Back in January 2010, Cox Cable announced it was getting into the cell phone business with an ambitious plan to construct its own competing wireless network.  Cox used their little spacemen to market their forthcoming alternative as delivering “unbelievably fair” pricing and terms for cell phone service.  The bigger players were selling bait and switch plans with high extra charges and bill shock at the end of the month, or so Cox’s ads suggested.

Now, the cable company has announced it is pulling the plug on its partially constructed 3G network, and will rely exclusively on reselling Sprint service.

“We believe this approach is good for our customers, allowing us to take the necessary steps to fulfill our promise to deliver a Cox experience that customers expect from us,” read a statement from Cox.

What happens to Cox’s existing infrastructure, and the frequencies it won at auction in 2008, is unknown.

Although the reasons for the change of heart are not officially known, there is speculation in the investment community Cox’s expensive launch of 3G technology would be outdated just as larger providers were unveiling newer 4G networks.  Additionally, the dynamics of the market are increasingly trending towards a duopoly, especially after AT&T announced its intentions to acquire T-Mobile.

Two major carriers will provide service to the vast majority of Americans if the merger is approved.  That would leave Cox in a difficult position attracting investment to build its own network and interest from consumers looking for the latest and greatest smartphones Cox couldn’t sell.

Sprint’s wholesale division has allowed several providers to resell Sprint’s network, no capital investments required.  Cox had already been relying on Sprint for providing cell phone service in several markets.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Cox Wireless Advertising Campaign.flv[/flv]

Cox Wireless’ marketing campaign promised “unbelievably fair” pricing on its own wireless network.  Now it will resell Sprint’s network instead. (2 minutes)

AT&T’s alternate reality of the wireless universe is on full display as the company makes statements promoting its proposed merger with T-Mobile that, in some cases, retreat from the facts or otherwise distort them.

AT&T CEO Randall Stephenson has been visiting with journalists, often from the business press, to talk up the merger’s potential.  The company has supplemented those PR tours with a 400-page filing with the Federal Communications Commission that has won converts among some non-profit groups, many of which receive direct funding from AT&T.

Stop the Cap! felt a fact check was in order, so we reviewed Stephenson’s recent claims made in an interview with USA Today:

Claim:  In the last four years, the volume of (traffic on) these (wireless broadband) networks is up 8,000%. We believe that we’re going to go up, in five years, eight to 10 times from where we are today. We don’t have the spectrum position to accomplish that.  T-Mobile’s spectrum is very compatible with ours. In cities like New York, we put the two companies together, and we get a very quick lift in capacity of about 30%. That means fewer dropped calls, better service quality, and it gives us a path to do something that neither one of us could do independently, and that is deploy fourth-generation mobile broadband to 95% of the U.S.

Fact: Although wireless broadband traffic is up, AT&T holds more wireless spectrum than any other carrier, a good deal of it unused.  In fact, some of AT&T’s competitors and critics suggest the company is hoarding spectrum, and its insatiable appetite for more could get fulfilled if the company can sell Congress on its “shortage theory.”  Although some of that spectrum is being reserved for the company’s future LTE network, critics contend AT&T spent a lower percentage of its revenue on network expansion (despite being the exclusive holder of the Apple iPhone during the period) than its competitors.

Between 2008 and 2010, AT&T’s FCC filing said it spent $21.1 billion in capital expenditures to upgrade its wireless network.　That’s less than the $22.1 billion spent by Verizon Wireless over the same period. As a percentage of revenue, AT&T’s total was a little higher, at 13%, to Verizon’s 12.8%. Even so, given its congestion problems, AT&T should have spent significantly more. Complaints about congestion were apparent at least two years ago, yet in 2009 AT&T increased wireless capital expenditures by only 1% to Verizon’s 10%.

AT&T has admitted it has faced congestion issues in several large cities — an especially serious problem for a company using GSM technology, which combines voice and data traffic onto a single wireless pipe.  When the network gets overcongested, data sessions fail and voice calls drop.  CDMA networks like Verizon and Sprint have two virtual pipes, one for data and one for calls.  If one gets congested, it doesn’t necessarily harm the other.

