In 2008, after much protest, Verizon accepted openness conditions attached to valuable spectrum being auctioned off by the FCC, and spent $4.7 billion to buy nationwide capacity that would ensure it could build a robust 4G network for the next generation of mobile devices.

But in doing so, Verizon may have screwed itself out of ever being able to offer a 4G-capable iPhone.

The problem is that the "open access" rules attached to the so-called 700 Mhz C block require the carrier to allow the use of any hardware or software that it can't prove won't damage the network.

The rules were inserted at the behest of Google, which was bidding for the spectrum but who some cynics contended got involved not to win but to ensure that whoever got the spectrum couldn't hamper its business, which requires a free and robust internet.

Google's idea was to create an open space for innovation where a person could buy any device (including one from Google) and run any app that met open standards with no interference by the carrier.

And depending upon how you interpret the rules, which Verizon fought in court before the auction, they also required that the wireless carrier only offer devices that are open and able to run any app. That interpretation would clearly rule out the iPhone, which is locked down by design, and only apps approved by Apple can be loaded onto the device without breaking the device's warranty.

That's how Markham Erickson, a technology lawyer and the executive director of the Open Internet Coalition, sees it.

"The interpretation that the rules would ensure all handsets sold by the licensee would be unlocked was the clear intent from Chairman Martin at the time," Markham said, referring to Kevin Martin, the Republican who headed the FCC at the time the auction rules were set.

When Martin testified to Congress about the provision, Martin made it clear that that "this condition means all handsets will be unlocked and open to all apps," according to Markham.

Penn State University professor of law and technology Robert Frieden also thinks Verizon might find itself in a pickle.

"I would think the requirement would apply to any device Verizon marketed using that spectrum," Frieden told Wired.com.

Verizon told the FCC it thinks the rules mean that it has to allow any third-party app or device that doesn't harm the network, but that it can sell restricted devices and restrict apps on those devices.

As the company said in a September 2007 letter to the FCC: "Verizon Wireless's position [is] that the Commission should not force C-block licensees to allow any and all lawful applications to be downloaded to any devices that licensees provide, including devices that are not configured to accommodate any and all applications."

That's not how Google interprets the rule, according to a 2008 filing calling on the FCC to make sure Verizon follows the rules.

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The Commission’s open access rule is clear that C Block licensees "shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice…." The rule thus plainly proscribes a C Block licensee from selling handsets to customers that hinder a customer’s ability to use applications of their choice, and applies to all customers of a C Block licensee. Verizon’s position would completely reverse the meaning of the rule such that the open access condition would apply to none of Verizon’s customers, and thereby render the condition a nullity.

The FCC decided to impose rules on the 700 Mhz block after noting that carriers had blocked applications and crippled devices — such as turning off their WiFi chips or disabling Bluetooth, something Verizon used to be notorious for.

"Although wireless broadband services have great promise, we have become increasingly concerned that certain practices in the wireless industry may constrain consumer access to wireless broadband networks and limit the services and functionalities provided to consumers by these networks," the FCC said in a 350-page ruling on the auction (.pdf).

"Specifically, a C Block licensee may not block, degrade, or interfere with the ability of end users to download and utilize applications of their choosing on the licensee’s C Block network, subject to reasonable network management," the FCC continued.

Currently, Verizon is in the clear, despite having recently landed the iPhone. The company boasts that it's LTE network (a form of 4G) is the "fastest and most advanced," but all of the phones it currently offers for use on that network are Android devices — which allow a user to easily install any app they like, whether its in Google's only slightly curated market or not.

Verizon has also set up a portal to help developers who wish to create devices or apps that will run on its LTE network and has a certification program.

In retrospect, the rules seem almost superfluous, thanks to Android's stunning inroads into the smart phone market and in part, because Google's dream of selling an open handset directly to consumers died not long after birth. But the open-source OS has allowed AT&T's competitors to offer smart phones that rival the iPhone, creating an explosion in Android devices from manufacturers including Motorola, Samsung and HTC.

That development led Google and Verizon growing closer thanks to Verizon's embrace of the Android OS as a way to compete with AT&T's exclusive lock on the iPhone, and the two even came up with a "compromise" net neutrality proposal last summer.

But that new-found friendship might be tested if the 4G spectrum rules Google pushed end up blocking Verizon from launching a 4G iPhone.

Google declined to comment on how it interprets the rules now.

When asked, Verizon spokeswoman Brenda Boyd Raney said "I couldn't speculate on that since an LTE iPhone doesn't exist."

Verizon may have some time to mull its options or even go back to court to get the rules thrown own, as Apple tends to wait to adopt the latest innovations in wireless spectrum until the technology matures so it's unlikely that the 2011 version of the iPhone will be 4G. That means it's likely that Verizon won't have to face this tough problem until June of 2012.

But in the meantime, lawyers will be very busy trying to figure out possible loopholes, according to Penn State's Friedan.

"Lawyers get paid lots of money to think cleverly and then talk to engineers to configure the phone to do that," Friedan said.

Markham suggests lots of people in the tech world will be trying to figure this out as well.

"I don't think there's any kind of resolution around whether Verizon could sell a 4G iPhone," Markham said. "We will have to wait to see. We will see a collective scratching of the head."

Photo: A Verizon iPhone that runs on the carrier's 3G network. Credit: Noah Wesley

See Also:- Google Calls 700-MHz Auction A Major Victory For Consumers