Dial Zero
A look at what's surprising, silly, scary or stupid in telecommunications and data

Friday, October 31, 2008

With no buyers, Sprint will keep Nextel

After failing to find a buyer for its Nextel cellphone unit, Sprint Nextel said Thursday it will hold on to it and renew a partnership with Motorola to provide networking and phones for Nextel.

Earlier this year, Sprint began searching for potential buyers for Nextel, which has struggled since the two companies merged in 2005, losing millions of customers in the face of stiff competition from AT&T and Verizon Wireless. In the second quarter, Sprint lost 901,000 customers, largely because of Nextel defections, and ended with a total of 51.9 million subscribers.

Sprint attracted interest from several parties during the process, including private-equity firm Cerberus Capital Management and Latin American cellular provider NII Holdings. But the credit markets made it difficult for any player to raise the cash for a deal at the valuation Sprint would have liked -- more than the $5.4 billion in debt Nextel carries. In some cases, potential buyers wanted to pay Sprint less than that amount, essentially asking Sprint to compensate them to take on Nextel.

The logistics of such a deal would have been complicated. Sprint and Nextel employees have spent time and resources integrating back-end systems like billing and customer service that would have to be untangled. And Nextel bondholders opposed letting Sprint walk away from its commitment to guarantee Nextel's debt -- a provision of the companies' merger.

Sprint Chief Exec Dan Hesse said that Nextel's walkie-talkie technology is a differentiator for the company against rivals. The carrier plans to launch a new Motorola device for Nextel users in coming days, plus nine new handsets next year.

The news comes as Motorola reported that its share of the global handset market slipped to about 8% from more than 20% two years ago, and reported declining sales in its iDen business, which services and makes gear for Nextel's networks. (info from The Wall Street Journal)

Thursday, October 30, 2008

Man jailed for 22 prank 911 calls that sent cops to neighbor

Christopher Gonzales of Jacksonville, Florida was recently arrested after he placed nearly two dozen fake calls to 911, prompting emergency responders to rush to a neighbor's home. Each time officers learned the stories were false.

Officers rushed to Jodi Harris' home repeatedly, responding to what they thought were serious crimes. However, Harris said she and her family were surprised when the officers arrived.

"(He said) I was being beat, I was being stabbed to death, my husband killed his family and me," Harris said. "Every two days they would call."

At first, she thought the police visits were a mistake, but she soon realized it was a prank. "I would actually expect them. After a while, after it kept on happening I'd just expect them to come," Harris said. On one occasion, Harris said police were called to her home because they were told an officer had been shot and the body was in her car.

Not only did police respond each time 911 was called, but they also searched Harris' car and inside her home. "They're like, 'We need to check your house. We need to check your house,' and I'd be like why, and they said because someone said there was a body in here bleeding to death," Harris said.

She said the caller tortured her family and that her kids are now afraid of the police. Harris said for months she wondered who was behind the phony calls, until police let her hear the 911 calls. "I heard his voice and I was so stunned I was like that's my next-door neighbor," Harris said.

Gonzales is charged with making false 911 calls. According to the police report, officers were called to Harris' more than 22 times. Harris said she thinks Gonzalez was infatuated with her. She said the situation was a nightmare, and now with Gonzalez locked up, she hopes she won't see police at her door ever again.

"I hope he gets some help, I really do because I think something is wrong with him," Harris said. "He does need to be charged for it because, I mean, it's taking a toll on my family and my kids, really."

Harris said the reason officers had trouble tracking down the origin of the 911 calls was because Gonzales was using a cellphone that was no longer in service but could still call 911. (info from News4Jax.com)

Wednesday, October 29, 2008

Dolly Parton & Congressmen want FCC to delay decisions

Nearly 75 members of Congress are urging the FCC to delay next week's vote on a proposal to overhaul key pieces of telecommunications regulation, arguing that the matter should get public review. FCC Chairman Kevin Martin wants to significantly reorder the complicated menu of fees that phone companies pay to connect calls with each other's networks. He advocates more uniform, lower rates.

The proposed changes are backed by the two largest phone companies, Verizon Communications AT&T. They argue that existing rules are outdated and based on obsolete regulatory distinctions. But the plan faces opposition from a broad coalition of competing carriers and rural phone companies, which fear it could decrease the money they get for completing phone calls to their subscribers. Consumer advocates warn that it could lead to higher phone bills - particularly for rural customers - as phone companies seek to recover lost access charges from other sources.

Martin is also seeking major changes to the $7 billion-plus Universal Service Fund, a federal program that subsidizes telecom service in rural and poor communities through a surcharge on phone bills. Among other things, Martin would require carriers to use Universal Service money to invest in broadband networks in parts of the country that lack high-speed Internet connections.

Martin has scheduled a vote on these issues for Nov. 4. A spokesman, Robert Kenny, pointed out that the FCC faces a Nov. 5 deadline, imposed by a federal court, for reforming part of the complex access fee system.

