THE GOLDEN AGE OF WIRELESS
December,
2002
As the word "Wireless" replaces
previous buzzwords like "Push," "B2B,"
"Broadband," and "New Economy" as the Next Big Thing, it is
appropriate to examine the legal (and business) issues likely to confront the
wireless industry and those who intend to be players in wireless over the next
two to three years. First of all, what do we mean when we use the term
"wireless?" Technology resource www.techweb.com defines wireless as:
"Radio transmission via the airwaves. Various communications techniques
are used to provide wireless transmission including infrared line of sight,
cellular, microwave, satellite, packet radio and spread spectrum."
Wireless devices include wireless phones, Personal Digital Assistants (PDAs) --
such as the Palm series, Handspring Visor, Compaq iPaq -- connected with
modems, two way pagers such as Research in Motion's popular Blackberry device,
and laptops accessing the conventional Web via technologies such as now
bankrupt Metricom's Ricochet service, 802.11b LANs (known as Wi-Fi), as well as
competing technology standard Bluetooth.
The networks on which data is being
transmitted vary. Different technological standards co-exist uneasily, such as
CDMA (Code Division Multiple Access), GSM (Global System for Mobile
Communication), and TDMA (Time Division Multiple Access). All of these are what
is known as Second Generation systems. They are not necessarily compatible with
each other, so subscribers to AT&T Wireless, which does not use CDMA, will
have different experiences than subscribers to Verizon Wireless, which does.
The near future goal is to move from these "2G" technologies to 2.5G
networks, using systems such as General Packet Radio Service (GPRS). From
there, or directly from 2G networks, we move on to the big, bright future of 3G
networks, using technologies sometimes evolved from current standards, such as
W-CDMA (Wideband CDMA). These will be high-speed networks, capable of
supporting all sorts of bells and whistles not yet contemplated, as well as
those which engineers are currently implementing into prototypes. Examples of
these are voice activation/recognition, The Moving Picture Expert Group's MPEG
4 video with its myriad interactive capabilities, and Global Positioning System
functionality.
The types of data to be transmitted can be
broken down into 2 categories; what might be called Traditional and
Non-Traditional. Traditional includes (1) communication services such as voice,
email, Short Message Service and instant messaging, (2) information services
such as traffic reports, movie times, sports scores and stock quotes, (3)
entertainment such as single and multi-player interactive games, music
downloads and streams and even, potentially, video programming and (4) business
utilities. The thus far Non-Traditional includes (1) location based advertising
and (2) "mCommerce" (using the wireless device to effect financial
transactions such as purchases of goods or services and monetary transfers).
Now that we know what wireless is, the following
is a brief and necessarily incomplete overview of issues to watch out for.
"Necessarily incomplete" because of the rapid changes and
developments in the industry.
PRIVACY
Privacy as it relates to wireless devices can
be broken down into two categories: traditional Internet privacy and location
privacy.
"Internet privacy" refers to the
standard issues raised constantly, which do not require extended rehashing
here. Suffice to say that they include the provider's use of data, unsolicited
commercial email (spam) and data collection from children, among other items.
While Congress and the states are addressing these concerns in the larger
context of Internet data collection/privacy issues, much of what is going on
now relates to the use of privacy policies; the requirement that a site have
one, that it be specific and that the site abide by it. A specific challenge
for the wireless industry is that, while the FTC is focused on having every
destination clearly and completely articulate (and then abide by) its
privacy/data collection policies, having a several page privacy policy scroll
by on a cell phone display is thus far unworkable.
"Location privacy" presents issues
unique to wireless devices. Privacy on the wireless Internet becomes an even
larger issue than it has been for the wired Internet because of the ability of
some wireless devices to transmit data regarding the exact physical location of
its users. This enables corporate entities and law enforcement organizations
interested in obtaining a user's data to track his or her movements. In other
words, your phone becomes a personal Lojack courtesy of The Communications
Assistance for Law Enforcement Act (CALEA), which empowers law enforcement to
intercept wireless transmissions, including location information. Private
individuals who have no legitimate business tracking any other citizen's
movements also gain the technological capability to do exactly that. One can
easily imagine the issues this capability raises. As of this writing,
legislation has just been introduced into the US Senate to prevent
location-enabled cell phones from becoming "digital dog tags." The
proposed legislation appears to be based upon the FTC guidelines applying to
privacy, which are as follows:
v Notice - Inform the
customer of practices governing collection and use of data before disclosure of
customer's location takes place.
