The story was in all the papers. The Federal Communications Commission had decided on terms for auctioning new spectrum.

Some stories described it as a win -- for Google perhaps, or for consumers. It was neither.

It is a shame that the Federal Communications Commission (FCC) can drag a 40-year-old policy out of the closet, apply it to one little piece of today’s technology and congratulate itself for having done a good job for consumers.

It is even more of a shame that the FCC decided not to do anything to create new competition for high-speed Internet services, which are rapidly becoming an integral part of our economy, and of our social lives.

That’s the scorecard at the end of the day when the Commission made its rulings on what will be the biggest auction of the public’s airwaves for many years. What we got was good. What could have been – would have been great.

Through a combination of timidity and ideology, the FCC backed away from some simple steps that could have, in part, helped to jump start the wireless industry. Think of all the innovations from the regular Internet over the past 10 years or so. Has the wireless industry in the U.S. kept up? Jason Devitt, CEO of Skydeck, put things in perspective when he told the Commission in brief testimony before the agenda meeting started that contrasted with advances in the wired world, like online shopping, banking or instant messaging, in the wireless world, “ten years and we’ve got ring tones.”

There’s a reason that the U.S. is far behind the rest of the world in what consumers can do with their wireless phones. The FCC could have done something about it, but didn’t. The reason is the stranglehold the telephone companies maintain over the regulators and Congress. The companies want to make sure that if you are a Verizon customer, you download music from Vcast – not from Rhapsody. That’s fine for Verizon, but it squeezes out any potential entrepreneurs and innovators.

The solution would have been to require that about one-third of the spectrum up for auction be sold on a wholesale basis. That solution would have opened the doors to entrepreneurs to come up with new ideas for consumers. If the Commissioners had been serious about creating some competition to the cable and telephone companies, they would have allowed a new medium to start to create something new.

Instead, they got timid in the face of objections from the powerful telephone companies. Instead, the majority of the commissioners ignored the reality of the telecommunications marketplace. The fact is, that selling wholesale access to telecommunications services exists now – it is a recognized line of business in the wired world, and is growing in the wireless world.

The Republicans on the commission – Chairman Kevin Martin, and Commissioners Deborah Taylor Tate and Robert McDowell, wouldn’t go along with wholesale. They were afraid of putting conditions on the auction which might lower the amount of money that might be collected at the auction. Never mind that past auctions with conditions raised more money than unencumbered ones dominated by telephone companies.

They were afraid of bending to the will of Google, which backed the provisions to open the wireless market. Never mind bending to the will of the telephone companies, or that it was public interest groups, including my day-job employer Public Knowledge, which pushed the “open access” concepts. We, and Google, asked for four – the freedom to use any phone on any network; the freedom to run any application; spectrum should be made available on a wholesale basis; new services should be able to connect to existing telecom networks. They were afraid of too much regulation. Never mind that the absence of conditions and regulations gives the game to the telephone companies. They were afraid of the future.

So they settled for a half-measure, a policy enacted in 1968. Until then, it had been illegal to attach any telephones to the network other than those supplied by the Bell System. People didn’t own phones; they had to be rented. Because that 1968 FCC, in a decision written by Nicholas Johnson, didn’t listen, we got newer phones, fax machines, modems, and the Internet. Those were devices attached to the telephone network without AT&T’s permission. What would we have had that ruling not come about? It’s a sobering thought.

The old AT&T used the same arguments against connecting phones to the network then as Ma Bell’s grandchildren are doing today. It’s said that today’s Commission had to be dragged along to agree with this principle of choice and innovation, which doesn’t even apply to the 240 million cell phone subscribers out there today. Consumers will only get truly to own their phones, and take them when they switch services, in a small portion of the new spectrum. They agreed to half of the four elements of a true open network.

The two Democrats on the Commission, Michael Copps and Jonathan Adelstein, both support opening the cellular market, but decided instead to cut the deal with Martin for the freedom of equipment and applications, but not to create new competition. The inside buzz was that if they didn’t back Martin on this, he would stuff any of their future initiatives. So they stopped short of what they wanted and went with what Martin wanted.

Their reward came later Tuesday, after the FCC meeting on spectrum. The Commission released 10 studies on media ownership, with most of the topics and authors selected by Martin and his staff. Copps and Adelstein issued a statement saying they, and the public, had been sandbagged by Martin, calling the studies “supposedly serious.”

The words “no good deed” and “unpunished” somehow come to mind.