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.

Another reason to keep your landline. During major events, cell phone networks are quickly overwhelmed while wired phone lines still work.

The Associated Press is reporting minutes ago that a law enforcement official has ordered all cellphone service in the Boston area temporarily suspended to prevent any possibility of remote detonations of any other improvised explosive devices. But we have our doubts and in fact was able to reach one of our Boston readers by cell phone in downtown Boston just a moment ago.

“I can’t make calls on Verizon without getting a fast busy signal, but I am getting calls regularly at the moment,” reports Jim, one of our regular readers. “The cell networks are totally jammed with everyone on the phone in this city.”

Jim says a number of his co-workers had no idea there were two explosions at the finish line of the Boston Marathon this afternoon, but word-of-mouth office gossip spread the news over the last hour or so.

“Landlines are working fine, which is another reason you cannot and should not rely on cell phones alone during a major news event or disaster, because they are highly vulnerable to capacity crushes,” Jim said. “Our Internet access at work has also slowed to an absolute crawl and you cannot access a lot of local news websites, so we’ve watched the coverage on over the air television.”

Numerous press reports speculate the two explosions that killed two and injured at least two dozen were the result of some type of explosive device, but law enforcement officials have refused to confirm those reports so far.

As of 5:15pm EDT, Sprint and Verizon Wireless reported they were attempting to maintain service as best as possible despite the flood of wireless calls, and no carrier has confirmed they have been asked to switch off service.

“We are experiencing call blocking due to what’s happening,” Mark Elliott, a Sprint spokesman told the Boston Globe. “The network is blocking calls because the number of calls coming in exceeds the capacity. There’s no way the network can handle that kind of traffic.”

Elliott is asking cell phone users to text messages to friends and loved ones and avoid voice calling until capacity improves. This can keep lines open and clear for emergency and law enforcement officials.

Verizon Wireless, meanwhile, issued a statement, saying: “Verizon Wireless has been enhancing network voice capacity to enable additional calling in the Copley Square area of Boston. Customers are advised to use text or email to free up voice capacity for public safety officials at the scene. There was no damage to the Verizon Wireless network, which is seeing elevated calling and data usage throughout the region since the explosions occurred.”

Update 5:54pm EDT: The Associated Press has officially retracted their earlier story. There has been no request to suspend cell phone service, but carriers are impacted by heavy call volumes.

Canada’s effort to expand mobile competition has likely failed with news that three of the most significant new independent entrants have put themselves up for sale, with one likely to be acquired by Telus, western Canada’s largest phone company.

With Bell Canada, Rogers Communications, and Telus dominating at least 90 percent of Canada’s wireless marketplace, breaking up the triopoly was unlikely to be easy, but three of Canada’s newest players that acquired spectrum just five years ago are already looking for exit strategies.

Bloomberg News reported Friday that Mobilicity is in talks to be imminently acquired by Telus for between $350-400 million. Public Mobile has hired investment bankers to find a buyer. Vimpelcom, Ltd., which owns Wind Mobile, announced it was “exploring its options, including divestment.”

The three companies have competed with the dominant players for about three years with little success. Combined, the three have not managed to achieve even a combined 10 percent market share. Most sell unlimited talk and text plans to customers that would normally buy prepaid service.

Potentially slowing any sale is a requirement that none of the independent companies can transfer their spectrum licenses until 2014, a condition of the 2008 special spectrum auction that reserved prime frequencies for new competitors and put them off-limits to larger mobile companies.

Telus remains the most likely suitor of independent providers because the company lacks the spectrum assets of its larger competitors Bell and Rogers.

Mobilicity operates its HSPA+ “4G” network on Advanced Wireless Services (AWS) frequencies in the 1,700MHz range. Although Telus has considerable spectrum in British Columbia and Alberta — its home territory — the provider has considerably less in eastern Canada, particularly in large metropolitan cities. Mobilicity has a tiny market share in the Greater Toronto Area, yet its AWS spectrum equals that of Telus in the city. Telus could find an acquisition of Mobilicity the easiest way to bolster its available spectrum for future 4G deployment and expansion.

Three small independent wireless providers hold almost as much combined spectrum as Telus holds today.

Any exit of a combination of Canada’s newest wireless players will likely be seen as a failure of the government’s efforts to bolster competition. The dominance among the three largest providers has left Canadians with high-cost plans and a wireless service contract that lasts one year longer than America’s standard two-year service agreement.

