Blackberry Butter Spreader

As Blackberry owners enter their fourth day of a serious global service outage, a growing number are now wondering why they are still wasting their time with a phone that has been increasingly abandoned “for something better,” — namely smartphones running Apple’s iOS or Android-powered handsets that now have the largest share of the smartphone market.

Only Nokia is facing market share challenges greater than Waterloo, Ontario-based Research in Motion, the maker of the formerly popular device.  After days of service disruptions, RIM may be getting a lot more acquainted with their town’s namesake than they’d like.

The trouble started Monday with a switch problem at the company’s offices in Slough, Great Britain.  Yes, the same Slough that is home to the workers of British television’s original rendition of “The Office.”

The switch failure soon began impacting customers in Europe, Africa, and the Middle East — the remaining places where RIM still commands a respectable position in the handset market.  On Tuesday, problems spread across South America and India.  Yesterday, North Americans joined the growing crowd of users who found e-mail service and instant messaging spotty, when it worked at all.

Company officials suggest the spreading outages were caused by a cascading series of failures.  When the switch failed, backup systems proved inadequate, and the inevitable sea of “is your Blackberry working?” and “test… test… test” messages started piling up, arriving faster than RIM’s backup systems could handle.  The more frustrated users became trying to send and receive messages, the worse the problems got.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Blackberry Outage 10-13-11.flv[/flv]

The Blackberry outage caused a sensation in the United Kingdom, where the phone still maintains a significant market share.  British reporters and analysts had no time to throw softball questions at Blackberry officials.  Watch as Sky News and the BBC report the service failure as a veritable crisis for the company, followed by an increasingly uncomfortable managing director for Research in Motion’s UK operations who faced sharp questioning from a reporter intent on getting beyond the pre-written damage control statement.  In the United States, the declining market share for the Blackberry gave ABC News license to have some fun with the service outage, poking fun at the phone that is increasingly irrelevant to Americans.  (11 minutes)

RIM Founder and co-CEO Mike Lazaridis Apologizes

Blackberry users are dependent on RIM’s networking infrastructure because the company distributes messages through its own servers.  That can deliver more control to RIM’s network engineers, but also exposes the company to spectacular service failures when things go wrong.  And they have gone wrong repeatedly, as customers worldwide report regular sporadic service outages.

Wireless phone companies faced the wrath of angry customers, who initially blamed them for the service outages, but in fact the problems reside with RIM’s own network.

Loyal Blackberry customers have been forced, much to the amusement of other handset owners, into desperate measures.

“My God, I actually had to walk down the hall to my co-worker’s cubicle to ask him a question,” wrote one angry customer.  “Damn you, Blackberry!”

“So much for today’s lunch meeting,” shared another. “Nobody knew what to do or where to meet until someone suggested we call everyone on the phone.  The phone??? Are you kidding me?”

The New York Times shared other serious side effects of the outage:

By Wednesday morning, Wall Street was alight with e-mails from technology departments notifying employees of the problem. Bankers’ meetings fell through when attendees couldn’t look up the locations. Employees were reduced to leaving voice-mail messages.

Perhaps more concerning is the ultimate future of Research in Motion, which has seen better days.  Just three years ago, Blackberry enjoyed a 46 percent market share for mobile devices around the world, according to data from IDC, a research firm. This year, it’s 12 percent and dropping (and is already much lower in North America.)

The Blackberry toe spreader

Wall Street is furious, of course.

“[The outage] is symbolic of what’s going on at the company,” Colin Gillis, an analyst at BGC partners who follows the telecom industry told the Times. “It’s a bloodbath.”

The same can be said for the company’s stock price, which one analyst compared to a train wreck in slow motion.

This morning, Research in Motion made the riskiest move of all — trotting out the historically idiosyncratic and impatient RIM Founder and co-CEO Mike Lazaridis to apologize.  He appeared more contrite than an earlier appearance with the BBC’s Rory Cellan-Jones.  Lazaridis turned up to that earlier interview with his press handler and a lot of attitude.  He soon found himself being questioned by the reporter about the company’s user privacy policies in the Middle East.  After slamming the reporter for the question, Lazaridis ended the interview.