In a letter sent this week, however, 61 House members called on the chairman to release the proposal for public review and comment for at least two months. "The public deserves the opportunity to provide fully informed comments, and the commission stands to gain by understanding the positions of all parties interested in its potentially sweeping decision," the letter says. It was written by Virginia Democrat Rick Boucher and Nebraska Republican Lee Terry, who have sponsored legislation to reform the Universal Service Fund. That sentiment was echoed in two other letters that lawmakers sent to Martin this week, including one signed by 10 senators who expressed concerns that the details of Martin's proposal could end up hindering the construction of rural broadband networks.

Kenny said the chairman intends to move ahead with next week's vote on his broad reform proposal. Kenny added that while the plan has not been put out for public comment in its current form, most of the main elements have been debated in Washington for years. Kenny also insisted that the proposal will not necessarily lead to higher phone bills and will help expand high-speed Internet connections in underserved parts of the country.

Kenny said Martin also intends to move ahead with a vote on another contentious item on the Nov. 4 agenda: a proposal to open up unused portions of the television airwaves known as "white spaces" to deliver wireless broadband services. Public interest groups and many of the nation's biggest technology companies, including Google and Microsoft, hope the plan will lead to universal, affordable broadband.

But the proposal has run into fierce opposition from the nation's big TV broadcasters, which argue using the fallow spectrum to deliver wireless Internet services could disrupt their over-the-air signals. Manufacturers and users of wireless microphones have also raised concerns about interference with audio systems at concerts and sporting events. A wide range of sports leagues, church leaders and performers - from Dolly Parton to Guns N' Roses - have written the FCC urging the vote to be delayed. (info from The Associated Press)

Tuesday, October 28, 2008

Cox cable to set up cellphone network

Cable TV provider Cox Communications plans to have its own cellular network up and running next year, a move that intensifies cable's competition with phone companies.

Cox had signaled an interest in building a wireless network by spending $550 million on licenses to use the airwaves. But such spectrum purchases don't always lead to the building of a network, and privately held Cox hasn't previously detailed its plans.

The Atlanta-based company plans to build its own network in its cable service area, and partner with Sprint Nextel for roaming outside those areas. Cox's spectrum licenses cover the areas around Atlanta, New Orleans, San Diego, Omaha and Las Vegas as well as much of Kansas and southern New Mexico. Those areas have about 23 million people.

Wireless phone service will add to Cox's video, phone and Internet services to head off competition from telcos like AT&T and Verizon, which already have wireless and are adding video.

Cox, which has 6 million customers, appears to be the only major cable company that is building its own cellular network right now, but it's an area where the cable industry has long been involved. Cox itself built and operated a cellular network covering Southern California and Las Vegas in the 1990s, then sold it to Sprint in 1999. Comcast, the country's largest cable company, also owned a wireless network in the '90s and had ties to Sprint.

The cable companies teamed up with Sprint again in 2005 to market wireless service to their video customers, but the project was scuttled this year.

Generally, wireless carriers are struggling with getting fast fiber-based data connections to their cellular towers. They need the fiber to handle higher wireless data speeds used by smart phones like the iPhone and wireless laptop cards. Even though Cox can use its dense fiber network for its cell towers, the cost of building a wireless network will be at least hundreds of millions of dollars.

Other cable companies also have their fingers in wireless. Rather than building their own wireless networks, Comcast and Time Warner Cable are investing along with Sprint in a venture that is building a network based on WiMax, a new wireless data technology. Cablevision is building its own wireless network, but it's a less ambitious project than Cox's. It's using free airwaves and Wi-Fi technology to create a mesh of Internet "hot spots" over its cable service area. (info from The Associated Press)

Monday, October 27, 2008

Little fish will swallow bigger fish.
Century Tel buying Embarq

CenturyTel will acquire larger telco Embarq in a deal valued at $5.8 billion. The deal continues a trend of consolidation in the market for traditional local phone service, which is shrinking as people turn to cable companies or cellphones for their calling needs. The combined company would have about 8 million lines spanning 33 states, mainly in rural areas.

Even though CenturyTel is the acquirer, Embarq shareholders would be left with control of two-thirds of the combined company. Embarq shareholders would get 1.37 shares of CenturyTel for each share of Embarq. Based on CenturyTel's Friday close of $29.50, that's equivalent to $40.42 of CenturyTel stock for each Embarq share owned. Embarq shares closed Friday at $29.74. The stock is down 40 percent for the year, while CenturyTel shares are down 29 percent. CenturyTel will also assume $5.8 billion of Embarq's debt, the companies said.

The corporate headquarters would be in Monroe, but there would be a "significant presence" at Embarq's current headquarters in Overland Park, Kan., the companies said. The name of the new company has not been determined.

