The Engadget Interview: Steve Largent, President and CEO, CTIA

We had an opportunity earlier today to sit down with one of the powerhouses of the wireless industry in the US: Steve Largent, who heads up the CTIA. In that capacity, Largent oversees the industry group most directly responsible for lobbying carriers' interests in Washington, which means he's helping to steer the direction this business is going on a very broad, long-term, critical scale -- and he also happens to run a trade show that we attend twice a year. We were joined by the CTIA's VP of Regulatory Affairs, Christopher Guttman-McCabe, for a spirited conversation covering the gamut from net neutrality to spectrum allocation to the Droid R2-D2 Edition and pretty much everything in between. Check it out after the break, won't you?

Steve Largent: Obviously, the first priority and second priority and third priority for us as an association is finding additional spectrum from the industry. You know, it really is the lifeblood of this industry... it's what fuels the virtuous cycle of innovation and competition, and we're trying to get more spectrum as quickly as possible. We've gotten a commandment from both the FCC, NTIA, Congress, even the President has joined us in supporting our efforts, so we're really pleased with that... now it's just a matter of getting it all together and getting this spectrum in the pipeline as quickly as possible. As you know, it takes somewhere between eight and eleven years to get the last two spectrum options completed, and we have a five-year plan that calls for 300MHz of new spectrum to be auctioned and a ten-year plan that calls for an additional 200MHz to be auctioned for a total of 500. We think that that's reasonable; we'd love to see more spectrum and get it sooner, but that's workable, so we're very, very pleased with the progress that we've made this year on getting more spectrum and now we just need to get those promises fulfilled.

The second issue we have as an association is on taxes. Wireless users in this country, many of them are not even aware of this, pay on average 15.3 percent in taxes and fees on their bills. In a lot of states, 23 as a matter of fact, they pay more than 15.3 percent. That's too high. Many states are above 20 percent. Now, you're in Chicago, right? I don't know how high Illinois is, but I know it's about 15 percent, too. But New York, California, Washington State are all above 20 percent, and that's... we feel like that's unreasonable. So we're trying to bring attention to Congress and get that repealed or get that enacted.

And then the other thing that we did get repealed is the IRS listed property rule, we got that done this year, and that's a real victory for wireless users. That was the rule that said that if you got a business-provided phone and made personal calls on it over the course of the day, you had to keep track of those personal calls and then pay taxes on those calls that you made that were personal in nature and not associated with your business. We thought that was crazy, and so did the President and Congress, and so did the American people, so that's a good thing.

And then the other thing is we're also calling on Congress to come up with a national framework for taxation on digital goods and services. That's when you're downloading music on your iPhone and you're charged, you pay taxes on that. And it seems like every state in the Union is charging a tax, so you could be paying taxes two or three times on the same song which you pay for initially. We think that's unbelievable, and it needs to be rectified and we're trying to get that.

And just a couple other issues and I'll get to net neutrality. We're going to continue our public safety "On the Road, Off the Phone" campaign that we did in conjunction with the National Safety Council right there in Chicago with you, and that was a very successful campaign. We're going to continue our "Be Smart, Be Fair, Be Safe" responsible wireless use, where we try to instigate a conversation between kids and their parents about responsible wireless use, and that was very successful this year. Our safe driving campaign was in the 95th percentile of most-viewed public service announcements. And then we're gonna highlight some of our industry's eco-friendly practices, whether that's on recycling, phone batteries or phones themselves, or some of the other issues there.

Finally, net neutrality, I'll just say a couple brief things about net neutrality. We still don't believe that any of these rules should apply to wireless. This is a highly competitive, innovative, constantly-evolving wireless ecosystem, and we think that the best thing that Congress and the FCC could do would be to let it work and produce -- continue to produce good results for consumers. However, the move away from the Title II regulations was a positive step by the Chairman; we applaud him for that, and I think that he recognizes the unique nature that wireless service has for the American people and provides, and he's made some significant steps in the right direction on the wireless front. So, that being said, we haven't seen the final rules yet -- we anticipate those will be out in the next week or two. We'll have more comment at that point, but the Chairman's worked awfully hard on this, we know companies have worked awfully hard to make their points, and we think the compromise that the Chairman's proposing -- he's trying to bridge this gap that he has between our companies and the industry that we represent that are literally investing billions of dollars in the internet and the infrastructure, and he's gotta balance those interests with the net neutrality advocates. We think that the Chairman's doing a good job with trying to find that right balance.

