Verizon Wireless today introduced HomeFusion Broadband: a new service that provides high-speed in-home Internet access using the company’s 4G LTE wireless network.

Designed primarily to reach households with limited broadband options, HomeFusion will deliver download speeds of 5-12Mbps and upload speeds of 2-5Mbps. While installation will come free of charge, a one-time equipment charge of $199.99 applies.  Pricing is nearly identical to Verizon’s mobile broadband service:

• Up to 10GB — $60/month
• Up to 20GB — $90/ month
• Up to 30GB — $120/month
• Overlimit fee: $10/GB

Verizon's 4G LTE antenna must be mounted on an outside wall of your home to assure good reception. (Picture: The Verge)

Verizon says HomeFusion is their broadband answer for rural America.

“HomeFusion Broadband is just one of the new products and services that is made possible with our 4G LTE network,” said Tami Erwin, vice president and chief marketing officer, Verizon Wireless. “Customers want to connect more and more devices in their homes to the Internet, and HomeFusion Broadband gives them a simple, fast and effective way to bring the most advanced wireless connection from Verizon into their homes.”

A third party company, Asurion, will handle installation of Verizon’s cylinder-shaped antenna, installed on the side of a customer’s home.  The antenna is designed to pick up the best possible signal from Verizon’s growing 4G network.  The antenna transmits the signal to a company supplied router capable of connecting up to four wired and 20 wireless devices.

HomeFusion Broadband will be available beginning later this month in Birmingham, Ala., Dallas and Nashville, Tenn., with additional markets to follow.

Verizon’s product is unlikely to attract substantial interest in more populated areas where a 10GB monthly usage cap would prove unacceptable in many homes where multimedia content is a growing part of the Internet experience.  But is could compete with satellite broadband, which also has low monthly usage caps.  Verizon may also win back customers in service areas it sold to independent providers like FairPoint and Frontier Communications, which have since saddled most of their rural customers with 1-3Mbps DSL service.  But Verizon’s pricing puts rural America at a usage disadvantage because of the low monthly limits and higher price tag.

The development of HomeFusion could reduce Verizon’s investment and interest in further expanding its traditional rural broadband product — DSL.  But Verizon will have to expand its still-urban focused LTE 4G network further into the countryside for HomeFusion to serve its intended market.

An aborted takeover attempt of MetroPCS by America’s third largest cell phone company — Sprint Nextel has some on Wall Street calling for the hide of Sprint CEO Dan Hesse.

The proposed multibillion dollar takeover of prepaid provider MetroPCS, which offers mostly urban service in select cities, was vetoed late last week by Sprint’s own board of directors.

The deal would have delivered a 30 percent premium to MetroPCS shareholders, and further consolidate America’s wireless marketplace. It would have also further complicated Sprint’s financial position — already heavily indebted as it commits to a major 4G wireless service upgrade and deals with an even more expensive commitment to Apple to pitch the iPhone on Sprint’s network.

Reuters reports some investors considered the deal a mistake and are glad it was aborted.

A 30 percent premium seemed “irrational” and would have hurt Sprint shareholders, Roe Equity Research Kevin Roe told the news service.

“He’s on a short leash,” Roe said. “The board did the right thing, thank God. It’s remarkable this deal got this far.”

MetroPCS competes with Sprint’s prepaid services in several regions including metropolitan New York City, northeastern Texas, southern California, southern Michigan and central/southern Florida.  MetroPCS operates its own 4G LTE network.

Now that MetroPCS is considered “in play,” it is likely other suitors may consider buying the company out.  Among the most likely — Leap Wireless, which owns Cricket and operates a comparable service.

Craig Moffett of Bernstein Research has told investors the wireless industry continues to be “crying out for consolidation.”  The most important players in that consolidation story are T-Mobile and Sprint, which remain potential partners if the two companies can overcome their technology differences.  T-Mobile operates a GSM network incompatible with Sprint-Nextel.

[flv]http://www.phillipdampier.com/video/CNBC Sprint Walks Away from MetroPCS Deal 2-24-12.flv[/flv]

CNBC reports Sprint walked away from a takeover attempt of MetroPCS on Friday.  (3 minutes)

CNN's Scare Stories on Wireless

As part of our ongoing coverage of the telecommunications industry, I talk with a variety of reporters in both Canada and the United States.  We have educated local newspapers, national wire services, local TV news, and even big national consumer magazines about the problems consumers have with the North American telecommunications industry.  Whether you are a wireless customer facing eroding usage caps and increasing prices, or a wired broadband customer now being slapped with Internet Overcharging schemes that monetize your usage, the truth about why your bill has gone up isn’t too hard to find, if you bother to look.

Unfortunately, CNN-Money just published a “week-long” series on the wireless mobile phone market that might as well have been written by the CTIA, the nation’s cell phone lobby.