The companies expect "synergies" of $400 million a year through the deal, in part by cutting corporate overhead costs and eliminating duplicate functions. The acquisition should also make it more attractive to upgrade the companies' phone networks for broadband, video service and wireless data, they said.

The deal is expected to close in the second quarter next year, pending regulatory approvals.

Embarq is the former landline arm of Sprint Nextel, which spun it out in 2006. The company provides service in rural areas and smaller cities in 18 states from coast to coast and is the main phone company in Las Vegas.

CenturyTel's service areas are mainly in the South and Midwest, from Louisiana to Minnesota. It also provides service in Colorado and the Northwest. (info from The Associated Press)

Friday, October 24, 2008

iPhone subsidy hurt AT&T profit margin

AT&T's profit rose slightly in the third quarter as the launch of Apple's iPhone 3G helped boost the ccompany's wireless business, but the phone's heavily discounted price tag significantly crimped profit margins. AT&Ts decision to sell the iPhone 3G at $199 led to strong sales, helping AT&T to add 2.4 million iPhone users in the quarter. But subsidizing the iPhone was costly. Wireless operating margin excluding depreciation and amortization fell to 33.5% from 37.3% last year.

The company (formerly known as Woodbury Telephone Company, McCaw Cellular and a bunch of other things) reported third-quarter net income of $3.23 billion, or 55 cents a share, up 5.5% from a year earlier. The company said $900 million in customer-acquisition costs related to the iPhone shaved 10 cents off its earnings. Revenue rose 4% to $31.34 billion.

AT&T execs said the investment will pay off because iPhone users are lucrative in the long-term, spending about $95 a month on average, or about 1.6 times the amount other customers do.

The iPhone costs, combined with weaker-than-expected performance in AT&T's landline unit, resulted in an overall operating margin of 33.8%, down from 35.3% a year earlier. The company lowered its free cash flow estimate for the year to $14 billion from $16 billion.

With a boost from the iPhone, AT&T increased wireless revenue 15% over the year-earlier period and recorded net additions of two million cellphone subscribers, bringing the company's customer base to nearly 75 million. Data services such as text messaging and Internet access now account for nearly a quarter of the average AT&T cellphone bill.

The iPhone is starting to run into new competition from other smartphones such as the G1 from T-Mobile and Google BlackBerry Storm from Verizon.

AT&T added 148,000 high-speed Internet customers, well below the year-earlier gain of 499,000. Consumers continued to drop landlines as they turn to cellphones, with AT&T losing one million residential lines in the quarter. (info from The Wall Street Journal)

Thursday, October 23, 2008

Comcast challenges telcos with faster Internet service

Comcast is upping the ante in the broadband war with phone companies.

The country's largest cable operator said Wednesday that it plans to aggressively deploy super-high-speed broadband services to 10 million homes by the end of the year. Download speeds on the new services will be 50 megabits per second for the top tier, and 22 megabits per second for the second tier. The new higher speed services will cost substantially more than the services Comcast currently offers.

Comcast has begun to deploy the services in Boston, Philadelphia, New Hampshire and New Jersey. Rival Verizon Communications Inc., which offers its own super high-speed FiOS service, competes in those regions.

It also plans to double Internet speeds for all its customers -- beginning with those Eastern regions -- and offer the higher speeds to all customers by the end of 2010. Comcast could finish its speed upgrades well before then.

Comcast's push comes as cable companies are increasingly relying on their Internet connections to sell customers bundles of services in competition with phone giants Verizon and AT&T, which are spending billions to build their own TV services.

Internet connections are the most profitable service for both phone and cable companies. They also play the biggest role in deciding where customers purchase their service bundles.

After a multiyear stalemate, the tide has recently begun to turn in the favor of faster cable Internet service. In the second quarter, 80% of new subscribers opted for cable Internet services. As consumers flock to bandwidth-intensive applications like online video, they increasingly prefer faster speeds. Some analysts question the future viability of the slower DSL connections phone companies offer in the vast majority of their markets.

On Wednesday, AT&T announced it had signed up 149,000 new broadband customers over the quarter -- a fraction of the half million customers it signed up during the same period last year. (info from The Wall Street Journal)

Wednesday, October 22, 2008

South Carolina fighting Feds over cellphone jamming in prisons

South Carolina wants to jam cellphone signals in prisons to prevent convicts from committing more crimes, but it's against the law.

The struggle to stop cellphone use in prisons has states trying body scanners and even dogs trained to sniff out batteries. South Carolina's prison chief Jon Ozmint wants to add technology that blocks cell signals. Standing in his way is the federal Communications Act, which prevents states from interfering with airwaves. The FCC can give federal agencies authority to use jammers, but not state and local law enforcement. "This is a classic example of a rule that has not kept up with technology," said Ozmint.