Industry Canada, the economic regulator fostering a growing, competitive and knowledge-based Canadian economy, had little to say about the news.

“Any transaction that requires regulatory approval will be considered accordingly,” said Alexandra Fortier, a spokeswoman for Industry Minister Christian Paradis. “We cannot comment on speculation.”

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BNN reports industry consolidation is likely forthcoming in Canada’s wireless marketplace as Telus seeks to acquire independent provider Mobilicity. A financial analyst says the move is designed to curb budget-priced wireless service in Canada. Mobilicity would likely eventually be merged into Telus-owned Koodo Mobile, the company’s prepaid mobile division.  (5 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Globe and Mail Feds aim to open up wireless market 3-13.flv[/flv]

Too little, too late? Industry Minister Christian Paradis says the Harper government wants to open up the wireless market to more players with another wireless spectrum auction. But now several of Canada’s newest independent providers are all up for sale, and the country’s dominant three may end up owning one or more of them.  (2 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Globe and Mail Market View Why we love to hate our wireless companies 3-13.flv[/flv]

The Toronto Globe & Mail explores why Canadians hate their cell phone and mobile broadband providers so much.  (2 minutes)

Nearly four months after Hurricane Sandy struck Manhattan, many customers are still waiting to get their phone and Internet service restored.

Verizon’s black hole extends across parts of Lower Manhattan, such as along Avenue C, roughly from Third Street to Tenth Street. There, business transactions are often “cash-only,” because stores and bars have no ability to process credit card transactions. But getting cash can also be difficult as ATMs, which also rely on Verizon’s network, display the same “Offline” message they have shown for more than three months.

Some of Verizon’s customers are fed up, especially after the company started asking customers to pay for phone and broadband service they don’t have. Several customers report the company expects its monthly bills to be paid, with complicated service credits forthcoming after payments are applied. Customers who don’t pay have been assessed late fees or face collection activity for service that has not worked since Halloween.

WNYC Radio reports it has been nearly four months since Hurricane Sandy hit the northeastern U.S. and large sections of Lower Manhattan still don’t have phone or broadband service from Verizon. (February 13, 2012) (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Verizon does not seem to be in much of a hurry, a point of contention with the New York State Public Service Commission, which may be preparing to fine Verizon yet again for failing to meet service standards. The company has been on probation with the PSC for some time. Last summer, the regulator fined Verizon $100,000 for missing required service standards during the month of July, 2012. More than 1,100 of 5,400 reported outages were not repaired within the required 24 hours.

That was an improvement over how the company performed in October and December, 2011, where prolonged service outages provoked the PSC to eventually fine Verizon $400,000.

This time Verizon wants a free pass from more fines, claiming enormous restoration efforts necessitated by Sandy are responsible for any delayed response.

Assistant Attorney General Keith Gordon is not buying it. He called Verizon’s reports on outages “disingenuous at best,” and accused Verizon of manipulating data and delivering incomplete outage statistics.

Nobody outside of Verizon knows how many New Yorkers still lack phone or Internet service — the PSC is obligated to keep specific numbers private at the behest of the telecommunications companies themselves.

“Given the fact that the telecommunication industry is highly competitive, such information is considered confidential,” James Denn, a PSC spokesperson told WNYC Radio.

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NY1 reports on Greenwich Village residents who are still without Verizon service months after Sandy. They claim Verizon broke multiple promises to get service restored.  (1 minute)

The Bloomberg Administration strongly disagrees with the PSC’s handling of outage information.

“This information should also be made publicly available to consumers so they may track the status repairs, obtain reasonable estimates as to when service might be restored, and compare performance across competing carriers,” said Rahul Merchant, chief information and innovation officer for New York City.

For customers who can’t manage their businesses without phone or Internet service, relief is coming from an increasingly aggressive Time Warner Cable.

Verizon’s largest rival has dispatched armies of salespeople onto the streets in Verizon-deprived areas. The cable company has begun to steal away a number of out-of-service Verizon customers.

That occasionally comes as a surprise to Verizon workers that show up to make repairs, only to be told “I quit you two weeks ago,” by annoyed business owners.

Verizon never got the message.

[flv width=”624″ height=”372″]http://www.phillipdampier.com/video/WNBC New York Sandy-Damaged High School Still Without Phone Service 3 Months After Storm 2-6-13.flv[/flv]

WNBC reports this New York City high school has been left without Verizon service for three months, forcing teachers and staff to use cell phones to communicate.  (2 minutes)