Chris Ziegler: Great. First of all, you mentioned net neutrality last, so maybe that's a good place to start. I'm wondering -- and you mentioned earlier that you'd like more than 500MHz of spectrum, and that's not surprising, I'm sure that would be fantastic -- but do you think at some point we would reach a situation either through technology or spectrum availability or a combination of the two where your views on net neutrality might change?

Steve Largent: You know, I would have to say I don't know, and it would not even be fair for me to speculate on that question. You know, ask me that question in another three to five years, and I can give you a better answer.

Chris Ziegler: Sure, fair enough. So I know that the larger carriers have clashed a little bit with rural providers on a number of issues lately -- device exclusivity periods, roaming laws. How's your relationship with the Rural Cellular Association? Do you have any ongoing open dialogs with them?

Steve Largent: Sure. Steve Berry used to work here at the Association -- he was here when I was hired in 2003, and Steve's a really good friend and does a great job for the rural carriers. So we have a regular dialog. We're working with them, we're working -- I mean, we have a number of small carriers in this association, too. We feel like we've made some headway and we're continuing to encourage our companies to have this dialog, this conversation. One of the issues that's near and dear to their hearts is trying to clear this channel 51, and we're helping them in that vein. But that's just one example of ways that we're trying to work with them to get what they need.

Chris Ziegler: Okay, and spectrum acquisition's clearly one of your top goals right now, if not your top goal. And it looks like you're generally pleased with how aggressively the FCC's tackling it. But what would you say your biggest roadblocks are there? Are you concerned with holdouts from the broadcast industry? Have you engaged anyone over there?

Steve Largent: Yeah, we have a very open dialog with the National Association of Broadcasters, and we hear -- you know, depending on which story you read, you can hear broadcasters who are vehemently against giving any of their spectrum away, and those that are more willing to sell that spectrum which is what the FCC's proposed. So, you know, I think it just depends on which market you're talking about, but we think that overall that there is spectrum out there that could be made available and that the FCC is gonna do their work and the NTIA's gonna do their work to make that spectrum available to the wireless industry.

Christopher Guttman-McCabe: Just one thing to keep in mind. You don't need to clear anything close to all the broadcasters in a market. You need to clear just a few, and then you can re-pack the remaining broadcasters. You know, if you look at the fact that there's almost 300MHz in every market, even if you leave them with 180, that just means clearing out a few in each market. And not in every market -- a few in about 20 markets.

CZ: Okay. And that's what you're actively working on addressing? You're talking to those guys specifically?

SL: That's right. There can be as many as 15 to 17 broadcasters in an area, and each of them having a huge swath of spectrum. So we don't think that this is -- it's not rocket science.

CZ: Sure. And then on the other end of the spectrum -- no pun intended -- T-Mobile, AT&T, and others are arguing right now over backhaul availability and allocation. For obvious reasons, some guys have it, some guys don't, and others need it. What's the CTIA's stance on that? Are you working to sort of mediate this discussion at all?

SL: We try to encourage our companies to have these conversations within the industry and without the government. Because, you know, it just works better when you have company-to-company type conversations. The results are always better.

CZ: Okay. But you're not taking any official stance on how that conversation should go, necessarily?

SL: No, we're just trying to facilitate the conversation. That really is a business discussion.

CZ: Sure. And American carriers have started pushing pretty aggressively to get signal boosters banned unless they've been pre-approved, and considering that three of the four -- the big four -- offer femtocells and the fourth is pushing WiFi calling, approval generally seems unlikely. Do you see a place for signal boosters in the consumer landscape long-term, or is that a market you'd like to see phased out altogether?

SL: You know, I would say that signal boosters are fine as long as they're approved by the companies. The problem is when you have signal boosters that are out there that aren't pre-approved by companies, that aren't coordinated with their signals. Real interference can take place, and that's what we're trying to avoid.

CGM: And Chris, it's not just us. I mean, public safety is all over this. You know, there was some concern that has arisen from a wide range of people beyond just the commercial carriers. And then the FCC record is full of examples... Verizon had an experience in New York City near Madison Square Garden that impacted close to 200 cell sites and it was a booster that did it.

CZ: Okay. Talking a little bit about this brewing 4G war -- you've already mentioned that you're not going to take a stand on how next-gen markets are marketed, but in the long term, do you think there's value potentially in promoting standards for how networks are branded based on speed or quality? And as it stands right now, do you think there's any risk for consumer confusion there?

