open access is a big problem for Verizon and many other wireless carriers that are accustomed to controlling the handsets that customers use on their networks as well as the software and applications that consumers use.

This isn't the first time companies have used the courts to try to settle differences with the agency over spectrum auctions. During the AWS auction in 2006, a few companies filed lawsuits against the commission, claiming that recent changes to the designated entity rules prevented small firms from bidding on spectrum. The court found that the claims were not enough to stay the auction because the majority of the bidders in the auction were qualified designated entities and most had not complained about the auction process.

Likewise, Verizon Wireless has attempted to use the court system in the past to battle the FCC. In 2002, Verizon filed a suit against the commission demanding that the agency return $1.7 billion in funds from the re-auction of the C-Block spectrum licenses. NextWave, you may recall, won 63 C-Block licenses and then filed for bankruptcy making the future of its licenses uncertain.

However, as Scott Wallsten, senior fellow and director of communications policy studies at the Progress and Freedom Foundation points out, filing this appeal is really the only recourse Verizon has against the FCC. Because the commission is an independent regulatory agency, Verizon has no other choice but to use the court system.

Wallsten also speculates that this type of appeal may succeed in further reducing the value of the 700 MHz spectrum because it makes the rules under which the carriers must manage the spectrum more uncertain. "If you put more uncertainty on the spectrum, companies will pay less for it," Wallsten says

I don't know if Verizon will succeed in its appeal. But I do know that the carrier has a strong motive for fighting the FCC on the open access provisions. Let me know what you think of this latest development. -Sue

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