Today, the founder of the company still couldn’t answer the all-important, “when will service be fully restored?”  But as of late this morning, RIM’s co-Chief Executive Officer Jim Balsillie claimed all is well again with the Blackberry, but wouldn’t answer questions about whether customers were entitled to refunds for lost service.

That’s a question mobile carriers are starting to ask RIM as well, particularly as customers look for service credit for the outages cell companies were not responsible for causing.

“This is it. This is the boiling point. Someone has to go over to Waterloo and slap those in charge at RIM,” wrote Crackberry.com forum user BlackLion15.

With tomorrow’s release of Apple’s latest iPhone, RIM officials may prefer a good customer spanking over the alternative — customers throwing their Blackberries in the trash and switching to a new handset.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Lazaridis Before After.flv[/flv]

Before and After.  During better days for Research in Motion, RIM Founder and co-CEO Mike Lazaridis had no time for ‘impertinent’ questions from British reporters and called an early end to one interview.  Earlier today, he checked his attitude at the door to issue an apology to upset customers.  (3 minutes)

Sprint CEO Dan Hesse is now at risk of losing his job over decisions to increase spending to upgrade network performance and capacity.  In the last week, Sprint announced it will likely seek outside financing to accelerate the launch of its new 4G LTE network, while concurrently deciding to stop selling 4G WiMax smartphones that work on the troubled Clearwire network by the end of this year.

Wall Street hates companies spending money to upgrade their networks, particularly when there is little evidence Sprint will enhance profits with price increases or cut costs by limiting customers’ data usage.

For several major investment firms and banks, the last straw was Hesse’s revelation that the company will likely need to borrow money to complete its Network Vision plan, which calls for major upgrades of Sprint’s wireless network to support much faster data speeds for customers.  His earlier commitment to spend up to $20 billion on Sprint’s version of the Apple iPhone did not help matters.

Sprint’s stock price took a beating last week, sliding 26 percent to the lowest level since February 2009 as investors fled.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/KSHB Kansas City Sprint makes another new announcement 10-7-11.mp4[/flv]

KSHB in Kansas City reports Sprint intends to stop selling devices that work on the company’s existing 4G/Clearwire WiMax service by the end of this year in favor of Sprint’s forthcoming launch of a new 4G LTE network.  (1 minute)

The Detroit News reports an investor meeting with Sprint executives “grew ugly” after Hesse announced the company needed to spend money to upgrade and refused to show a clear pathway to enhanced profits earned from those upgrades.

Wall Street to Hesse: Don't Get Comfortable

“Hesse is on thin ice now,” Ed Snyder, an analyst with Charter Equity Research, told the newspaper. “One, perhaps two, more big mistakes and he’s probably gone.”

More than a half-dozen Wall Street analysts have slashed their ratings on the wireless company because they believe Sprint’s spending plans will hurt liquidity.

While customers are increasingly rewarding Hesse and Sprint for making customer service improvements and retaining customer friendly unlimited service plans, Wall Street shows no signs of being charitable to Hesse’s management of the Overland Park, Kansas company.

Ben Abramowitz, an analyst with Kaufman Bros., downgraded the stock to “hold” from “buy,” excoriating the company for expensive strategic shifts, including network upgrades and the company’s recent commitment to Apple to sell millions of Apple iPhones on Sprint’s network.

“Management credibility is lost with investors,” Abramowitz wrote.

Jonathan Schildkraut from Evercore Partners told CNBC the spending at Sprint may just be getting started.  Millions of customers remain connected to Nextel’s legacy iDEN network, which Sprint intends to decommission.  Schildkraut believes Sprint will have to provide deep discounts or free phones for displaced customers who will need to move to Sprint’s primary network.  He also notes that despite Sprint’s plans to abandon Clearwire’s WiMax network for 4G, the company will likely make further investments to maintain the partnership, and Clearwire’s network, for other purposes.

