CenturyLink’s massive nationwide broadband service outage on May 7 hurt Florida schools trying to administer online testing, small businesses in Nevada that were forced to close for the day, and frustrated nearly six million customers across both states and in Arkansas, Missouri, Louisiana, Texas, Kansas, Minnesota, Ohio, Wisconsin, Pennsylvania, Colorado, Washington, Virginia, Michigan, Montana, Oregon, Tennessee, and Illinois.

An unspecified router failure disrupted broadband service for up to eight hours, and it could not have come at a worse time for Lee County and Cape Charter Schools in Florida that had to postpone state-mandated tests that are completed by students online.

Dr. Lee Bush told WZVN when things like this happen it is not good for the students or area schools.

“There’s a window of time for these tests and there’s a short period of time left. It does affect us,” said Dr. Bush.

The Las Vegas Sun also found itself without Internet access for much of the day, which also brought the newspaper’s website down. Several area businesses that depend on the Internet decided to send workers home late in the morning after it became clear CenturyLink had no realistic expectation of when service would be restored.

The Clark County School District, which serves Las Vegas, also reported their broadband service was interrupted.

In Illinois, Michigan, and Wisconsin outages created a significant problem for farmers cut off from commodity trading markets during the morning hours.

“An early Tuesday morning in May is definitely not a good time to have a long-lasting service outage for agribusiness,” said Sam Haupmann, who advises small and medium-sized farms on telecommunications matters. “Connectivity is very important for the farm economy these days, and farmers can’t just switch to the cable company or a cell phone. There often is no cable company serving farms and cell phone service can be difficult in rural areas.”

Ask CenturyLink to credit your account for the May 7 outage.

Ed Perrine, the chief of operations of Network Tallahassee, a Florida provider, told the Tallahassee Democrat all of his operations went down in the outage, affecting at least 4,000 customers and the 600 to 700 businesses they serve on the Florida Panhandle alone.

Perrine is not too happy with early reports CenturyLink’s massive outage could have come as a result of botched routine maintenance right before the start of business on a weekday:

Perrine said he spoke with CenturyLink at 6 a.m. where they advised him the company was doing scheduled maintenance. At 7:35 a.m. they told him something had gone wrong during the maintenance and it was affecting customers in 13 states.

By 10:30 a.m., the company advised the outage had spread to 22 states.

Perrine said the company has not told him what is causing the outage, but said that just after 11 a.m., the company advised Perrine that they were in the process of restoring service.

The timing of the update is questionable according to Perrine, who said maintenance is normally scheduled on early Sunday morning so if something goes wrong businesses won’t be affected.

CenturyLink had no plans to issue automatic service credits to affected customers, but you can request a refund for a day of lost service by contacting CenturyLink by phone or e-mail.

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WBBH in Fort Myers explains how a nationwide CenturyLink Internet outage on May 7 hurt the local economy, affected area schools, and frustrated area businesses and residents. (2 minutes)

Sprint will focus its postpaid wireless business on profitability in 2013, with reductions in customer discounts and a tighter upgrade policy that will raise prices for some and slow down others seeking new subsidized smartphones.

CEO Dan Hesse today told Wall Street investors Sprint will be leveraging its upgraded LTE network to help hold the line on discounts and early upgrades, reminding customers Sprint’s Network Vision plan is delivering better service with faster speeds and fewer dropped or blocked calls.

Sprint released its 1st quarter 2013 earnings this morning, showing the company reduced its quarterly losses from $863 million in the same quarter last year to $643 million. The company spent $1.4 billion during the first quarter on network upgrades, primarily on forthcoming 4G LTE network roll-outs.

Steve Elfman, Sprint’s president of network operations reported the company activated more than 12,000 LTE-upgraded cell towers by the end of the quarter, slowed only by inclement weather. This year will see a massive increase in those numbers.

“We now have zoning complete on over 32,000 sites and leasing complete on over 31,000 sites. More than 25,000 sites already or have already begun construction,” Elfman reported. “Our weekly construction starts are now at a level to achieve our goals for the year. There are over 600 cities under construction and we have now launched 4G LTE in 88 cities with over 170 expected to launch in the months to come.”