SL: I think there is real risk for consumer confusion, and yet this is a very competitive industry, so I think what will happen because it is so competitive and our companies understand the confusion that could possibly exist, it's incumbent upon them to make the information available to consumers about their services as clear as possible. But that's, again, a company decision that really doesn't involve us as a trade association.

CZ: Okay. And how do you view the market for unlocked, non-carrier-branded phones? Do you think there's a place for that in the US? Because, you know, some carriers -- most notably T-Mobile -- offer some support for consumers that want to go that way, but obviously, keeping the lion's share of consumers on branded handsets seems just as much a core part of the business model as ever.

SL: If you go right now and get a Best Buy catalog of all their cellphones, you'll find pages and pages of cellphones that are unbranded, that aren't associated with any particular carrier, that are available to be used on that carrier's network. So that is taking place right now. That's happening. I know that we've looked at the last two years' catalogs that have come out of Best Buy, and they all had multiple entrants that are unbranded phones, so if people want to do that, they sure can do that today.

CGM: If you look at the manufacturers' websites... I mean, I think you're right in that a greater percentage is some form of integration between the manufacturer and the carrier, but the reality is that there's greater and greater percentage of handsets that are starting to become sold to multiple carriers at the same time, that are unlocked. You're also seeing a movement towards carriers offering -- and every carriers does this -- unsubsidized versus subsidized for the same handset, contract versus non-contract. So there really is an almost limitless range, or unlimited range of choices.

SL: You know, Chris, just a little side note for your benefit -- at our last count, there were 630 different handsets available to customers today. Now that's the same BlackBerry that's available on T-Mobile and is also available on AT&T -- we didn't count those as two. That was one handset. But 630 different handsets are available to customers today in this country.

CZ: Okay, so that's the US market, specifically.

SL: That's right. 630. 32 different manufacturers.

CZ: Okay, 32 different manufacturers. I think I could name maybe 15 at most.

SL: Me too.

CZ: And what work are you doing -- I know this is a big concern for us and for a lot of our readers -- it seems like the band picture for LTE is becoming more fragmented, not less. And we were hoping at one time that, you know, when we moved to a next-generation network, it would give us an opportunity to unify some of this spectrum globally. What, if anything, is the CTIA doing to try to push that message and work with other trade associations and carriers internationally to try to harmonize spectrum long-term?

CGM: I'll take that one. Perfect scenario would be internationally-harmonized spectrum, but the question is do you lead or do you follow? And to some extent, part of where the US looking, some of the areas that we're looking, we'd be leaders, particularly with a broader look at 700MHz as a good example. For some countries, you'd be going above where they are, and in some countries you'd be going below where they are, but you know, it's hard because each of these different countries -- and sometimes in these different regions -- already have services ingrained in that space. And it just makes it really difficult. But the US, I think, is doing a good job harmonizing with Canada and it's really trying to harmonize with the continent. And then, reality is, most of Asia, south Asia, is not really harmonizing with Europe, and Europe's not really harmonized with the US. It's difficult, and I know everyone around the globe is trying to do that, is trying to get some harmonization. So that was the long-winded way of saying we're trying -- and yet you can't let the perfect be the enemy of the good. If there's a good block of spectrum below 3GHz that is ripe for reallocation, you know, you really have to try to bring that to market.

CZ: Sure. Okay, so that closes out the main questions I had -- but I wanted to finish by asking all of you what your favorite current handset is?

SL: Well, I was just looking at a brand-new one -- the Nexus S.

CZ: Oh, yes, the new Google one. Sure.

SL: Yeah, the Nexus S. Looks like you can do everything but make ice cream.

CZ: Oh, you might be able to do that too -- we'll see. [Laughter.]

CGM: Mine is [R2-D2 sound]. Oh, I'll have to do it again, it didn't do it. Mine is the Motorola Droid, the R2-D2.

CZ: Okay, yeah, that's a very cool one.

CGM: I've been very happy [R2-D2 sound]. There we go. I think you and I talked last time and I was looking at what Palm was going to come up with, and I was a big fan of the Palm Pre Plus.

CZ: Right, and now the Pre 2's out.

CGM: And now, in the interim, I got this R2-D2, and I'm extremely happy with it.

CZ: Very cool.

CGM: How about yourself? What do you carry right now?

CZ: Right now I'm using a G2 on T-Mobile, but like you, Steve, I think I'll probably get a Nexus S.