An industry orphan?

Sprint CEO Dan Hesse probably rues the day his Board of Directors pulled the plug on a merger deal that would have combined MetroPCS and Sprint back in February. The merger was abandoned after board members openly worried the transaction would distract Sprint from its network improvement project — dubbed Network Vision — then just getting underway.

The deal with T-Mobile and MetroPCS may have limited Sprint’s takeover options, although analysts say a hostile counteroffer for MetroPCS could still take the small carrier away from T-Mobile.

Hesse himself is a proponent of additional wireless industry consolidation. He believes the current market has too many wireless carriers and the two dominant providers — AT&T and Verizon — enjoy economy of scale Sprint cannot hope to achieve in its current position.

Hesse

Wall Street was more pessimistic about Sprint after the T-Mobile/MetroPCS merger was announced, suggesting they may be an industry orphan, pushed into a corner and running out of options.

Shares of Leap Wireless, the owner of Cricket, rose as much as 17 percent after the T-Mobile deal was announced, signaling Cricket is likely an endangered species. Leap’s cellular network is similar in scope to MetroPCS, although the two companies largely serve different markets. Wall Street’s favorite dance card has Sprint and Leap Wireless as future partners, and Sprint may be forced to acquire the smaller carrier to save face. Leap operates its own modest network of cell towers and has plans to roll out LTE 4G service to its customers. That spectrum could become important to Sprint, especially in the larger urban areas Cricket targets.

An endangered species.

Some Wall Street analysts say deals with MetroPCS, Leap, and other small regional carriers are small potatoes. Many advocate for a much larger merger between Sprint and T-Mobile to more realistically confront the de-facto duopoly of AT&T and Verizon Wireless.

Regulators under the Obama Administration may take a dim view of a merger that combines the third and fourth largest nationwide carriers, but nobody expects much regulatory resistance approving mergers that wipe out MetroPCS and Cricket.

“The problems that Sprint and T-Mobile have are they are not as big as AT&T and Verizon,” Piper Jaffray’s Chris Larsen told Bloomberg News in a phone interview. “They don’t have the scale so therefore it is harder to compete. Increasing your size 25 percent, it helps. But when you are less than half as big as your rival, getting 25 percent bigger narrows the gap, but it does not close the gap.”

[flv]http://www.phillipdampier.com/video/CNBC MetroPCS Down on Merger Reports 10-3-12.flv[/flv]

CNBC reports the T-Mobile/MetroPCS deal reignites wireless consolidation and leaves Sprint in a potentially difficult position.  (5 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Sprint Left Behind as MetroPCS Joins T-Mobile 10-3-12.flv[/flv]

Bloomberg News reports T-Mobile needs more subscribers, but some Wall Street analysts think the company is making a mistake focusing on the prepaid market.  (1 minute)

Susan Crawford, President Barack Obama’s former Special Assistant for Science, Technology, and Innovation Policy has the solution for America’s lack of universal broadband, and she solves it in just four Tweets:

• Step 1 gives private companies the push they need to get rural broadband financing within their existing Return on Investment formulas by reducing capital costs for unserved areas;
• Step 2 stops the corporate welfare legislation that protects the incumbent duopoly from publicly-owned competition that can ignore Wall Street’s insistence that more competition = fat profit erosion;
• Step 3 gives the ISPs access to public land and infrastructure either at no or low cost in return for recognizing they are benefiting from that taxpayer-owned infrastructure, so they better not abuse the privilege;
• Step 4 makes ISPs common carriers that have no financial interest in the content transported down broadband lines, thus no incentive to favor their own services while discriminating against others.

Whether such policies can withstand court challenges claiming violation of corporation free speech rights is, of course, another matter. But Crawford’s ideas create incentives for broadband providers to aggressively wire their respective service areas while avoiding monopolizing what travels down those broadband pipelines.

Most Time Warner Cable broadband customers across the country will soon pay a $3.95 a month cable-modem lease fee in an effort by the cable operator to boost revenue by as much as $300 million annually.

New York City-area customers will be the first to see the modem rental charge, and customers began receiving postcards this week informing them of the new fee, which begins Oct. 15.

“It’s an outrage considering how much Time Warner Cable is already charging for broadband service,” says Stop the Cap! reader B.J., who received notification in yesterday’s mail. “My Ubee cable modem is four years old and they want to charge almost $50 a year for something that costs $40 retail brand new? Not a chance. I am calling Verizon. Goodbye Time Warner.”