Additionally, although T-Mobile will provide some additional capacity in selected urban markets, some of their towers are remarkably close to AT&T’s own towers, effectively making them redundant.  Because T-Mobile uses different spectrum, in some cases AT&T customers will see no benefit from the combination of the two networks, unless they buy new equipment capable of accessing both.

AT&T using T-Mobile as the key to deploying fourth-generation mobile broadband is more than a little hard to believe, considering the German-owned carrier is dwarfed by AT&T.

Claim: Anybody who opens the newspaper or watches TV sees this as a fiercely competitive industry — maybe the most competitive in the United States.  The large majority of Americans, when they go to buy cellphone service, have a choice of at least five providers. In 18 of the top 20 markets, the customer has a choice of five different competitors. It’s a fiercely competitive market today. It will be a fiercely competitive market after this deal is done. We don’t see that changing.

Free Press characterizes AT&T's claims of more competition by absorbing a competitor to be the equivalent of chucking your smartphone down the rabbit hole.

Fact: If ad purchases were evidence of a robust, competitive market, we could say phone and cable companies were hot competitors.  Both advertise heavily, but charge similar prices for similar service — a classic case of duopoly market pricing power. In the cell phone business, the overwhelming majority of Americans subscribe to either AT&T or Verizon Wireless.  Sprint is a distant third at around 12%.  After T-Mobile, all other carriers represent just 1-2% of the remaining market share.  Many cities don’t have access to smaller providers like Cricket, US Cellular, or MetroPCS, either.  In those areas, the choices are usually AT&T, Verizon, and perhaps Sprint.

How does this marketplace concentration impact customers?  Loss of innovation.  Typically, smaller carriers have to innovate to attract attention and compete successfully with larger providers.  AT&T and Verizon have long track records of locking up access to the most innovative phones, so smaller providers have to create unique service plans, offer lower prices, or provide attractive bundles.  Sprint sells unlimited access in a marketplace full of restrictive data caps or calling minute allowances.  T-Mobile provided some of the least expensive plans around, especially for families.  Cricket offers pay-per-day prepaid calling plans that can make a wireless phone affordable for anyone.  US Cellular has stellar customer service.

All competitors are not equal.  Anyone who lives or visits rural areas understands the implications of relying on Cricket, MetroPCS, or even Sprint for cell phone service well off the main highway.  With coverage being a major factor, many quickly decide there are only two realistic choices for robust service — AT&T and Verizon.

AT&T’s myopia aside, eliminating T-Mobile, one of the market’s most fiercely innovative providers, will do nothing to benefit consumers.

Q&A Claims:

Q: There are small companies in the market, but one commentator said that they’re like grocery stores trying to compete with Walmart.

A: Everybody has their analysis. We can evaluate the numbers nine ways to Sunday. At the end of the day, the Justice Department will do the fact gathering and data gathering and will evaluate it market by market, then make those determinations. Based on our analyses, this is a deal that should be approved.

Q: If the market is so competitive, why might two companies have 70% of the business?

A: We all make technology decisions. We all put marketing plans into place. We all make decisions that drive how effective we are in the marketplace. I think we’ve done pretty well. I think Sprint has done a remarkable job over the last couple of years and will do very well tomorrow.

Q: Consumers only have two places where they can get an iPhone.

A: But there are RIM (BlackBerry) devices. There are Windows (Phone) 7 devices. Android devices tend to be doing very well throughout the market — in fact, we are having a lot of success with Android. Metro PCSand a lot of our competitors are having a lot of success there. So there are plenty of options for the customer.