Sprint’s decision to adopt Apple’s iPhone and upgrade their network may make competitive sense against larger players AT&T and Verizon Wireless, but Schildkraut notes Apple commands top dollar for the popular phone — upwards of $600 on the wholesale level, which carriers in turn subsidize to lure customers to sign two-year contracts.  But Sprint would do well to consider Verizon’s experience with the iPhone, he says.  Most of Verizon’s iPhones were sold to customers who already owned smartphones.  That forced Verizon to subsidize up to $400 for each iPhone with no chance of increasing the average revenue collected from customers.  Investors were hoping the iPhone would instead attract budget handset customers who would upgrade to more expensive smartphone service plans.

Because the iPhone still does not support 4G technology, it seems less likely existing Sprint 4G WiMax smartphone owners would consider the Apple 4S an upgrade, and may hold off waiting for the anticipated iPhone 5.  But as Sprint begins to promote its forthcoming 4G LTE network, those Sprint customers using WiMax phones will be tempted to move to something else.  Either way, phone subsidies could create a significant drag on Sprint’s cash on hand at a time when the company is spending heavily on upgrading its network.

In the telecommunications business, upgraded service helps customers and spurs competition.  But it is nearly always the enemy of Wall Street unless a clear pathway to enhanced profits can be shown.  Investors may ultimately have the last word on those upgrades, and the person responsible for green-lighting them.  Hesse may learn that lesson first hand if the company can’t find a way to boost its stock price, and soon.

[flv]http://www.phillipdampier.com/video/Sprint CEO in Trouble 10-12-11.flv[/flv]

Wall Street goes on the attack, unhappy that Sprint is spending their money to upgrade its networks for the benefit of Sprint customers.  CNBC covers all the business angles.  (6 minutes)

Cable subscribers paying ever-increasing television bills for hundreds of channels they never watch may find some relief if Comcast decides its experiment in “a-la-carte” cable-TV is a success.

The company is testing a new way of selling service that delivers a basic package of channels for a lower price and then offers customers bouquets of add-on channels sold in “theme packs” for $10 apiece.

Comcast is testing what it calls MyTV Choice in parts of Connecticut, Massachusetts, Vermont and Charleston, South Carolina, and plans to expand it to the Seattle area soon.

Here’s how MyTV Choice works:

Customers start with a basic package of channels that Comcast calls “Get Started” ($24.95) or “Get Started Plus,” which sells for $44.95 a month.

What differentiates the two options are the networks they contain.  Inexpensive cable networks turn up in Get Started — A&E, Discovery, C-SPAN, Animal Planet, Daystar, Food Network, home shopping, and The Weather Channel are among the 32 channels that accompanies a basic package of local channels.

Get Started Plus includes all of those networks plus sports — the budget-busting networks that help keep cable bills growing.  ESPN and other regional sports channels are included in the more expensive package.

Missing from the basic package of channels are kids shows, news, movies, and niche networks.  That’s where Comcast’s “Choice” packs come into play.  Customers can add a 19-channel News & Info pack, 31-channel Entertainment & Lifestyle pack, 16-channel Movie pack, and/or an 11-channel Kids pack for $10 each.

That’s where the “choice” ends.  Customers cannot skip the basic channel package to select only one of the theme packages, individual channels are not for sale, and anywhere outside of Charleston, customers also have to buy phone and Internet service from Comcast. HD also costs extra.

So much for a lower bill.

In fact, Comcast sells a digital cable package incorporating a full lineup of basic cable channels for just under $60.  If your family loves sports, has kids, and needs news channels, sticking with the digital cable package is actually cheaper than MyTV Choice.  That’s because the latter will require a $44.95 base package, plus three theme packs for an additional $30 a month.

Comcast denies their experimental a-la-carte package has anything to do with cord-cutting Internet viewers.

“It’s more or less responding to feedback from customers that they want more choice,” Comcast spokesman Bill Ferry told the Post & Courier.

While Ferry and others argue the pay-per-channel is not economically feasible, Christopher C. King, a telecom analyst for Stifel Nicolaus in Baltimore told the newspaper that is the trend.

“Certainly the industry’s moving more toward an a la carte model,” King said.

Theme-packs are not a new concept for some pay television viewers.  In the 1980s and 1990s, consumers owning large 6-to-12 foot satellite dishes routinely encountered the channel bouquet concept.  Customers would purchase a basic package and then select from a dozen or more mini-tiers, usually made up of networks owned by one company.  Want TBS and TNT?  Turner Broadcasting sold an add-on with those two channels.  Wanted a superstation package?  Channels uplinked by cable companies like TCI from Denver could be purchased as a small package.  So could stations like WSBK in Boston, WWOR and WPIX in New York, KTVT in Dallas and KTLA in Los Angeles.

