We've written a lot recently about a planned auction of a block of prime airwaves by the Federal Communications Commission, the so-called "700 Megahertz Auction."

We've written about it so much because, properly handled, it could lead to fundamental changes in the price and variety of wireless devices and services available to American consumers. Depending on how the FCC fashions the rules for the auction, consumers could be freed up to use virtually any wireless device or application on their wireless network. That would be in direct contrast to the current "walled garden" model in the wireless industry, where big service providers such as AT&T and Verizon impose ruthless control on the devices and applications available to consumers.

The Federal Communications Commission is expected to establish rules for the auction when it meets next Tuesday, July 31st.

FCC Chairman Kevin Martin announced a few weeks ago that he wants the auction rules to produce a new nationwide wireless network that would allow the use of any wireless device or application. In theory, that would mean that consumers shelling out $600 for a nifty new I-Phone would not have to sign up for service with AT&T -- and only AT&T -- as they currently do.

Google has said it is willing to pony up the FCC's minimum bid requirement of $4.6 billion for the airwaves necessary to build the open network Martin is touting, but only if the FCC takes the additional step of requiring the auction winner to sell access to the network on a wholesale basis. The agency has long required phone companies to provide such wholesale access to their local wired networks.

The big wireless companies naturally hate the idea of any sort of open access network, which would likely unleash a wave of true competion in the industry. At first they argued hard against Martin's proposal, saying it would drive down bidding prices at the auction but a couple of weeks ago AT&T shifted its position and said it would support it.

Today Verizon announced it was also changing course and will support Martin's proposal.

But in order for a truly competitive market to develop in the wireless industry, Martin and FCC need to go further.

Requiring the winning bidder to wholesale access on the new network would unleash a whole host of new competitors offering new and innovative devices and services.

American wireless consumers now pay more for inferior services and devices than most other parts of the developed world. Network speeds in parts of Asia and Europe are many times faster -- and cost less. The primary reason American consumers are being forced to pay more for less is the draconian control exerted by big wireless companies, who literally lock the wireless devices they sell to consumers so they can't be used on any other network.

The fact that AT&T and Verizon have decided to endorse the Martin plan should set off alarm bells with the FCC commissioners that the proposal doesn't go nearly far enough in helping create a truly competitive market in the wireless industry. If it did, the big wireless companies would still be fighting the Martin proposal tooth and nail.

That point was hammered home by a report issued a few minutes ago by Stifel, Nicolaus & Company, which provides investment advice on the telecom industry.

"If the Martin plan holds, we believe there is unlikely to be a new national wireless carrier, which we see as a positive for existing wireless and broadband providers," says the report.

Indeed.
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