Hesse

While Elfman oversees LTE upgrades, Sprint is also busy working towards decommissioning its Nextel network on June 30. Despite repeated warnings Nextel’s demise was close at hand, at least 1.4 million Nextel customers, nearly all business accounts, are still active on that network. Sprint is focusing most of its promotional budget again this quarter on convincing those customers to convert to Sprint service. But only 46 percent of Nextel customers took Sprint up on their repeated offers during the first quarter. Many others left for Verizon Wireless, switching off not only their Nextel commercial phones, but also those on Sprint’s network as well.

Sprint expects to hold on to a declining number of its Nextel customers as the second quarter progresses, until the network is switched off for good at the end of June.

That hurts, because Sprint has also been losing customers due to “pardon our dust” construction-related service interruptions as part of LTE 4G upgrades. Those disruptions are expected to accelerate  as more cities are prepared for LTE service.

Sprint’s Lifeline cell phone service for the poor, Assurance, also took major hits during the quarter after the FCC tightened eligibility requirements for the free/low-cost cell phone service. The company switched off 224,000 accounts in the last three months that either failed to re-certify eligibility or were never qualified in the first place. Sprint’s wholesale customers, which resell access on the Sprint network, are also busy deactivating unqualified Lifeline wireless lines, so Sprint expects a similar number of disconnects during the second quarter as those accounts are dropped from the network.

As Sprint turns its attention to profitability, revenue numbers at Sprint improved slightly. Sprint’s prepaid division added 568,000 net prepaid customers, and Virgin Mobile raised its minimum top up amount for 90 days of service to $20 (up from $15 with a credit card). As customers upgrade their Sprint postpaid phones, more customers are also encountering Sprint’s $10 “premium data” surcharge.

Customers will also discover a tightening of Sprint’s discounts and upgrade promotions. Among the efforts underway:

• curtailing or eliminating certain customer credits and discounts;
• tightening device upgrade policies to end early upgrades, although Sprint still retains its 20 month upgrade policy for now;
• holding the line on phone subsidies for increasingly expensive smartphones.

Sprint’s prepaid mobile division

Slowing phone upgrades is particularly important for Sprint’s bottom line.

“I think the policy shifting is important in the industry because subsidies just keep going up and I think from the economic model perspective of the carriers we just can’t afford to upgrade as often,” said Sprint CEO Dan Hesse. “We’re not seeing any evidence yet that customers are interested in upgrading less often if they see less difference or improvement year-over-year in terms of what’s going on with these devices. In fact the opposite might be true which means these policies are really quite important for the industry.”

Hesse admitted that the drive to increase profits could cost Sprint some of its postpaid business, and probably already has over the last three years. But Hesse noted many of those contract customers have migrated to the company’s prepaid service, which keeps revenue in-house. Hesse expects as long as popular phones are available on prepaid plans, price-sensitive customers will continue to migrate towards prepaid service.

“I think what you are seeing is maturing of the U.S. markets beginning,” Hesse noted. “The U.S. has always been or traditionally been almost exclusively postpaid and it’s beginning to look like other markets that have a higher prepaid mix in terms of the number or percentage of customers.”

The Lifeline program became campaign fodder last fall when the Drudge Report released a video showing a minority voter praising Obama for “free phones.”

Two competing philosophies to address the digital divide will clash in Congress this week as Democrats introduce legislation to subsidize Internet access for the poor and Republicans hold hearings critical of the FCC’s existing Lifeline program, which provides low-cost phone service for those on public assistance.

The Broadband Adoption Act, introduced by California Democrat Rep. Dorris Matsui, would reform and expand the Lifeline program to allow participants to choose between a discounted landline, cell phone, or broadband Internet access.

“In today’s digital economy, if you don’t have access to the Internet you are simply at a competitive disadvantage. For example, more than 80 percent of available jobs now require online applications,” Matsui said. “The Internet is increasingly the economic engine for growth and innovation.”

Matsui has introduced similar legislation in the past, but it has never been taken up by the Republican-controlled House.

The bill is co-sponsored by ranking member Henry Waxman (D-Calif.), communications subcommittee ranking member Anna Eshoo (D-Calif.) and five other Democrats.