v Consent - Obtain the
customer's express authorization prior to data collection or use. Consent may
be oral, electronic or in another form, as long as it manifests the customer's
desire to participate.
v Security/integrity of
the data - Protect data from unauthorized access by, and disclosure to 3rd
parties and ensure that authorized 3rd parties adhere to policies communicated
to the customer.
v Technology neutral tech
solutions - Employ standards that are the same for each handset or network,
offering users some expectation of privacy, regardless of the device.
Also, because of the nature of the process in
which signals are sent and received by wireless devices, the tracking of each
use becomes much easier than it is for a standard connected PC. Given the
plethora of emerging uses for wireless devices, the potential for invasive
information gathering relating to private transactions skyrockets.
PIRACY
The ever-present piracy concerns confronting
all digital content formats exist in the wireless space as well. The
jurisdictional issues (in what country is the piracy taking place? which
country's laws should be applied? where should an enforcement action take
place?) continue to exist, and, because the end-user terminal (i.e., cell
phone, connected PDA, etc.) can more easily move from jurisdiction to
jurisdiction, a new wrinkle is added to an already complicated debate.
As with many of the issues created by
technology, piracy may have a technological, rather than a legal, solution.
Some wireless Internet enabled cell phones (such as the Samsung Uproar) are
built with read only memory, so that no recording can be done, and, arguably,
less unauthorized transfers of data can be effected. The industry (and any
content company wishing to distribute its intellectual property to wireless
devices) will have to decide on an acceptable level of piracy and attempt to
create legal, technical and/or business impediments to the proliferation of
unauthorized and, hence, unpaid access to its content. As in the wired world,
delays in making this determination and effecting appropriate solutions will
delay the roll-out of mobile content, which may suppress product and service
sales until the dilemma is resolved.
PERSONAL DATA
This is the data security issue, as opposed
to data collection and use by collector issue. Encryption is provided in the
transmission process for all digital wireless transmissions. Additionally, some
services use additional encryption protocols from 40 bit to 128 bit to enhance
security offered to Internet customers. iMode, for example, uses Secure Socket
Layer (SSL), a transaction security standard developed by Netscape
Communications to enable secure commercial transactions to take place over the
Internet. As with all other emerging technologies, hackers are getting more
sophisticated and the industry must try to stay a step ahead by upgrading
security measures. The industry must also continue to educate the consumer as
to the dangers of insecure transactions and methods of inhibiting security
breaches.
Recently, Wi-Fi security flaws have been
exposed. The 802.11 specification includes a security protocol called Wired
Equivalent Privacy (WEP). However, WEP is quite easily crackable. In fact,
software programs such as AirSnort have been developed with the ability to
surreptitiously grab and analyze data moving across just about every major
wireless network. When enough information has been captured, AirSnort can piece
together the system's master password and security is breached. This technology
is not new, but easy access to it is. AirSnort's creators say that is the
point. They want to increase Internet users' awareness of the fact that WEP is
easily crackable. A follow up protocol (WEP2) is being developed, but may not
be on the market until mid-2002, at the earliest. It is expected that the
revised version will address the latest hacks, but, until then, the system is
clearly subject to security breaches.
LICENSING
Hearkening back to presentations I gave in
the mid-90's, entitled "Speed bumps on the Information Superhighway"
regarding the difficulty in obtaining rights to content needed for the then new
medium of the wired Internet, licensing issues promise to be as complex in the
wireless space, if not more so. The following is a list of some of the types of
issues that have already come up in wireless content licensing transactions.
v Rights/uses - which of the
"bundle" of copyrights will be licensed? The bundle consists of the
following rights: performance, display, modification, reproduction,
distribution, and performance by means of digital audio transmission (sound
recordings only). After determining which of the bundle of rights will be
licensed, the following issues regarding limits on the licenses will need to be
resolved:
§
Exclusivity -- Will other parties
be entitled to license the same content?
§
Term -- What is the term of the license? Will it be
exclusive throughout the term?