Experts say the consequences of not using jammers can be dire. Perhaps the most glaring example took place in Maryland last summer, when Carl Lackl identified a shooting suspect. He was gunned down outside his home after the suspect used a cellphone to order the hit from behind bars.

In South Carolina, Ozmint blames illegal phones for most prison escapes. In one 2005 case, cellphones were found on two inmates who escaped a maximum security prison by hiding in a trash truck.

Ozmint invited federal officials and the state's congressmen to South Carolina's maximum-security Lieber Correctional Institution in a few months, where CellAntenna Corp., which manufactures jamming devices, will demonstrate that technology.

Critics say it's impossible to contain the jamming technology to one or two buildings, and that using it runs the risk of affecting people using phones nearby.

"You can prevent emergency calls if these jammers are allowed," said Joe Farren, spokesman for CTIA-The Wireless Association, a trade group for the wireless industry. "You put signal jammers in, you interfere with critical communications, life and death." Howard Melamed, the chief exec of CellAntenna, said jammers can be angled so that cellphones won't function inside prison walls, but someone standing just outside would have no problem.

Ozmint said his officers are stretched thin by a rising prison population and tightening budget constraints. He believes the technology would help him run a safer, more efficient prison system. (info from The Associated Press)

Tuesday, October 21, 2008

Qwest sued for early termination fees

Two former customers have filed a lawsuit against Qwest Communications seeking to end early-termination fees for Internet subscribers. The suit is one of the first challenges to the practice of early-termination fees as it applies to broadband services.

Early-termination fees have come under scrutiny by consumer groups and lawmakers, who say they lock in customers and discourage competition. Providers say they must hold customers to long-term agreements in exchange for offering aggressively priced service plans. Qwest's termination fees are part of its "price for life" plans, which cost $30 or more a month for broadband.

In recent months, customers have fought similar charges for early termination of cellphone contracts with wireless carriers. In July, a California judge ruled that Sprint must refund about $73 million in early-termination fees, and Verizon Wireless settled a set of early-termination lawsuits for $21 million.

According to the Qwest complaint, Robin Vernon of Auburn, Wash., and Rory Durkin of Anoka, Minn., were each charged $200 when they canceled their high-speed Internet service.

Qwest, based in Denver, markets its price-for-life plans as requiring a two-year agreement, but customers don't sign a contract, said Michael Lieder, an attorney at one of the firms representing the plaintiffs. The fee applies regardless of when they cancel service during those two years. Such a lengthy term requires a written agreement, and the fee isn't a good-faith estimate of what the real damages are, he added.

"Qwest simply imposes a $200 charge whether someone ends service on month one or month 23," Mr. Lieder said. "We believe that it just picked the $200 amount in an effort to dissuade consumers from switching service if they find a better service."

Unlike the wireless suits, said Chris Murray, senior counsel at Consumers Union, in Qwest's case, "the fig leaf justification that the wireless carriers have -- subsidized handsets -- doesn't really apply." Customers canceling their wireless service still have their cellphone, whereas former broadband subscribers don't have that, he said. (info from The Wall Street Journal)

Monday, October 20, 2008

Mad Men TV show has illegal phone

In the 6/22/08 issue of the New York Times, there's an article about the Mad Men TV series. Writer Alex Witchel says that Matthew Weiner (above), the show's creator, producer and head writer "approves every actor, costume, hairstyle and prop." Entertainment Weekly said there's "a team of researchers who ensure period accuracy on all fronts."

Weiner and his team goofed on one prop. The suburban New York bedroom of the main character Don Draper has a GTE Starlite phone in a color chosen to go with the green velvet headboard.

However, in the 1960s that headboard would have been located in AT&T territory, not GTE territory. Since this was before a Supreme Court ruling that allowed freedom of phone use, it would have been a violation of the government-sanctioned phone company regulations to use that phone.

Of course, since Draper lies about his past, uses a phony name and cheats on his wife, it's no surprise that he has an illegal phone. (photo from The New York Times)

Friday, October 17, 2008

Alaskan 911 totally screwed up

For the past two years the Regulatory Commission of Alaska has been tackling a tough issue: how to make Enhanced 911 work throughout the state.

But the Commission has been told it didn't have the authority to adopt the regulations to make the program work.

The Department of Law said it doesn't appear the Commission has the authority, even though the State Legislature had asked the Commission to come up with appropriate standards for the telephone systems.

In late September, the Commission decided to pursue a legislative solution to allow the commission's regulations to stand. "Because it involves hardware manufacturers and local governments, how the telephone systems interact with local governments' E-911 systems, it's a very technical process," Commissioner Mark Johnson said. The Commission is awaiting a Department of Law recommendation on how to pursue the issue. (info from KTUU.com)

Thursday, October 16, 2008

Man jailed for trying to use 911 to call FBI

Kenneth Borders of Tampa Florida wanted to talk to the FBI on Tuesday night, so he called 911. However, the FBI can't be reached by calling 911.