Comcast has “simplified” things with a much smaller set of choices.  But that also dramatically limits any potential savings.

The concept of a-la-carte cable horrifies cable companies and their Wall Street shareholders, because a true “pay-per-channel” offer would dramatically cut the average revenue earned per subscriber if customers took a hatchet to the bloated channel packages most customers receive today.

Cable operators have resisted the concept because every channel would have to be encrypted to sell individually, billing would become more complicated, and the business model of niche-oriented networks supported by more popular fare would end.  That’s why programmers hate the idea as well.  While A&E, TNT, and CNN would have no trouble surviving, networks like Current TV, TV One, Hallmark, Cloo, and LOGO probably would not.

More importantly, many subscribers might find savings elusive from a-la-carte, because the most expensive cable programming networks also happen to be among the most popular.  ESPN and Fox News Channel, for example, have dramatically increased their rates to cable companies, who helpfully pass them along to you.  But if cable operators suddenly stripped those networks out of basic packages, while leaving the much cheaper networks together in broad-based theme packages like “lifestyle and entertainment,” subscribers may howl in protest or accuse the cable operator of playing politics.

It gets even harder when the cable companies selling the big packages of channels customers never watch also happen to own some of the networks found within those packages.  Comcast shareholders may not like the cable side of the business kicking lucrative NBC-owned and operated cable networks like The Weather Channel, USA, E!, Cloo, and other owned networks to a-la-carte Siberia.  Every cable subscriber pays for Cloo and E! today.  How many will choose to pay for those networks under an “a-la-carte” model is an open question.

Only two cable operators have expressed an interest in switching to a true, a-la-carte model to date — Suddenlink and Mediacom — both small, regional players that have no programming interests and lack sufficient buying power to score the kinds of discounts available to companies like Comcast and Time Warner Cable — discounts they can have if they agree to keep as many channels bundled in one digital cable package as possible.

Wall Street is pushing back against Justice Department efforts to unwind a merger proposal between AT&T and T-Mobile that will leave America with three national carriers.  Some investment firms even believe three carriers are still “too many” and want mergers and acquisitions to accelerate to allow two dominant national carriers to emerge.

“It’s pretty clear what the end game is in wireless,” said Julie Richardson, managing director at Providence Equity Partners Inc. “LTE, 4G — you have to have those services to compete. One of the most interesting things to watch in telecom will be these players coming together.”

Richardson shares the view among many on Wall Street that carriers forced to build costly 4G services like LTE need less competition and more cash-on-hand to pay for upgrades and to obtain needed spectrum.

Only AT&T and Verizon Communications have the resources to support a national 4G Long Term Evolution network, Richardson said. Sprint, the third-biggest U.S. wireless operator, is struggling to compete against larger rivals and has lost money for 15 consecutive quarters, Bloomberg News reports.

Among smaller players, Richardson believes the future is clear: mergers, acquisitions, and partnerships.  Sprint is moving increasingly closer to the nation’s cable companies, which have sought a cost-efficient way to deliver the ultimate “quad-play” service package that includes wireless, landline, cable-TV, and Internet service, all from the cable company.  But talk of constructing competing cell networks has gone largely nowhere, and cable companies that do offer some type of wireless service typically resell an existing service under their own brand.  Road Runner Mobile, from Time Warner Cable, for example, is really Clearwire under a different name.  Same for Comcast’s wireless Internet service.  Cox is pitching “unbelievably fair” wireless phone service that actually comes from Sprint.

But cable operators currently don’t seem to be interested in outright acquisitions of cell companies like Sprint, preferring to partner with them instead.

Clearwire, which needs financing and better wireless spectrum, may eventually find a friend in Dish Networks, the satellite TV company.  Dish controls wireless frequency spectrum it currently does not use, and has expressed an interest in expanding beyond a traditional satellite television provider.  An acquisition of Sprint or Clearwire could help them accomplish that.