§
Territories -- How does an entity
control the territories in which content is licensed? Or does the licensor do
away with territories and license by language? Because the infrastructure of
the wireless Internet is built around limited access points, rather than the nearly
unlimited access points of the wired Internet, territorial licensing may not be
as difficult as it is on the traditional wired web.
§
Right to sublicense -- Can the rights be
resold by the licensee (known as reseller rights)? Is the license going to the
end user or to resellers?
§
Style manual guidelines -- What sort of
guidelines will be imposed? A copyright or trademark notice can take up more
than an entire screen on a cell phone.
§
Download or stream -- Is the content going
to be delivered by download for storage by the end-user or will it be
ephemeral, delivered by stream? The "celestial jukebox" (any song
streamed to your device for listening, any time, anywhere) is ephemeral, but
not all content services are. For example, ring tones and mp3s are downloaded
for storage and re-use.
§
Technological standard -- Which standards will
be useable by the licensee? Examples are WAP, iMode, GSM v. CDMA, WCDMA (a 2.5G
transmission standard) and 3G. Who will customize the content for each
technology?
§
Terminal - To what type of terminal will the
content be delivered? Are some properties viewable on a wired PDA but
impossible to view properly on a web-phone? The Kyocera Smartphone is bridging
the gap between the two formats, as it is a wireless phone with a Palm OS PDA
that is slightly smaller than a Palm, but larger than the latest wireless
phones.
§
Payment scheme - Which pricing model
will apply? Common methods of billing licensors include:
· by the song or
composition (customized rings, etc.)
· by the amount of time on
the system
· flat rate for a period
of unlimited access or per use
· tiered access (i.e.,
premium services for a premium)
· billing the sender vs.
billing the receiver (as used by SMS services)
· Revenue sharing between
the licensor/reseller and licensee
BROADCAST SPECTRUM
Can wireless enterprises obtain clearance for
the same spectrum throughout the world, or must they use different spectra for
different regions? The use of different spectra can lead to compatibility
problems and attendant business challenges, the issue of spectrum now has the
The FCC also faces problems regarding the
NextWave spectrum that it auctioned off to other parties. NextWave appears to
be mounting a successful effort to reclaim the spectrum taken away from it by
the FCC when NextWave experienced severe financial problems. This dispute will
further delay the distribution of the spectrum which may be required for
next-generation wireless networks. In
LITIGATION
Of course, massive litigation itself, without
regard to the success of the plaintiffs, can pose a serious problem for any new
industry. Will product related litigation interfere with the growth of the
industry? The types of matters causing the greatest concern include:
Product liability - Is your cell phone sending carcinogenic waves into
your brain? Experts are debating the dangers of radiation exposure from
wireless devices. Many studies have found no evidence of such a phenomenon, but
the body of studies which disagree is growing, and there have been safety
standards regulating wireless phone transmissions for many years. With the
Bluetooth and 802.11b wireless local networking developments looming, will
people spend their days walking around inside radioactive fields? Even if the
answer is no, will that fact prevent litigation from occurring on a large
scale? Consumer adoption may be affected by fears relating to this issue.
Liability to
service/content providers for auto accidents - Litigation has been attempted with billboards and
other outdoor driving distractions with varied success. Municipalities have
already passed laws against the use of wireless phones while driving within
their own jurisdictional limits. State or National regulation of such behavior
is currently being debated. The
Reliability of
transactions - Will the industry
be responsible for consumer and business losses caused by flaws in the
infrastructure? For example, day traders may attempt to pin liability on
carriers for failing to execute a trade. Any other time sensitive transactions
can raise similar liability issues.
CONSOLIDATION ISSUES (TELCO CONTROL OF
ACCESS)
As opposed to the wired Internet, access to
the wireless Internet can be controlled by the carrier, by virtue of the device
used to access the wireless Internet. Use of a particular handset/terminal can
be coupled with access through a specific telco, and an individual may have
difficulty accessing the wireless Internet through any portal other than that
which the controlling telco allows. As wireless entities continue to
consolidate (witness Cingular and Verizon within the last several years) and
global brands continue to strengthen, there are fewer and fewer options for
accessing the wireless Internet.
CAPABILITY OF SYSTEM
The bandwidth issue of the web returns (as if
it has ever actually been resolved). Today, most wireless Internet users are
accessing the system at 9600 baud, with higher speed access -- 384k and beyond
-- still one to three years away. Of course, speed affects the user's
experience, enabling text, then audio and later, video, as bandwidth increases.