Borders was told not to call 911 again unless there was an emergency. Borders called 911 two more times. After the third time, deputies went to his home and asked him to stop making calls. Borders voluntarily broke his phone, and then called again on a different phone.

After the fourth 911 call, deputies arrested him.

He was charged with making false 911 calls and was held in jail with bail set at $500. (info from Tampa Bay Online

Wednesday, October 15, 2008

FCC plan may raise residential phone rates

Federal regulators are proposing changes to the rules governing phone company fees that could raise rates for residential phone lines and potentially create a windfall for giant telcos.

State regulators and rural phone companies that stand to lose power and money from the changes are readying legal arguments against the proposal. They also are appealing to Capitol Hill, telling representatives that they stand to lose $2 billion annually if the rates in their areas are cut.

Advocates of change say one low, nationwide rate would replace a hodge-podge of charges and eliminate the opportunity for phone companies to profit by routing phone calls through the most expensive connections.

Federal Communications Commission Chairman Kevin Martin is proposing to revamp the system under which phone companies pay each other to transfer calls to their customers. Details are subject to negotiation, but the outline of the proposal calls for allowing phone companies to raise by $1.50 to $2 the monthly fee charged customers for individual phone lines.

Under the current payment system, some carriers charge a fraction of a penny per minute for calls to their customers, and others charge hundreds of times that much for the same service. The current system effectively subsidizes rates for rural phone customers.

AT&T has said establishing one, lower national rate for connecting calls would result in roughly $4 billion in savings for the entire industry. But it isn't clear how much of those savings will flow to consumers in the former of lower rates, and how much will go to the phone companies. AT&T and Verizon officials said they could lose money from the proposal because they benefit from some of the higher charges in certain areas.

Wireless companies like Sprint Nextel and T-Mobile also will be affected by the proposal. They also support a low national rate for exchanging phone traffic.

To woo broadband advocates and Democrats on the commission, Martin's plan will propose asking phone companies to build high-speed Internet connections within five years. Consumers Union Senior Counsel Christopher Murray said the benefits of Internet in rural areas may not be enough to compensate for higher phone charges. (info from The Wall Street Journal)

Tuesday, October 14, 2008

Boost cuts cellphone service prices, wants older customers

Sprint Nextel's prepaid cellphone service is offering lower pricing plans as it seeks to expand its target market from tech-savvy youth to a broader, older demographic.

The Boost Mobile service last week slashed its rate in half to 10 cents a minute. It will also modify its unlimited-usage plan, which currently starts at $50 a month, though the company declined to specify how. Boost plans to roll out its new plans in select US cities.

The company is targeting 18- to 35-year-olds, compared with the 14-to-25-year-old market it previously sought, said Neil Lindsay, Boost's marketing VP. The repositioning is part of Boost's attempt to remake its image as a brand that mainly appeals to younger consumers and hip-hop music fans.

Prepaid carriers have benefited as the slowing economy has prompted consumers to cut expenses. Such carriers sell service based on usage instead of annual contracts.

Prepaid carriers "built a business model which was basically a new pricing plan" and one that's difficult for large carriers to copy without cannibalizing existing subscribers, said Rory Altman, a telecom consultant. (info from The Wall Street Journal)

Monday, October 13, 2008

FCC boss wante free Internet access.
T-Mobile may sue to stop it

FCC Chairman Kevin Martin intends to press the five-member body to sell a currently unused block of airwaves with a condition that the buyer offers free Internet access.

FCC engineers released an analysis late Friday indicating that wireless Internet activity on the unused channels won't interfere with cellphone connections on an adjacent swath owned primarily by T-Mobile USA.

Citing tests conducted in September, the FCC's Office of Engineering and Technology said a T-Mobile phone and a test device operating on the neighboring airwaves, even when sitting next to each other, "does not necessarily result in interference." "The engineers are confirming that this can be used for broadband services without interfering with spectrum users next door," Martin said.

Martin has proposed selling the unused airwaves to any bidder willing to devote at least 25% of the spectrum for free Internet access for 95% of the country. Martin said T-Mobile's cellular connections will be unharmed if the Internet traffic on neighboring channels is kept below a certain power level and other layers of protection are put into place. He said the interference standards the FCC will consider "are stricter than the interference standards that we've ever used."

T-Mobile has been aggressively lobbying the FCC against the idea, saying Internet uploads and downloads next to its own spectrum would cause dropped calls and wipe out weak T-Mobile cell signals.

According to Martin, part of T-Mobile's interference problem lies with the filters in its phones, which inadvertently pick up neighboring channels. "You shouldn't have equipment that reads spectrum you don't own," he said. T-Mobile has said the phone filters aren't the problem, noting that Internet traffic on neighboring channels would bleed into its own airwaves.