Sprint is preparing to launch its own 4G LTE network early next year in an undetermined number of markets to increase 4G speeds and compete with AT&T and Verizon.

Sprint’s existing 4G service, based on older WiMax technology that powers the Clearwire network, has not kept up with subscriber demands, and many of Sprint’s “4G”-capable markets have speeds more in common with 3G than Verizon’s LTE or AT&T HSPA+ 4G networks.  As Clearwire continues to struggle through serious financial problems (the service has not expanded into a new market since 2010), lawsuits, and disgruntled customers, Sprint isn’t waiting around for Clearwire’s own planned upgrade to TD-LTE, which would require at least $600 million in financing to undertake.

Instead, Sprint is deploying the same technology used by Verizon for its LTE network.

CNET reports Sprint will initially use its G-block spectrum (1900MHz) for its LTE network, but the most robust coverage will come in 2013 when Sprint retires the Nextel iDEN network which currently resides in the 800MHz band, more suitable for longer range reception.

Sprint says the 4G LTE upgrade is all part of its Network Vision plan, which upgrades virtually the entire Sprint network at a cost of $4-5 billion.  But shareholders aren’t reacting over Sprint’s LTE spending, because it is included in the earlier budget already disclosed to Wall Street.

For consumers, the upgrade will mean the company that first embraced 4G will once again deliver speeds worthy of that label.  Sprint customers across the country have reported network speeds have suffered as more customers have piled on Sprint’s and Clearwire’s network.  Clearwire will remain a Sprint partner, but that wireless provider will increasingly depend on Sprint’s network, a reversal of Sprint’s current dependence on Clearwire WiMax for their existing 4G service.  Clearwire may ultimately be unable to finance its own upgrades.

Sprint also announced it will keep its unlimited smartphone data plans, because they attract customers from AT&T and Verizon who do not want limited-use plans.  But preserving unlimited data comes at a cost.  Sprint has been cutting perks all month:

1. Sprint nearly doubled its early termination fee from $200 to $350 effective Sept. 9.
2. Sprint slashed its satisfaction guarantee program for new customers from 30 to 14 days on Sept. 16.  Sprint’s guarantee allows new customers the opportunity to test Sprint’s network before committing to a two-year contract.  The company also now expects to be paid for whatever airtime charges were incurred during the trial.
3. Sprint has announced it is ending its Premier Program Dec. 31.  Premier gave customers who spend more than $89 a month on an individual cell plan the opportunity to upgrade their phones annually, penalty-free.  Members also received free minutes, discounts on accessories, early buying opportunities for the newest phones, and regular plan reviews.  Instead, customers will be dropped into the same New for You^SM Upgrade Program lower spenders receive.  But Sprint will be changing that program too:

Unlimited data... for now.

On October 2, the following changes to our New for You^SM Upgrade Program will take effect:

• New lines of service and existing customers who upgrade on or after October 2, 2011 will receive future upgrades after 20 months;
• $75 and $25 upgrade discounts will no longer be available for customers signing up for a 1-year agreement or 2-year agreement after 12 months or signing a 1-year agreement after 22 months.

Additional information for existing customers. As of October 2:

• If you’ve already qualified for a full upgrade, nothing changes. When you sign up for a new 2-year agreement and take your device offer, future upgrades will be available after 20 months;
• If you haven’t qualified for your full upgrade yet, to receive a discount you’ll wait until you qualify for your full upgrade at 22 months.

On Oct. 5, Sprint is expected to introduce the Apple iPhone on its network for the first time.  Some analysts predict iPhone will be the catalyst to drive Sprint’s unlimited data plan into the ground, because the phone has a reputation for being a favorite for heavy data users.  iPhone 5 will remain dependent on 3G networks for connectivity outside of Wi-Fi, which could drive data usage higher than any other Sprint phone.  Should that overwhelm Sprint’s 3G network before its 4G service enjoys a widespread rollout (and Apple introduces a phone that works on 4G), Sprint may find itself limiting data usage as well, as least on its 3G network.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Welcome to 4G from Sprint.flv[/flv]

Sprint’s promotional video promoting its current 4G WiMax network, powered by Clearwire.  (3 minutes)