Q&A Facts:

1. AT&T’s in-house analysis decides what is best for AT&T, not for individual American consumers.  The Justice Department and the Federal Communications Commission are subject to political pressure and are not independent arbiters of competitive fairness.
2. Sprint has lost customers for years and is only now attracting some of them back.  While charitable to Sprint, Stephenson’s remarks are not welcomed by them.  They consider this deal anti-consumer and anti-competitive.
3. Perhaps with the exception of the Evo, available first from Sprint, almost every other cutting-edge phone launches exclusively with AT&T and/or Verizon.  Other carriers get to sell these popular phones much later, or sell stripped down models that don’t deliver the same features.  Just review the phones available to Cricket and MetroPCS customers and compare them with what is on offer from Verizon and AT&T.

Claim:  History tells you that prices in this industry have come down for 10 years. In the last 10 years, there’s been a significant number of business combinations in this industry, and prices have come down by 50%. And prices continue to come down. We have a history, when we acquire one of these companies, we map their rate plans into AT&T. So if somebody chooses to stay on that rate plan, those rate plans are available. I don’t see why we would change it for this case. It’s just a customer-friendly thing to do.

Fact: More and more customers are no longer simply buying voice plans, on which Stephenson’s claims are based.  Instead, they are upgrading to smartphones, where they discover carriers’ mandatory add-on fees for data services.  Although prices for voice plans have not increased, rates for text messaging, data, and other add-ons have.  That can add $25 a month or more per phone.  Many carriers are reducing their discounts on new phones while adding new “junk fees” to their bills to cover “regulatory costs” as well.

AT&T also doesn’t specifically promise to retain T-Mobile’s innovative rate plans.  Instead, they propose to grandfather existing customers on those plans until they purchase new phones or switch carriers.  That does not mean existing AT&T customers can jump to a T-Mobile plan.  It also doesn’t mean those plans will still be available for new customers.

AT&T has a track record of not being particularly customer-friendly, either.

Claim: T-Mobile will continue to operate their business exactly like they have. They’ve demonstrated that they’ve had a lot of success. They market directly against AT&T. I envision them to continue marketing against AT&T in the marketplace.

Fact: T-Mobile is so successful, they have been shopping around for a buyer for some time to allow them to exit the business.  A success story that is not.

Claim: Q. If the deal goes through, would you offer all of the AT&T handsets to T-Mobile? A: Of course. If you’re a T-Mobile customer, that’s one of the great advantages. The handset selection that AT&T offers would become available to T-Mobile customers.

Fact: This proves our point T-Mobile customers do not have access to the latest and greatest equipment available to AT&T customers.

AT&T has also claimed the deal will create new jobs and stimulate economic growth.  Tell that to the T-Mobile employees who will be collecting unemployment shortly after being deemed redundant by AT&T.  Virtually all of T-Mobile’s current service areas overlap AT&T.

Free Press’ Tim Karr compares the consolidation of the cellular industry to the railroad mergers of the 19th century.  By locking up competition, carriers can raise prices and call the shots in the marketplace.  While a handful of competitors could eke out their 1-2% market share in such a duopoly, all will be starved for capital and considered a risky bet in light of the domination by AT&T and Verizon.

Karr is asking Americans to put their elected officials on notice they don’t want this anti-consumer merger:

So should it be left to Washington and one exceedingly powerful company to decide the fate of our communications? (If you’re thinking “no,” you can help stop this merger by contacting the members of the Antitrust Subcommittee and urging them to grill AT&T next Wednesday.)

If Congress, the FCC and Department of Justice hear from enough people like you and me, they can muster the courage to ask the right questions of AT&T.

Next Wednesday’s hearing on the Hill is our first chance to expose this merger for the nightmare that it is, and save our smartphones from following AT&T down the rabbit hole.

Verizon 4G users across the country are still without their super-fast wireless service thanks to a major outage that wiped the LTE network out for users of the HTC Thunderbolt, Samsung Charge, and mobile broadband units from Novatel and Samsung.

The network has been down since late Tuesday evening, and Verizon took their sweet time telling customers, only admitting the outage after media outlets began reporting on it.