T-Mobile has also said it would bid on the spectrum in question if the free Internet condition isn't a part of the auction. T-Mobile is currently launching its own low-cost wireless Internet service that would compete directly with a free Internet option.

Martin said he wants to begin the auctioning process "as soon as possible," but couldn't state when the FCC would vote on an item detailing the rules for the sale.

If the FCC goes forward with its free Internet idea, T-Mobile has hinted it would sue. In a presentation to FCC officials earlier this week, T-Mobile executives noted that after their company paid billions to operate in its spectrum swath, the FCC has an "enforceable contract" with the licensees to ensure minimal interference.

Bwfore the engineers' report, T-Mobile applauded the FCC for putting their observations on record. "We will read the report in detail to determine if they have correctly evaluated the extensive record from multiple parties that have expressed concern about interference. Given the importance and complexity of these technical issues, the FCC needs to provide for sufficient time for comment on their report before any FCC action on these rules," T-Mobile's statement said. (info from The Wall Street Journal)

Friday, October 10, 2008

Verizon willing to leave 100 markets to get approval for Alltel merger

Verizon Wireless is offering to divest airwaves in an additional 15 markets as a part of talks with the Justice Department over a pending merger with Alltel. Verizon has already pledged to divest in 85 markets to appease regulators' antitrust concerns over the proposed merger, which would create the nation's largest cellphone company.

In a letter sent to the FCC, Verizon Wireless said the 15 markets where it will divest its assets are located in Alabama, Arizona, Georgia, Iowa, Minnesota, Nebraska, New Mexico, North Carolina, South Carolina, and Utah.

The merger must be approved by both the Justice Department and the FCC before it can be finalized. FCC Chairman Kevin Martin wants to sign off on it before the end of the year.

Stifel Nicolaus, a private analyst group, said in a research note Thursday that the latest divestitures indicate that the Justice Department is wrapping up its review of the Verizon-Alltel transaction and could approve it with conditions by the end of the month.

The recent credit crisis has raised questions about whether Verizon will walk away from the merger, which could increase the urgency, particularly on Alltel's part, to seal it quickly, Stifel Nicolaus said. Currently, both Verizon and Alltel appear to be actively lobbying the FCC and DOJ to approve the transaction.

Once DOJ signs off, as expected, the FCC will be forced to consider additional factors which could cause more protracted negotiations. Smaller wireless companies say the merger will disadvantage them in roaming agreements with the merged company.

Earlier this year, Verizon promised to give small, rural carriers the option of maintaining any roaming agreements they now have with Alltel after the merger. Verizon has said said small and rural companies that have roaming agreements with both Alltel and Verizon Wireless can opt for either agreement to govern all roaming traffic after the merger. But smaller wireless carriers say they want stronger roaming rights guaranteed as a condition of the merger. (info from The Wall Street Journal)

Thursday, October 09, 2008

Broadcom is suing Qualcomm, again

Broadcom is mounting another legal attack on rival Qualcomm, this time taking aim at a key tactic used by a patent-licensing business that provides the bulk of Qualcomm's profits.

The suit seeks to stop Qualcomm from a longtime practice of charging patent royalties both for cellphones and for the chips used inside them. Broadcom, relying on a Supreme Court ruling in June, argues that a principle known as patent exhaustion prevents Qualcomm from what Broadcom sees as charging customers twice.

Broadcom said in a statement that Qualcomm's patents and licenses are unenforceable, and that its "practices constitute patent misuse that has brought Qualcomm a financial windfall and brought harm to the industry and consumers."

Don Rosenberg, Qualcomm's general counsel, disputes Broadcom's assertions and its interpretation of the Supreme Court case, which involved LG Electronics Inc. and Quanta Computer. "Clearly, they are misstating the law of the Quanta case," Rosenberg said.

Rosenberg said the case did not affect the practices of Qualcomm. The company explicitly spells out limitations to the use of its patents, so that cellphone makers that ultimately use its chips have to be covered under a licensing agreement too, he said.

Broadcom is trying to become a major supplier of cellphone chips, but has so far failed to win a patent-license agreement from Qualcomm, which has the leading market share in that business. But Broadcom has had some success in putting pressure on its rival by filing patent-infringement cases. (info from The Wall Street Journal)

Wednesday, October 08, 2008

Cellphone carriers sued for text price fixing

Twenty class action lawsuits have been filed against national wireless carriers alleging price-fixing for text messaging. All but one of those cases cite an inquiry from Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., according to a letter sent Monday to Kohl from AT&T, formerly known as Woodbury Telephone Company and a bubch of othger things.

Last month, Kohl asked Verizon Wireless, AT&T, Sprint Nextel and T-Mobile USA to account for the doubling of charges for text messages since 2005. Kohl noted in a Sept. 9 letter that each of the four wireless companies changed their prices for text messaging at nearly the same time.