“The Spectrum Crunch” was supposed to be a sober and objective report about the state of congestion on America’s cell phone networks. Instead, the reporter decided industry press releases and lobbyist talking points were good enough to form the premise that America is deep in a cell phone crisis.

Sorry America, Your Airwaves Are Full

Part one of CNN’s special report is a laundry list of disaster predictions, explaining away rate increases and usage caps, and an industry-skewed view that the answer to the “crisis” is to give wireless carriers all the frequencies they want.

The spectrum crunch is not an inherently American problem, but its effects are magnified here, since the United States has an enormous population of connected users. This country serves more than twice as many customers per megahertz of spectrum as the next nearest spectrum-constrained nations, Japan and Mexico.

When spectrum runs short, service degrades sharply: calls get dropped and data speeds slow down.

That’s a nightmare scenario for the wireless carriers. To stave it off, they’re turning over rocks and searching the couch cushions for excess spectrum.

They have tried to limit customers’ data usage by putting caps in place, throttling speeds and raising prices. Carriers such as Verizon, AT&T, Sprint, T-Mobile, MetroPCS and Leap have been spending billions to make more efficient use of the spectrum they do hold and billions more to get their hands on new spectrum. And they have tried to merge with one another to consolidate resources.

The FCC has also been working to free up more spectrum for wireless operators. Congress reached a tentative deal last week, approving voluntary auctions that would let TV broadcasters’ spectrum licenses be repurposed for wireless broadband use.

[…] The bad news is that none of the fixes are quick, and all are expensive. For the situation to improve, carriers — and, therefore, their customers — will have to pay more.

The United States also covers more ground, with lots of wide open spaces where frequencies can be used and re-used without interference problems.  As AT&T keeps illustrating, how you run your business has a lot to do with the quality of your service, spectrum crisis or not.  AT&T customers in heavily-populated urban markets cope with dropped calls and slow data not because the company has run out of frequencies, but because AT&T has failed to appropriately invest in its own network.  AT&T’s problems are generally not shared by customers of other carriers.  Even T-Mobile, which has the least spectrum of all major carriers, does not share AT&T’s capacity issues.

CNN reporter David Goldman suggests mergers and consolidation have been a solution for ‘wireless shortages’ of the past.  But are mergers about consolidating resources or leveraging profits?

The spectrum war’s winners and losers

AT&T’s failed $39 billion bid for T-Mobile was largely aimed at getting its rival’s spectrum. The Department of Justice and the Federal Communications Commission killed the deal, saying it would be too damaging to wireless competition.

That put the entire industry on notice: The carriers will have to solve their problems without any blockbuster takeovers.

The regulators’ main concern was that the deal would take the ranks of national carriers down from four to three. That’s why experts now expect the big players to focus instead on acquiring smaller, low-cost carriers like MetroPCS and Leap Wireless. Their spectrum could relieve capacity issues in large metro areas, which are the places most crippled by the crunch.

Industry analysts also think that Sprint and T-Mobile could gain approval to merge, though that’s a bit like two drowning victims clinging together. Sprint is losing piles of money every quarter, while T-Mobile is hemorrhaging customers with contracts.

Another possibility is that several carriers could partner in a spectrum-sharing joint venture.

But the most likely scenario is that the carriers continue fighting each other to snap up the last remaining large swaths of high-quality spectrum.

Stephenson

The claim that AT&T sought the purchase of T-Mobile USA for spectrum acquisition falls apart when you examine the record.  For instance, during AT&T CEO Randall Stephenson’s presentation at the merger announcement, shareholders were told the buyout would deliver cost synergies and savings, would stabilize earnings from a more predictable mobile market (with T-Mobile’s ‘market disruptive’ pricing out of the way), and would allow the company to secure additional frequencies.  However, as Stop the Cap! reported back in August, documents released by the FCC showed AT&T unprepared to specify what T-Mobile spectrum it expected to acquire, much less how the company intended to use it.

The “problem” AT&T sought to solve, in the eyes of both the Justice Department and the FCC, was pesky competition from T-Mobile and the reduced profits AT&T endured as T-Mobile forced competitors to deliver better service at lower prices.

Even Goldman admits T-Mobile had the smallest inventory of wireless spectrum among the major carriers — scant reason for AT&T to court a merger for spectrum purposes.

The spectrum winners continue to be AT&T and Verizon, who have the largest inventory of favorable frequencies, and both continue to warehouse spectrum they are not using for anything.

Your Cell Phone Bill is Going Up

Has your mobile phone bill jumped this past year?

Get used to it.

Demand for wireless data services is soaring, forcing carriers to invest massively to keep up. They have two main options: Upgrade their network technology or acquire more wireless spectrum to give them more bandwidth.