A Time Warner Cable spokesperson said the company is busily printing notification cards that will arrive in customer mailboxes across the country in the next two months.

“Customers have the choice to purchase a modem from a third-party retailer to avoid paying the $3.95 per month,” according to the cable company.

Last year, Time Warner began gradually rolling out a $2.50 modem rental fee for new customers, but exempted current ones. Now the cable operator has increased the rental fee and intends to impose it on everyone except Starter Internet, Connected Learning, SignatureHome and certain IntelligentHome customers.

The cable operator may get resistance from customers, but Wall Street analysts state other cable operators, including Comcast, already charge up to $7 a month for modem leases.

Many customers will elect to buy their own cable modem, but the cable company has severely limited its approved device list in many areas to just a single manufacturer: Motorola Mobility, despite still leasing out often less-costly models from seven other manufacturers.

“It’s convenient how they will lease out inexpensive Ubee cable modems made in China but they won’t let you buy one,” says B.J. “There is nothing wrong with Motorola modems, but it reduces customer choice.”

Time Warner Cable (and Stop the Cap!) recommends all customers who plan to buy modems choose a DOCSIS 3 model for future compatibility. The company has switched out cable modems for customers at least twice over the decade plus history of cable broadband service. If history holds, the estimated useful life for a DOCSIS 2 cable modem will probably be five years or less before future standards make them obsolete. DOCSIS 2 modems are not capable of supporting the fastest broadband speeds, while DOCSIS 3 modems often cost just a little more.

Time Warner Cable’s Approved Modem List in the Northeastern U.S. And Our Reviews (all prices approximate, from Amazon.com — consult Time Warner Cable’s website for specific modems approved in your area):

DOCSIS 3

Recommended Motorola SurfBoard SB6141 DOCSIS 3.0 Cable Modem ($100): The SB6141 is now on the approved list for most TWC service areas and has gotten excellent reviews. It is an upgrade from the 6121, now off the list of approved devices. The 6121 could only support four-channel bonding for upstream and downstream, while the 6141 supports up to eight downstream channels and four upstream channels increasing data rates to over 300Mbps for received data and over 100Mbps when sending data. The only downside is that it is harder to find in stock for purchase.

Motorola SURFboard Gateway SBG6580 DOCSIS 3.0 Wireless Cable Modem ($117): The 6580 includes built-in gigabit Ethernet and a Wireless-N router, so it theoretically could replace your home router. My personal experience with cable modem-router combinations has been less than glowing, however. Consider this only if you do not already have a Wireless-N router. This model gets overall good, but not excellent reviews.

DOCSIS 2 – Consider a DOCSIS 3 modem to guarantee future compatibility.

Motorola Surfboard SB5101 Cable Modem ($50): This workhorse DOCSIS 2 cable modem has been around since 2003 and is popular with cable companies and customers, with a proven track record of performance. But it is not DOCSIS 3-capable, which means its useful life may be shortened as cable broadband standards continue to evolve.

Motorola Surfboard SB5101U Cable Modem ($53): Functionally equivalent to the 5101, the 5101U was introduced in tandem with Motorola’s cheaper 5101N model that omitted the USB port and driver CD. Choose the 5101 or 5101U based on which model is currently selling at the lowest price.

Not recommended Motorola SURFboard Gateway SBG901 DOCSIS 2.0 Wireless Cable Modem ($84): Overpriced and mixed reviews plague this aging Motorola DOCSIS 2 modem with built-in wireless G support. You would do better buying a Wireless N router yourself, or consider the SBG6580 if you absolutely need built-in Wi-Fi.

Updated 4:54pm ET: Readers report the SB6141 now has the best chance of being on TWC’s list of approved equipment, so we’re deleting the 6121 and replacing it with the 6141. If you happened to place an order for the 6121, make sure you verify whether it is on your area’s approved list. If not, cancel the order.

Update #2 10:00am ET 10/17/12: After publishing, Time Warner Cable overhauled their entire website. We have updated the link for the current approved list. None of the models have changed as far as I can see. I have also deleted the model 6121 entirely from the story — it is not on any approved list I’ve seen. As of today, the gouging continues on eBay with the 6141, still selling for up to $200. Amazon.com sellers have also jacked up the price to take advantage of current demand, though not as much.