Verizon Wireless spokesman Jeffrey Nelson says 4G users are temporarily being punished with data sessions that use Verizon’s ancient 1XRTT data connection — largely worthless for most broadband apps:

We are aware of an issue with 4G LTE data connections and our network engineers are working to resolve this quickly. We have determined the cause of our issue and are working with our major vendors to restore connections.

• 4G LTE Smartphones will still be able to make calls.
• Customers are temporarily unable to activate any 4G LTE devices.
• Please note: Customers may experience a 1XRTT data connection during this time.
• After determining the cause of our 4G LTE network connection issue, we are continuing to work to restore connections.
• We expect to see the network restored on a market-by-market basis. Timing and additional details will be provided as they become available.

Lucky for Verizon comparatively few customers rely on LTE service.  As of late Wednesday evening, the service remains down.

 

The National Association of Broadcasters (NAB), a trade association and lobbying group representing many of the nation’s television stations, says claims by wireless carriers of a nationwide spectrum crisis are troubling and counterfactual.  That conclusion comes in a new report issued by the NAB this morning that wants the FCC to keep its hands off UHF broadcast channel spectrum the agency wants to sell off to improve mobile broadband.

The paper, “Solving the Capacity Crunch: Options for Enhancing Data Capacity on Wireless Networks,” written by a former FCC employee, suggests claims by wireless carriers that they will “run out” of frequencies to serve America’s growing interest in wireless services are simply overblown.

Many wireless companies own spectrum they are not using, the report argues, and other licensed users are holding onto spectrum without using it either, hoping to make a killing selling it off at enormous profits in the future.  Besides, the federal government holds the largest amount of underutilized spectrum around — frequencies that could easily be allocated to wireless use without further reducing the size of the UHF broadcast TV band.

Many of the ideas in the NAB report emphasize the need for carriers to deploy innovative technology solutions to increase the efficiency of the spectrum they are already using.  Those ideas include additional cell towers to split traffic loads into smaller regional areas, and improving on network channel-bonding, caching, and intelligent network protocols.

But the NAB report has some obvious weak spots the wireless industry will likely exploit — notably their recommendations that seek a reduction in wireless traffic — ideas that would suggest there is not enough spectrum to handle every user.  Among those recommendations:

• Implementing Internet Overcharging schemes like “fair use” policies and consumption-based pricing to discourage use;
• Migrating voice traffic to Internet Protocol;
• Migrating data traffic to a prolific network of “femtocells” — mini antennas that provide 3G service inside buildings, but deliver that traffic over home or business wired broadband connections;
• Offering wider access to Wi-Fi networks in public areas;
• Encouraging the development of bandwidth sensitive devices and applications.

The National Broadband Plan’s conclusion of a spectrum shortage is based on little more than a wish list by wireless carriers, says the paper. Its author, Uzoma Onyeije, cites contradictory statements by high-ranking corporate officials to show the Plan’s calls for making 500MHz of spectrum available for broadband in ten years is a gross overestimate of the actual need.

“There is no denying that the corporate imperative of mobile wireless carriers is to obtain as much spectrum as they can,” Onyeije wrote. “However, the fact that wireless carriers cannot find a unified voice on the amount and timing of their spectrum needs suggests that this advocacy is more strategic gamesmanship than factual reality.”

The NAB has heavily lobbied Washington officials on the issue of spectrum because their members — broadcast television stations — are facing the loss of up to 120MHz of what’s left of the UHF dial, already shrinking because of earlier reallocations.  The FCC proposal would resize the UHF dial to channels 14-30 — 16 channels.  In crowded television markets like Los Angeles, up to 16 stations would be forced to sign-off the public airwaves for good, because there would be insufficient space to allow them to continue a broadcast signal.  Instead, the FCC proposes they deliver their signal over pay television providers like cable or telco-provided IPTV.  Or they could always stream over the Internet.  But that would mean the decline of free, over the air television in this country.

Considering the millions of dollars many stations are worth, it’s no surprise broadcasters are howling over the proposal.