“Massively” is in the eye of the beholder.  Verizon outspent AT&T on network upgrades and continues to enjoy enormous returns on that investment.  Most major cell companies spend billions on network improvements, but also earn tens of billions from their customers.  Yet in the midst of the “spectrum crisis,” AT&T CEO Randall Stephenson told investors revenue was up — way up:

“We’ll expand wireless and consolidated margins. We’ll achieve mid-single-digit EPS growth or better. Cash generation continues to look very strong again next year. And given the operational momentum we have in the business, all of this appears very achievable and probably at the conservative end of our expectations.”

AT&T’s chief financial officer John J. Stephens put a spotlight on it:

In 2011, 76% of our revenues came from wireless and wireline data and managed services. That’s up from 68% or more than $10 billion from just 2 years ago. And revenues from these areas grew about $7 billion last year or more than 7% for 2011. We’re confident this mix shift will continue. In fact, in 2012 we expect consolidated revenues to continue to grow, thanks to strength in these growth drivers with little expected lift from the economy.

[…] We also continue to bring more subscribers onto our network with tiered data plans, more than 22 million at the end of the quarter, with most choosing the higher-priced plan. As more of our base moves to tiered plans and as data use increases, we expect our compelling [average revenue per subscriber] growth story to continue.

That’s a story AT&T has avoided sharing with customers, because more than a few might take exception that the past year’s rate increases have more to do with the company’s “compelling growth story” than a spectrum shortage.

CNN could have reported this themselves, had they bothered to look beyond the press releases and talking points from the wireless industry. The reporter even conflated recent increases in early termination fees as part of the “spectrum shortage.”

Readers have to glean the real story by reading between the lines.  Here is an example:

As Suraj Shetty, Cisco’s marketing chief, puts it: “Data caps are curbing the top 1% of users, but not the top 20%.”

For carriers, finding the sweet spot is a delicate balancing act. Heavy data consumption is costly for them. On the flip side, smartphone users, who are typically required to buy pricey monthly data plans, are their most lucrative customers.

The ideal customer is someone with a smartphone they use sparingly.

That reality could eventually be reflected in your monthly bill. All four of the major carriers declined to comment about their future pricing strategies, but analysts expect them to start experimenting with new “pay for what you consume” approaches.

The real agenda is finding customers who buy the most service and use it the least.  Usage caps and throttles don’t even work, if one believes Mr. Shetty.  Curbing one percent of your heaviest users does little to curtail congestion when the top 20% remain within plan limits and create an even greater strain on the network.

It’s another hallmark of Internet Overcharging — monetizing broadband usage while using “congestion” as an excuse.  If a customer uses 10GB on an unlimited usage plan or 10GB on a limited use plan, the impact on the network is precisely the same.  Only the profit-taking is different.

There Are Solutions

Only in the last part of the series does CNN’s reporter discover there are some practical solutions to the spectrum crunch.  They include:

• Splitting cell phone traffic to reduce tower load.  Adding additional towers is one solution, but not all have to be huge, unsightly monstrosities.  In parts of Canada and Europe, new “micro-cells” on top of traditional power poles or buildings can reduce tower load, especially in urban areas.  These units, which can fit in the palm of your hand, are especially good at serving fixed location users, such as those sitting at home, work, or in a shopping center.  They don’t create eyesores, are relatively inexpensive, and are effective.
• Allocation of spectrum.  The FCC is working on making additional wireless spectrum available.  Some carriers are cooperating to alleviate capacity issues, share towers, and collaborate on new tower planning.
• Consider Wi-Fi.  AT&T found offloading traffic to Wi-Fi and even home-based “femtocells” — mini in-home cell towers have effectively reduced demand on their wireless 3G/4G networks.  There is still room to expand.

[flv width=”576″ height=”344″]http://www.phillipdampier.com/video/CNN Solutions to the spectrum crunch 2-2012.flv[/flv]

Alcatel-Lucent has a solution to the capacity crunch — a microcell cube that can be attached to a building or phone pole.  (3 minutes)

...some of that juicy 700MHz spectrum Verizon is getting from the nation's biggest cable companies.

In an ironic turnabout, Deutsche Telekom’s T-Mobile USA, last year an acquisition target of AT&T, has filed comments with the Federal Communications Commission opposing Verizon’s spectrum purchase from the nation’s largest cable companies as “contrary to the public interest.”

Verizon Wireless is seeking to acquire a substantial block of unused AWS spectrum that is unlikely to provide any near-term benefits to Verizon Wireless customers (indeed, the company already holds other AWS spectrum and has not even put it to use yet). Rather, the principal impact of the acquisition would be to foreclose the possibility that this spectrum could be acquired by smaller competitors – such as T-Mobile – who would use it more quickly, more intensively, and more efficiently than Verizon Wireless. The acquisitions will limit the deployment of LTE by competitors of Verizon Wireless and the bandwidth available for such deployments.