Do NOT pay eBay sellers $200 for the 6141, which normally sells for $99. It only encourages the bottom-feeding speculators. If you want the 6141, I recommend you wait until prices drop to between $99-125. Do not pay more.

Some readers are finding used/refurbished cable modems that work perfectly fine on Craigslist and eBay. There is generally nothing wrong with these, unless they happen to be stolen or unreturned modems that really belong to Time Warner Cable, which will in turn not activate them. Be careful.

A 52-year old Los Angeles woman was bill shocked when she found Time Warner Cable charged her for 17 pay-per-view adult movies ordered over four days, often within minutes of each other.

Total charge: $154.65.

The actual number of adult movies watched, according to Time Warner customer Carol Scott: Zero.

Time Warner Cable’s initial response to Scott’s billing complaint: “We don’t make mistakes. You must have watched all those movies.”

The Los Angeles Times‘ David Lazarus reported on the plight of the healthcare lawyer the cable company thinks can’t put down her remote control:

On one day, the bill shows, a dirty movie was ordered at 9:55 a.m., followed by additional orders at 9:57, 10:03, 10:04, 10:05 and 10:06. Each movie came with a $7.98 charge.

Two days later, according to the bill, Scott’s craving for porn returned in a big way with orders for adult movies at 10:39 a.m. and 10:40, and again at 2 p.m., 2:01, 2:03 and 2:04.

She was apparently in such a randy mood, the bill shows that two adult movies were simultaneously ordered twice that day at 2:03 p.m. and 2:04.

The next day, a little more afternoon delight was seemingly in order. Scott’s bill indicates that two more adult movies were ordered, at 12:15 p.m. and immediately after at 12:16.

Unfortunately, Time Warner’s bill doesn’t specify the titles of the various films, so we can only guess at the range of tastes on display.

Scott explained she never ordered an adult pay per view movie in her life, much less 17 of them — a fact Time Warner Cable could have taken into account had it appropriately investigated her pay per view order history.

Instead, the representative insisted he had proof the movies were directly streamed to her television (was he outside her window?). If she wasn’t the one watching, someone else was — or several people, considering Scott’s bill showed she had as many as six sleazy sex flicks running at the same time.

Scott’s request to block adult pay per view titles from being ordered ever again was blocked by Time Warner. A customer service agent explained it was all or nothing — block all pay per view titles or none of them.

When the Los Angeles Times reporter called Time Warner Cable on behalf of Scott, the cable operator got nervous and had premature explanations.

Scott said one representative suggested electrical shorts could have resulted in her pay per view porn escapade, or perhaps someone got inside her cable box. Another repeated the company’s earlier insistence she must have watched the movies.

Jim Gordon, a company spokesman, didn’t really want to talk about it.

“We take customer privacy seriously, which we know our customers appreciate, and as such we are not able to comment on a particular customer’s account,” Gordon said.

Gordon passed the newspaper reporter to Motorola to discuss cable box hacking, as the Time Warner Cable set top box involved was manufactured by them.

In the meantime, under threat of going public with a relationship gone bad, Scott’s account was credited $154.65 and the cable company found its way clear to configure a block on future adult pay per view titles on Scott’s account.

If you do not use your cable company’s pay per view service, why not consider avoiding being the next lucky victim of cable porn roulette and ask your provider to block all pay per view purchases.

AT&T has secured support from the Federal Communications Commission for authority to deploy 4G LTE service within a 20MHz portion of the 2.3GHz WCS band after cutting a deal with a next door neighbor especially sensitive about potential interference.

WCS spectrum holders have fought for years to develop commercially viable wireless service, but faced regular opposition from the satellite radio industry concerned that interference problems would result from using the band for mobile data. Right in the middle of the WCS band is Sirius XM, which depends on sensitive receivers to pick up the company’s satellite signal.

But now AT&T and Sirius XM have worked out a compromise both companies believe will protect mobile data and satellite radio. AT&T has conceded 10MHz of its total WCS spectrum for two 5MHz guard bands, devoid of signals, around Sirius XM’s frequencies. Sirius XM signal engineers believe this, combined with power limits, will protect radio receivers from overloading whenever near AT&T’s ground-based LTE cell towers.

In August, AT&T announced its intention to acquire WCS spectrum from NextWave Wireless, a spectrum-squatting holding company, for $600 million. The phone company is also attempting to acquire the remainder of WCS spectrum from the last two significant holders — Comcast and Horizon Wi-Com, which both have between 10-25MHz of spectrum in 149 and 132 communities respectively.