The thought of discounted Internet access is about as popular with some House Republicans as Lifeline-subsidized cell phone service, which some conservatives have derided as “Obamaphones.”

The House Energy and Commerce Committee will hold a hearing on Thursday to look at Lifeline and consider its future. Members are expected to share stories of waste, fraud, and abuse, particularly over the controversial subsidized cell phone service.

Senator Tom Coburn (R-Okla.) is a regular critic of the program and offered the House committee anecdotal reports that some subscribers have eight or more subsidized cell phones with one subscriber saying that to get one, “she just goes across the street and gets it.” Coburn claimed to have evidence in one case where a man kept a “bag full of subsidized phones that he sells for about 10, 15, 20 bucks each.”

Still seen by some as a luxury, a program that subsidizes cell phones was likely to attract critical attention among politicians.

Senators Claire McCaskill (D-Mo.) and David Vitter (R-La.) both drafted amendments that would end the Lifeline subsidy in its entirety, calling it a waste and abuse of resources.

The program and providers have admitted there have been lapses in eligibility verification and there was fraudulent participation in the program.

Last year, the FCC modified the program to tighten eligibility requirements:

• Required all subscribers to recertify their eligibility and to do so annually by providing documentation of income or program participation;
• Confirmed the program’s restriction of one subsidy per household;
• Started a process to create a State-by-State and/or a National Lifeline Accountability Database to prevent multiple subsidies to the same household;
• Eliminated Link-Up support except for recipients on tribal lands that are served by ETCs that take part in both the low-income Lifeline and high-cost support programs;
• Imposed independent audit requirements on carriers receiving more than $5 million in annual support;
• Directed the FCC and Universal Service Administrative Company staff to take action no later than December 31, 2013, to offer an automated means of determining enrollment in the Medicaid, Food Stamps, and Supplementary Security Income programs, the three most common criteria for Lifeline eligibility;
• Set an interim base subsidy amount of $9.25 per month for non-tribal subscribers.

Lifeline was first enacted by Congress in 1985, during the Reagan Administration. In 2005, the Bush Administration expanded the program to include cell phone service.

Satellite television provider Dish Network today offered $25.5 billion for Sprint Nextel Corp., in an unsolicited bid that surprised the wireless industry.

The bid, announced by CEO Charles Ergen, is $5.5 billion higher than that offered by Japan’s Softbank, which already had a pending deal to take a 70 percent stake in the third largest wireless carrier.

The bidding may not yet be over if Softbank decides to counter with a higher offer or if other bidders emerge in the coming weeks.

Ergen has signaled his interest in entering wireless markets to compensate for slowing earnings in the satellite television business.

“He is trying to transform his own business,” Vijay Jayant, an analyst at International Strategy & Investment Group in New York told Bloomberg News. “He’s trying to reinvent himself, moving from satellite to wireless.”

Ergen’s vision would include a bundled package of satellite television, broadband wireless Internet and cellular telephone service. Providing suitable wireless broadband Internet in rural areas may be the biggest challenge because of Sprint’s more limited network coverage, but a marketing deal combining satellite television from Dish and Sprint cell phone service would be easier to carry out.

Ergen’s offer includes $8.2 billion in stock and $17.3 billion in cash. Ergen’s company has stockpiled at least $10 billion from selling bonds over the last year. He intends to borrow the rest.

Ergen earlier had attempted to disrupt a deal that would have consolidated Clearwire into Sprint. Ergen offered $3.30 a share for Clearwire, 33 cents higher than the $2.97 per share offer from Sprint. Ergen also reportedly approached both MetroPCS and Deutsche Telekom’s T-Mobile USA looking for a deal to no avail.

Some analysts question whether Ergen has enough experience to manage a major wireless company with only his past involvement selling satellite TV subscriptions. But he arrives with more than just cash and stock options. Ergen has acquired mobile spectrum from bankrupt TerreStar Networks and DBSD North America. Ergen says he has no interest in building his own wireless network, but a combined Sprint/Dish could manage the spectrum through Sprint’s existing operations.