In response, AT&T, T-Mobile, and Sprint all said the bulk of their customers don't pay for texting on the per-message basis that Kohl asked about. Instead, most customers buy texting services in bundles. Verizon declined to make public its response to Kohl.

The texting packages range from a Sprint's $99.99 monthly plan that gives a customer unlimited access to voice, video, text, and picture-sharing, to T-Mobile's $4.99 per month price for 400 text messages. T-Mobile also offers unlimited texting for $14.99 per month.

AT&T offers 200 text messages per month for $5 or 1,500 messages for $15. Sprint and AT&T both offer unlimited texting for a $20 monthly rate, their letters said.

Verizon's texting packages are similar, with a monthly $5 rate for 250 text messages to a $15 rate for 1,500 messages, according to the letters from the other companies.

Kohl is concerned that consumers may be forced to buy text bundles because of rising per-message costs, which have gone from 10 cents to 20 cents in the past three years.

The timing of texting price changes among the top carriers also worries Kohl. Responding to the timing question directly, T-Mobile said that its per-message rate changed "anywhere from several months to a full year after the other carriers." T-Mobile said text-messaging prices have decreased when the different packages subscribers can buy are taken into account, but its letter didn't provide specific data. T-Mobile also said 90% of its customers have text messaging included in their service plans. AT&T said less than 2% its text messaging is on a pay-per-use basis. (info from The Wall Street Journal)

Tuesday, October 07, 2008

Verizon loses patent lawsuit against Cox

Verizon lost its patent-infringement case against Cox Communications, signaling that Verizon may have a difficult time extracting royalties from cable providers for Internet-based telephony.

A federal jury in Virginia found that Cox didn't infringe on six Verizon patents related to Internet telephony. Cox said it would "look forward to competing vigorously with Verizon in the marketplace, not the courtroom."

Verizon has been aggressively asserting its patents in Internet phone technology, despite not promoting the service to its own customers. Many analysts and patent lawyers said its case against Cox, which was filed early this year, was a prelude to further lawsuits against bigger cable rivals.

"Despite the decision, we believe our patents were infringed," Verizon said in a statement. "We will continue to innovate and protect our intellectual property." The New York company said it hasn't decided whether to appeal the decision. Verizon was seeking past damages from Cox of $404 million.

Cox argued that it wasn't liable because it doesn't actually offer Internet phone service. While its call traffic is broken into digital voice "packets," it isn't routed over the public Internet, the company said. Cox said it carries the calls through its own cable network.

A Verizon spokesman declined to say whether the company would target other major cable providers like Time Warner Cable and Cablevision with lawsuits. Verizon recently reached a deal with Comcast in which both companies agreed not to sue each other for patent infringement for a period of five years. That agreement covers all patents the companies hold. (info from the Wall Street Journal)

Monday, October 06, 2008

Sprint has offers for Nextel, but problems remain

Wireless provider Sprint Nextel, which has been exploring a sale of its Nextel business, has received interest from Latin American carrier NII Holdings and several private-equity firms. But a variety of factors are complicating any deal, from the cost of separating the Nextel unit to the large amount of debt Sprint wants to unload on the buyer.

Sprint acquired Nextel in 2005 in a deal valued at $35 billion, but the Nextel side of the company has struggled to retain subscribers in the hotly competitive wireless market. Sprint began evaluating a sale or spinoff of Nextel earlier this year. The carrier has held discussions with a range of prospective buyers in recent months and is within days of receiving a second round of bids.

Among those considering a purchase of Nextel are NII, which has 5.4 million subscribers and a roughly $5.3 billion market cap, and private-equity firm Cerberus Capital Management LP. There may be other bidders as well.

NII, which was once the international division of Nextel but now operates as a separate company, is seen by many as the most logical buyer. Based in Reston, Va., it offers service in Argentina, Mexico, Brazil, Peru and Chile using the same network technology, iDen, as Nextel.

Any deal would likely have a value of at least $5.4 billion, which is the amount of debt Sprint wants a buyer to assume. Potential buyers have expressed resistance to taking on so much debt but have indicated they may be willing to if the equity part of the deal were negligible.

There are other hurdles that could sink a deal. First, Sprint and Nextel have spent the past few years integrating back-end systems like billing and customer service that would be costly to separate again. Second, there are legal concerns that Sprint won't be able to walk away from guaranteeing the $5.4 billion in debt under the contracts it signed at the time of the Nextel merger. Major Nextel bondholders would strongly oppose lifting Sprint's guarantee.

Also, the credit crunch has made it even more difficult for buyers to arrange financing than it already was. Even if they don't have to put much money into the deal, buyers would need significant cash to operate the company and its network of roughly 30,000 cellphone towers nationwide.