Onyeije’s report suggests AT&T and Verizon, among others, are grabbing whatever valuable spectrum they can get their hands on.  What they don’t use, they’ll “warehouse” for claimed future use.  By locking up unused spectrum, potential competitors can’t use it.  The proof, Onyeije writes, is found when comparing claims by the wireless industry with the FCC’s own independent research:

AT&T predicts 8-10 times of data growth between 2010 and 2015 and T-Mobile forecasts that data will have 10 times of growth in 5 years. Yet, the Commission’s assessment that 275MHz of spectrum is needed to meet mobile data demand is premised on data growth of 35 times between 2009 and 2014.

The Data Tsunami Debunked

The NAB also takes to task the “evidence” many providers use to claim the zettabyte era is at hand, where a veritable exaflood of data will force America into a widespread data brownout if more capacity isn’t immediately made available.

[…] The [industry claims rely] on suspect data. In arriving at its conclusion, OBI Technical Paper No. 6 relies heavily on forecast data from Cisco that is both wildly optimistic about data growth and unscientific. In a blog entry entitled, Should a Sales Brochure Underlie US Spectrum Policy?, Steven Crowley states that “[t]here is overlap between the people who prepare the forecast and the people responsible for marketing Cisco’s line of core-network hardware to service providers. The forecast is used to help sell that hardware. Put simply, it’s a sales brochure.”

Onyeije takes apart the oft-repeated claim that a data explosion will be unyielding, unrelenting, and will be the wireless industry’s biggest challenge for years to come.  It also speaks to issues about broadband use in general:

In particular, the paper appears to be premised on the highly suspect assumption that the high demand curve for mobile data will not slow. While smartphone growth is significantly increasing now, it will no doubt plateau and slow. It has been widely accepted for decades that the process of technological adoption over time is typically illustrated as a classic normal distribution or “bell curve” where a phase of rapid adoption ends in slowed adoption as the product matures or new technologies emerge.

As recently reported, Cisco now projects that U.S. mobile growth will drop by more than half by 2015. As Dave Burstein, Editor of DSL Prime, explains: “The growth is clearly not exponential.”  Mr. Burstein went on to say “Every CFO and engineer has to plan carefully for the network upgrades needed, but the numbers certainly don’t suggest a ‘crisis.’” Jon Healey of the Los Angeles Times Editorial Board similarly explains that “Much of the growth in the demand for bandwidth has come from two parallel forces: a new type of smartphone (epitomized by the iPhone) encourages people to make more use of the mobile Web, and more people are switching from conventional mobile phones to these new smartphones. Once everyone has an iPhone, an Android phone or the equivalent, much of the growth goes away.” AP Technology writer Peter Svensson echoes this concern and explains “AT&T’s own figures indicate that growth is slowing down now that smartphones are already in many hands.” Thus, the assumption that data demand will continue to grow unabated is deeply flawed.

Internet Overcharging is About Rationing and Reducing Use

Although the NAB favors Internet Overcharging to drive down demand for use, Onyeije’s report inadvertently provides additional evidence to the forces that oppose data caps, meters, and speed throttles: they are designed to monetize usage while driving it down at the same time:

While unlimited data plans on mobile phones were once the standard, there is now more focus on using pricing as a network management tool. As AT&T Operations President John Stankey put it, “I don’t think you can have an unlimited model forever with a scarce resource. More people get drunk at an open bar than a cash bar.”  In the past year, AT&T and Virgin Mobile abandoned unlimited data plans. In 2010, T-Mobile announced that it would employ data throttling and slow the download speeds of customers that use more than five GB of data each month. And Bloomberg reported on March 1, 2011 that “Verizon Communications Inc. will stop offering unlimited data plans for Apple Inc.’s iPhone as soon as this summer and switch to a tiered pricing offering that can generate more revenue and hold the heaviest users in check.” Usage-based smartphone data plans substantially reduce per-user data traffic. As a result, data growth is likely to slow over time. And companies, including Cisco, are marketing products to carriers to help make tiered data plans easier to implement and help carriers “increase the monetization of their networks.”