If these transactions go forward, the end result will be less LTE capacity available overall and reduced competition in the provision of LTE, which would be contrary to the public interest.

T-Mobile, in particular, is upset because it owns no spectrum in the valuable 700MHz range — frequencies that can travel longer distances and easily penetrate buildings.  Verizon Wireless does, and will acquire much more if the FCC approves the deal to transfer spectrum from Comcast, Time Warner Cable, and Cox. [Correction: As one of our readers pointed out, the spectrum being acquired is in the AWS band, which T-Mobile argues in its filing is still suitable for a 4G network deployment.]  T-Mobile argues Verizon does not need the spectrum, and will effectively “warehouse” the frequencies to keep them off the open market.  Without prime spectrum, T-Mobile argues, it will be difficult for the company to deliver a 4G experience to its customers.

T-Mobile also has a bone to pick with Verizon Wireless and the cable industry over what it suspects is a non-compete agreement:

At least in effect, this has all the hallmarks of a pure horizontal allocation of markets.

From the limited information available, it appears as though Verizon, the majority owner of Verizon Wireless, has agreed (tacitly if not expressly) to halt its extensive efforts to expand into the cable business and the cable companies have, in turn, traded their control of valuable spectrum in exchange for this protection of their cable markets.

It has been publicly reported that, coincident with acquiring the cable companies’ spectrum, thereby eliminating potential new competition in mobile wireless, Verizon ended its FiOS build out plans and terminated its agreement to resell satellite television. This series of acts appears to limit Verizon’s activity as a potential competitor in the video market and limit the cable companies’ role as potential competitors in the wireless market, while at the same time foreclosing competing providers from one of the only available sources of spectrum.

As a result of this “triple play,” competition in both markets will be substantially reduced. The antitrust laws have long condemned such agreements, even among potential competitors.

Not All Frequencies Are Created Equal

Will Verizon ultimately warehouse its newest acquired spectrum?

Unless you are well-acquainted with the wireless industry, all most people know about their cell phones is that they turn them on and a signal strength meter indicates what kind of reception quality you are getting.  In fact, wireless companies use a range of frequencies across several different frequency bands to handle voice calls and data.  As an end user, you never know the difference.  But if your wireless company is forced to use higher frequencies, they often have a harder time penetrating buildings or provide only limited distance coverage.  That’s why AT&T and Verizon customers have a better chance of making and receiving calls in the middle of a supermarket or office building while others lose reception.

Clearwire has an extensive holding of very high frequencies at its disposal — frequencies the company cannot effectively use because they require considerably more infrastructure (ie. more cell towers) to provide an effective service to customers.  Clearwire customers already complain about poor reception inside buildings, a problem exacerbated by the very high frequencies the company has to use for its service.  Verizon and AT&T collectively control the majority of the best, more robust spectrum — the 700MHz band.  Verizon’s LTE network, for example, relies on spectrum that used to be used by high numbered UHF television channels.

Companies like T-Mobile rely on frequencies in the 1700MHz and 1900MHz bands.  While certainly adequate in urban and suburban areas, T-Mobile has to spend more on cell tower deployment and be especially concerned with rural coverage, especially in areas where the terrain makes “line of sight” reception from cell towers more difficult.

While today’s 2G and 3G networks have made due with current spectrum, companies like T-Mobile are having a hard time finding space to launch the next generation — LTE/4G technology — on their current spectrum.  Without LTE, T-Mobile (and others) will find themselves at a competitive disadvantage.  The company argues it should have the right to acquire some of the frequencies Verizon intends to capture from the cable industry, especially if Verizon has no immediate plans to use the spectrum.

Some of the wrangling by T-Mobile seems especially ironic because parent company Deutsche Telekom has indicated it wants to sell T-Mobile USA and leave the American wireless market.  It has shown little interest so far investing in a LTE/4G network upgrade.  Additionally, as part of AT&T’s failed merger bid, T-Mobile is expecting to receive frequencies from AT&T as part of the “failed transaction” clause in the original merger proposal.

Verizon Wireless is experiencing yet another nationwide outage of its 4G/LTE wireless network.

The problem seems to afflict the authentication process that authorizes your 4G device for access to Verizon’s data network.  If your phone remained on overnight, you likely still have either 3G or 4G service.  But if you are powering up your phone this morning, or reboot, chances are you don’t have any 4G service.

For certain Samsung phone owners, the problem is worse — you don’t have any data service at all unless you are in range of Wi-Fi.  Samsung phones are notoriously poor at stepping down consistently to 3G speeds when they cannot successfully handshake with Verizon’s 4G network first.

Verizon has yet to confirm there even is a service outage, despite reports pouring in from around the country, so it is probably going to be awhile before service is back.

[Updated 10:38am ET:  Service is now gradually returning across the country. If your service is still interrupted, it should now be safe to reboot your phone.]