Sprint intends to hold out for a high valuation, but the company has acknowledged that Nextel, which has shed millions of subscribers in recent years, is worth much less than it once was. Sprint took a write-down of nearly $30 billion on the Nextel acquisition earlier this year. (info from The Wall Street Journal)

Friday, October 03, 2008

Thousands of Mexicans change telcos, but the biggest companies are run by the same guy

Mexico's new number-portability regulations have spurred more than 100,000 consumers to change their phone company, according to regulators. Federal telecommunications regulator Cofetel said Wednesday afternoon in a press release that 101,491 people have switched service providers since the regulations took effect in early July, of which 64% were prepaid mobile users and 30% fixed-line users.

Under number-portability rules, Mexican consumers are able to keep their fixed or mobile telephone numbers when they change carriers. Cofetel said that between 2,000 and 2,500 people change service provider on a daily basis. "Cofetel expects that in December, the month where operators have the most aggressive offers and most attractive rates, users will show greater interest in exercising their right to number portability," the agency said.

Portability, which affects 22 phone companies, is part of President Felipe Calderon's attempt to boost competition in key sectors of the economy such as telecommunications.

Mexico's telecommunications industry is largely in the hands of two firms controlled by Mexican billionaire Carlos Slim. Telcel had a 72% market share with 52.9 million clients at the end of June. Telmex, controls about 90% of the country's fixed lines with 17.7 million lines in service. (info from The Wall Street Journal)

Thursday, October 02, 2008

Apple drops secrecy pledge for iPhone developers

Apple will no longer force iPhone software developers to sign a nondisclosure agreement that many had said was hampering their ability to work. The change comes a week after the introduction of the first phone loaded with Google's Android software, an open-source operating system that lets developers make and sell programs without restriction.

In contrast, Apple had required every person who downloaded the iPhone software developer kit to pledge not to speak about its contents, even to fellow developers.

Recently Apple also barred programmers whose applications it rejected from iTunes - the only legitimate place to sell iPhone "apps" - from posting the reasons for rejection on the Web. The move fueled a new wave of critiques about Apple's approval process, already seen by many developers as secretive and capricious.

Apple said the iPhone nondisclosure agreement (NDA) was meant to protect Apple's innovations, "so that others don't steal our work. It has happened before." Programmers complained the NDA prohibited them from sharing tips or comparing solutions to common problems. Sharing information could help them produce programs faster and with fewer bugs, they said.

In response, Apple acknowledged that the NDA created a burden on the developer community, and so it will no longer apply to iPhone software that has already been released. Programmers who are working with unreleased test versions of new iPhone software will still be bound by an NDA.

That's in line with the sort of agreements Apple makes with Macintosh computer software programmers, and with practices of other companies, including Microsoft Corp. (info from The Associated Press)

Wednesday, October 01, 2008

Super-cautious New York regulators may block FiOS

New York regulators have raised the possibility of banning Verizon from installing its fiber-optic FiOS service in New York City until the company makes sure it's doing enough to provide electrical grounding for its equipment in homes.

Poorly grounded equipment or cables could give electrical shocks or start fires, but there have been no reports of FiOS equipment causing harm to people or property, Verizon said.

The New York State Public Service Commission, which regulates telecommunications, has been dogging Verizon on the electrical issue since 2006, and the staff concluded in a report to the commission last week that the company's remedies don't go far enough.

New York is the only state to have raised these concerns, but Verizon is installing FiOS in 15 others.

Fiber-optic cable itself isn't electrically conductive, but in most of the homes Verizon connects to the service, it wall-mounts a box that sprouts a coaxial video cable. The New York regulators are concerned that the coaxial cable could inadvertently carry a high voltage.

The report said 17 percent of new FiOS installations in the state still didn't meet the National Electrical Code in August, down from 50 percent earlier. The Public Service Commission staff considers 5 percent the goal, and asked the commission to consider suspending the company's right to perform new installations in New York City until it achieves that goal in the rest of the state.

Verizon is spending $23 billion on FiOS, replacing copper phone lines with optical fibers in much of its coverage area. The massive project is intended to let the phone company compete with cable companies in delivering TV service and fast Internet downloads.

With 3 million households, New York City is the single largest market for FiOS, and a big growth opportunity for the company. It received permission from regulators in July to start selling its FiOS TV service, and is now working toward making it available to half a million households by the end of the year. Some surrounding suburbs, particularly on Long Island, have had FiOS available for a few years.

Verizon spokesman Eric Rabe said that fewer than 5 percent of new installations in New York state were unsatisfactory in September, according to an independent consulting firm it has hired to perform inspections.

"We've bent over backwards to make sure we meet all their concerns," Rabe said. "Really, what it stems from is that we have installations of new technology that really isn't covered well by regulations." The company is inspecting all of the several hundred thousand FiOS installations in the state made before Aug. 1, and fixing the ones that don't meet the electrical code. "We certainly do not think there is any danger from this," Rabe said. (info from The Associated Press)