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FCC regulation or not, wireless business model will change

The FCC's wireless inquiry may not result in mandated industry changes, but even so, wireless operators should be changing their business models by offering higher-level services to increase revenue.

Although the FCC's wireless inquiry doesn't mean the hammer will come down on wireless operators soon or even at all, the wireless industry appears to be bracing for change anyway. (See main article: FCC wireless ruling may kill smartphone deals, create app partnerships.)

"A lot of the things that people might think the FCC could do or should do or will do are actually beyond the FCC's authority," said telecom consultant Tom Nolle, president of CIMI Corp. "The FCC cannot extend its own authority. All it can do is operate within the framework of the law."

If the commission wants wireless industry changes but doesn't have any authority under current law, it would have to petition Congress to change the law, Nolle said. Otherwise, it could issue a warning to the industry and finally an order – a process that is likely to take at least a year.

Still, telecom service providers that have relied on keeping a loyal consumer base by offering exclusive products like smart phones will have to take a two-pronged approach if regulators open up the market, Nolle said.

"The carriers are going to have to get much more involved in the higher-level services than before, and they're going to have to control and constrain their operations costs much more than they ever have before," he said. "If they don't do both of those things, they're not going to sustain their profit."

Is banning exclusive handset deals good for consumers?

Whether consumers will even benefit from opening up the device and applications market is a highly relevant question, analysts cautioned.

Some end users may even see worse service. The push to dissolve exclusivity deals seems to be more in the interest of third-party developers than consumers, according to Frost & Sullivan's Mike Jude. "Over time, it could represent a certain degree of degradation of carrier investment," he said. "It would likely have some impact over under-served areas."

"There are pretty strong indicators that suggest pure consumerism in telecom regulation leads to sub-par investment because the price levels tend to be driven below reasonable levels," Nolle said. "As a result of that, carriers are not incented to build infrastructure out."

See main article: FCC wireless ruling may kill smartphone deals, create app partnerships.

Let us know what you think about the story; email: Jessica Scarpati, News writer.

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