Ergen told Bloomberg News combining the spectrum Dish owns with the spectrum owned by Sprint and Clearwire would assure Americans of a robust wireless data platform that will not have capacity constraints or require individual device fees. That is in keeping with Sprint’s existing marketing as a provider of truly unlimited wireless data plans.

Several Wall Street analysts told CNBC and Bloomberg News the deal with Softbank may be more ideal for shareholders and consumers, because it would strengthen Sprint’s leverage with equipment manufacturers to offer cheaper and more robust devices.

Consumer advocates have mixed feelings. Dish has no prior association to the wireless industry so the deal does not represent direct, competitive consolidation. It also would boost Sprint as a more formidable competitor to AT&T and Verizon Wireless. But it could also further orphan T-Mobile USA.

“Right now, we have two giants and two also-rans, and now you’re getting potentially three giants dividing up the American market place, with T-Mobile lagging far behind,” Susan Crawford told the New York Times.

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Bloomberg News explores what Dish sees in Sprint that is worth a bid of $25.5 billion to acquire the country’s third largest mobile company.  (2 minutes)

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Bloomberg says Dish has been stockpiling $10 billion in cash for new acquisitions to transform its business away from a satellite TV-only company.  (2 minutes)

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Christopher Marangi, of Gabelli Asset Fund talks with Bloomberg’s Erik Schatzker about Dish Network’s unsolicited $25.5 billion offer for Sprint and what options are available to Sprint with the offers it has on the table. (2 minutes)

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Jonathan Chaplin, an analyst with New Street Research LLP, thinks Softbank’s original offer is superior to the one from Dish.  (6 minutes)

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Jennifer Fritzsche, Managing Director of Equity Research at Wells Fargo Securities, discusses the likelihood of other players making bids. (2 minutes)

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A Bloomberg News reporter interviewed Charlie Ergen about why he wants to enter the wireless business.  Ergen’s vision includes no nickel and diming customers with monthly device fees and usage charges. (4 minutes)

Canada’s three major independent wireless companies have resigned from the Canadian Wireless Telecommunications Association after claiming the group maintained a consistent bias in favor of the three largest carriers in the country.

Wind Mobile Canada, Public Mobile, and Mobilicity announced their departure in a joint press release.

“From this point, the CWTA does not, and cannot claim to speak on behalf of the Canadian mobile wireless sector,” said the news release.

“It has been evident for quite some time that, rather than being a true industry association which represents the views of all players regardless of size, the CWTA has instead largely been an advocate for Rogers, Telus, and Bell, and often directly contrary to the interests of new entrant wireless carriers,” said Bob Boron, general counsel and senior vice president of legal & regulatory affairs for Public Mobile.

“We have spent the better part of three years repeatedly voicing our opposition to the CWTA on a wide range of matters to the point of issuing a press release in January 2011 that publicly expressed our dissent on the CWTA’s position on wireless consumer protection,” added Gary Wong, director of legal affairs for Mobilicity. “There seems to be a blatant disregard of the new entrants in favor of acting in the best interests of the big three carriers, and it is unacceptable.”

The carriers suggest WCTA officials lured them into the trade association to bolster claims the group represents the collective interests of Canadian mobile providers. Once enrolled as members, the independents claim their concerns were ignored on a variety of issues.

“When we first approached the CWTA, we were promised clear and fair representation on issues of true industry alignment. But despite making our objections and concerns abundantly clear on numerous occasions, the CWTA has repeatedly failed to honor this promise, leaving us no alternative but to withdraw,” said Simon Lockie, chief regulatory officer at Wind Mobile.

Among the major points of contention:

• The independents favor transparency on mobile phone bills, with better disclosure of which services are optional or mandatory, the exact pricing of those services, contract termination fees and penalties. The three major carriers oppose anything beyond self-regulation;
• The CWTA argues Canadians have a highly competitive wireless marketplace with rates to match. The independent providers strongly disagree, claiming Canadians pay some of the highest rates in the world for cell service;
• The CWTA favors and supports three-year contracts for cell phone service, the independent providers do not.

“The many contributions of Wind, Mobilicity and Public Mobile will certainly be missed, and CWTA would welcome their return to the association in the future,” a CWTA official said in a written statement.