Federal Communications Chairman Julius Genachowski is racking up those frequent flier miles as he travels from one telecom industry trade show to another.  In addition to less-than-thrilling appearances at industry events run by the wireless industry and broadcasters, the chairman is now scheduled to be the headline act at the cable industry trade show to be held June 15 in Chicago.

Instead of devoting time and attention to provider profiteering and the ongoing concentration of the wireless marketplace, Genachowski will be shaking hands with big cable executives, sharing the stage with former FCC chairman Michael Powell, who now runs the National Cable and Telecommunications Association.  (Powell is a classic example of Revolving Door Syndrome: Start a career in public service and finish it using your government connections to cash in with a six figure salary working for the industry you used to oversee.)

While the current FCC chairman gets to bloat his expense account, his performance on behalf of the American people leaves plenty to be desired:

1. His vision of our broadband future is all talk and little action, with National Broadband Plan goals seen as increasingly anemic when contrasted with broadband development abroad;
2. Genachowski has caved on important consumer protections for broadband consumers, most notably with a very-industry-friendly Net Neutrality policy that won him little thanks (Verizon sued anyway);
3. His “white space” broadband plan to carve up UHF broadcast spectrum for mobile broadband comes poorly conceived, infuriating broadcasters who promise to spend millions in a lobbying death match;

At the NCTA convention, Genachowski is likely to deal with the hot potato retransmission consent issue — the one that pits you in the middle of million-dollar squabbles over what pay TV provider gets to carry what networks (and how much you will pay for them).  Also on the agenda: CableCARD 2: Electric Boogaloo, also known as AllVid, the almost certainly Dead on Arrival replacement for the first generation CableCARD set top box replacement that practically nob0dy uses.

Although Google loves AllVid, the powerful entertainment and cable industry is less impressed.  The Motion Picture Association of America considers it a piracy gateway because it lacks sufficient copyright protection mechanisms, and the cable industry has always been wary of standardized set top equipment that could tie down on-demand programming, signal theft protection, and future innovations.

Genachowski is sure to get a warmer reception at the cable show than he got from broadcasters earlier this month, who were downright hostile over his proposal to carve up the UHF TV dial (channels 14-51), selling off “extra” channels for wireless broadband.

The National Association of Broadcasters is starting to get a little worried, not feeling the love the Commission has bestowed on big cable and phone companies who got their lobbying wish-lists largely granted.  Instead, a year after being dragged into an expensive digital TV conversion, the FCC is back for more from television broadcasters, taking back perhaps a dozen or more channels for “white space broadband,” a vaguely-explained plan to enhance the amount of space available for wireless data.

Unfortunately, with thousands of television stations, the FCC will have to find enough channels for everyone to share without interfering with each other.  The FCC still hasn’t released a definitive plan about how to accomplish this, and with big wireless interests suggesting TV stations should slash their transmitter power and share the same or adjacent channels, a lot of stations fear they will be crammed together like a Japanese train at rush hour.

But the wireless industry wants it, even if it drives some stations in densely populated areas off the air completely.  In many other areas, especially in the northeast and southern California, stations might have to cut their signal coverage areas to avoid interfering with stations sharing the same channel in an adjacent city.  Rural residents relying on over the air television could be out of luck, even with a rooftop antenna.

In a bidding war, who would likely win the spectrum up for sale?  AT&T, Verizon, and perhaps some large cable companies looking for enhanced wireless services to sell.  No wonder the NAB is worried.  The FCC could favor selling spectrum out from under your local stations and sell it to their biggest competitors in the pay television business.

Consumers should be concerned as well.  Should today’s biggest wireless carriers scoop up “white space” frequencies, it will do nothing to bring enhanced competition or lower prices.  It will just lock up even more spectrum for a wireless industry that threatens to become a duopoly.

Instead of flying all over the country to attend trade shows and shake hands with industry leaders, Chairman Genachowski should be spending more of his time looking for creative, effective solutions to enhance competition and protect consumers, not simply throw them under the bus for the benefit of a handful of industry players already too large for the common good.