When the acquisitions are complete, AT&T will have WCS spectrum covering virtually the entire nation.

Frequencies in the 2.3GHz band are best received outdoors. Signals crossing windows and walls lose potency. (Courtesy: Greenpacket)

AT&T says it needs the spectrum to further deploy 4G LTE data service across the country. But the company admits it will take up to five years before it can switch on the new frequencies — no current smartphones support the 2.3GHz WCS band.

AT&T has also included provisions to ensure fixed wireless base stations will be able to utilize AT&T’s WCS spectrum, within reasonable limits to protect Sirius XM radios from harmful interference. That has important implications for AT&T’s long-term view that rural landline and broadband service is best delivered over a wireless network.

A major limitation of spectrum in the 2GHz band is the quality of indoor coverage it can deliver. As many Clearwire customers can attest, these frequencies suffer from high transmission loss, poor ability for diffraction, and most importantly, poor building penetration — especially in urban and suburban areas. Tall nearby buildings, homes, and even trees all impede WCS reception. According to Andrea Goldsmith in her book Wireless Communications, there is also a 6dB penetration loss when 2.5GHz signals cross un-insulated glass windows and a 13dB loss for concrete walls, with wood falling somewhere in-between.

But rural areas do better, in part thanks to the higher likelihood of unimpeded line-of-sight access between a cell tower and receiver. AT&T’s fixed wireless solution would place a small antenna on the roof or side of a home, positioned for maximum reception from the nearest cell tower. The signal is then brought indoors through cabling (or in some cases Wi-Fi) and available to customers, comparable to a home broadband connection.

AT&T’s strong spectrum position in WCS gives the company an opportunity to construct a robust, near-nationwide wireless network suitable for rural wireless communications. In more urban areas, WCS could operate seamlessly with AT&T’s lower frequency holdings and offer an extension of its current LTE service.

AT&T’s acquisition of WCS has several important implications for the wireless marketplace:

2GHz signals travel the least distance in urban and suburban areas, often blocked or degraded by buildings or trees. But better results in rural areas suggest AT&T’s WCS spectrum could partly be deployed as a fixed wireless broadband solution, if enough towers are available to support it. (Courtesy: Greenpacket)

1. It proves AT&T never needed to acquire T-Mobile USA. Through spectrum acquisitions like WCS, AT&T can still find relatively inexpensive spectrum suitable for mobile broadband use, without spending tens of billions to acquire a competitor just to poach its spectrum and eliminate a competitor.

2. The Competitive Carriers Association worries AT&T’s acquisition of secondary spectrum holders is allowing the company to gather a massive amount of spectrum.

CCA President & CEO Steven K. Berry said, “Allowing the largest carriers to obtain unlimited amounts of  spectrum on the secondary market raises serious competitive concerns.  The only way for the FCC to truly see the devastating consequences of further spectrum aggregation is by consolidating the proposed applications.  On their own, AT&T’s proposed license acquisitions may not seem significant, but when added together, it totals to a significant amount of spectrum.”

Berry continued, “Should the FCC decide to approve the transactions, it must impose conditions to ensure interoperability across the Lower 700 MHz band and to ensure data roaming – both are absolutely essential ingredients to a healthy, competitive marketplace.  Competitive carriers need access to usable spectrum, and I urge the Commission to carefully review the negative impact these transactions will have on the wireless marketplace.”

3. Clearwire’s 2.5GHz spectrum could become more valuable if AT&T can demonstrate its 2.3GHz service can deliver robust service, if provisioned adequately for customers. Clearwire’s capital investments and overall performance of its limited coverage WiMAX network have been deemed inadequate by its biggest partner Sprint, now constructing its own 4G LTE network to replace Clearwire’s WiMAX network.

4. Credit Suisse analyst Jonathan Chaplin notes Verizon will still have a better standing in spectrum even with AT&T WCS: “AT&T will have the following available for LTE: 20 MHz of 700 MHz nationwide; 20 MHz of WCS nationwide; a few AWS licenses (5 MHz on average). With Verizon’s deal with large cable companies, Verizon will have: 20 MHz of 700 MHz nationwide; 20 MHz of AWS nationwide; another 10 MHz of AWS in 60 percent of the country (13 MHz on average). In addition, Verizon’s spectrum is usable immediately, while AT&T’s WCS will take three to five years to deploy.”