Expect the increases to track those of the wired web over the last seven to
eight years. This situation recreates the chicken and egg problem witnessed on
the Internet since the early 90's: network companies will be reticent about
investing heavily in bandwidth until bandwidth sucking content is available and
desirable; content companies will not create bandwidth intensive content until
the network is in place and; hardware companies will be slow to roll out
expensive terminals until there is something to use them for.
MULTIPLE PLATFORMS/STANDARDS
As in any nascent technology-based industry,
multiple standards cause confusion and slow consumer adoption. The use of
various standards complicates licensing agreements, affects consumers' ability
to use wireless devices when traveling and creates uncertainty among
manufacturers of hardware and producers of software. Next generation services
must resolve these inconsistencies or suffer the consequence of dramatically
slower consumer adoption and higher costs of implementation.
CONSUMER CREDIT
Using your phone as a credit card (picture
the commercial with the Italian woman buying a soft drink from a vending
machine with her phone, as a dignified man fishes for coins in a fountain) will
implicate various laws, including the Gramm-Leach-Bailey Act, which requires
entities enabling credit purchases to disclose interest, fees, penalties and
privacy policies. Federal Reserve and FTC regulations can apply to wireless
carriers as well.
MISCELLANEOUS
Numerous other challenges exist on the way to
making the wireless industry successful and useful for businesses and
individual consumers. Among these challenges are: the implementation of text to
speech services; streamlining the process of buying content; dealing with navigation/design
challenges, such as ensuring that a home dec (page) is no more than one click
away, and never more than 2; determining and implementing online and
offline marketing requirements; and figuring out the logistics of driving
traffic from a phone to a website. As these issues resolve and the end-user
finds more convenience in using the device, the industry will grow.
PATENT ISSUES
The patent issues already facing the wireless
industry are properly the subjects of lengthy articles by themselves, and books
as these issues mount. For the purposes of this article, the following is a
list of a few types of current patent issues which may complicate the growth of
the wireless industry:
v Qualcomm's gateway - Qualcomm owns CDMA
patents, requiring carriers that use the CDMA protocol to license the
technology from Qualcomm. Qualcomm also requires carriers to buy circuits
employing the patents from them. Other companies also have patents covering
certain aspects of such CDMA and alternative technologies.
v Interfaces - The interfaces for
wireless devices are patented.
v Convergent wireless
devices - The insertion of digital cameras into cellular phones raises
numerous patent issues, as does the combination of a cell phone and mp3 device,
voice activation and any other hardware (e.g. - special printers) or software
based technology which is combined with either a cell phone or PDA.
Patent issues are also raised by the use of
compression technologies, encryption software, and other software utilities.
In general, infringement issues arise every
time a new innovation is implemented. Letters come to the manufacturer or
substantial seller offering a license, or demanding that the entity cease and
desist. Expensive and time-consuming dialogue, negotiations and, perhaps,
litigation, take place; uncertainty stifles innovation. This process relates to
everything from a format for transmitting data, to the hardware and software
required to run the device and/or deliver the services promised by the carrier.
Also complicating the situation is the territorial issue. Patents may be issued
in various countries to the US patentee or to a totally unrelated entity,
enforcement of patents may vary territory by territory and manufacture or sale
in one country may infringe a patent in another (as well as the country of
origin) when imported into such country.
CONCLUSION
It is important that the
technology/telecommunications/entertainment/media industries, and the service
industries that support them, learn the lessons of the dotcom expansion and
implosion. As with the Internet, the wireless industries have a potential to
improve lives, change the world for the better and create a great deal of
wealth. However, many obstacles stand in the way of this result. Businesses
will face challenges in the areas of creation of technology, the adoption of
the same by consumers, business considerations, global and local legal issues
and consumer fears and resistance to the constant change around us. These
obstacles can be overcome by understanding them and addressing them
systematically. Businesses must be aware of the challenges in order to
effectively plan the future and responsibly take in investment capital to drive
the wireless industries. If these steps are taken with an eye on lessons-learned
we will continue to learn about the networked economy and wonderful and
exciting times will await those in the wireless industries and any business
that benefits from new technologies.