Wireless

Clearwire investors are pumping in another $1.5 billion into the venture to help pay for the company's nationwide 4G wireless network, according to The Wall Street Journal.

The article cites two unnamed sources "familiar with the matter," who said that Sprint Nextel, Comcast, Intel, Time Warner Cable, and Bright House Networks have all agreed to contribute an additional $500 million to the cause. Google, which had initially invested with these other companies, is not participating in this funding round, the article said.

Sprint and these other partners invested about $3.2 billion in Clearwire about 18 months ago when a new joint venture was developed to build the Clearwire network.

In addition to cash, Sprint also gave Clearwire access to its 2.5 GHz spectrum. Sprint, Comcast, and Time Warner have already begun reselling the Clearwire WiMax service in areas where Clearwire has already built its network.

Clearwire now offers service in several cities including Baltimore, Las Vegas, Chicago, and Philadelphia.

There is little doubt that consumers' appetite for faster wireless speeds is growing. But Clearwire is building its network using WiMax technology while its major competitors, Verizon Wireless and AT&T, have chosen to use a competing technology known as LTE or Long Term Evolution.

Verizon is already building its LTE 4G network and will have commercial deployments in 2010. AT&T plans to continue upgrading its 3G network with newer technology, but has said it eventually plans to move to LTE. Most other major wireless operators around the world have also settled on using LTE for their next generation networks.

Clearwire does have a good head start in terms of deployments. But it's unclear if that will be enough to beat competitors, such as Verizon Wireless, in the long run.

But in order for Clearwire to even have a chance in competing with Verizon and AT&T, it will need a fully built nationwide network. And that takes a lot of money; money that Clearwire is spending very quickly. As of the second quarter of 2009, Clearwire had projected a cash burn of $1.5 billion to $1.9 billion for 2009. The company said in August it had burned through $646 million of its cash. But as it spends money, the company is also losing money. For the second quarter, Clearwire announced a net loss of $73.4 million on revenue of $63.6 million.

Clearwire will report third quarter earnings on Tuesday.

The Google factor
Google's decision not to invest in the next round of investment could be an indication that the search giant is losing faith in the technology. In a recent interview with CNET News, Andy Rubin, who heads up Google's mobile operating system division, said Google is planning its mobile future around LTE and not on WiMax.

That said, a Google spokesman told Reuters that the company still supports Clearwire's efforts to build a high-speed wireless network using WiMax. But the spokesman said the best way for Google to offer support is through product and strategic cooperation rather than investing more money.

Google also recently announced a strategic partnership with Verizon Wireless. The companies worked closely to launch a new 3G wireless Android device called the Droid. And the two companies will likely work closely to develop other new products and services on Verizon's new 4G network.

By contrast, Clearwire's other investors have far too much at stake now to abandon the network and the WiMax technology.

Intel has been a big backer of WiMax from the beginning. And the company has already invested millions of dollars in developing products. Sprint has also bet big on the WiMax technology, and the company is too far down the WiMax path to completely drop it. The cable companies Comcast and Time Warner, which are reselling Clearwire's service to their cable customers, have no other choice at this point, but to stick with the WiMax plan. The last thing these companies want to do is build their own wireless network, and they desperately need a wireless broadband service to compete with their phone company rivals.

Nokia is replacing potentially dangerous phone chargers for free, the mobile giant said Monday.

The recall affects 14 million chargers, according to the Associated Press.

The affected chargers are manufactured by third-party suppliers, Nokia said. A loose cover could potentially expose the charger's internal components and thus pose an electrical shock hazard if accidentally touched during use, the company said.

Chargers involved in the exchange are 2-pin types and include the AC-3E and AC-3U models manufactured between June 15 and August 9, 2009, as well as the AC-4U model made between April 13 and October 25, 2009. A Nokia site offers more information.

Read more of "Nokia rolls out charger exchange program" at CNET Asia.

Verizon has decided to take the spirit of Christmas and shove it into the part of iPhone users' chimneys where Santa would need a pick ax.

Some who viewed the first Droid teaser ad, just a couple of weeks ago, were stunned to see Verizon so baldly declare that the Apple uber-machine was, in some ways, deficient.

Rumor had it that this was an isolated attempt at leveraging publicity for the new Motorola device. However, this new ad shows that the iPhone is firmly on Verizon's list. And it's not Verizon's Christmas list.

The ad places the iPhone on the mythical Island of Misfit Toys. It's an island inhabited solely by those things you don't need, don't want and don't work.

At first, the strange collection of pink spotted elephants and peculiar Grandads-in-a-Box-Wearing-Some-Very-Strange-Bits-of-Chiffon are astonished that the iPhone has come to their island.

But then the Verizon version of the little AT&T 3G coverage map helpfully points out that it might be harder to download your beloved apps in some parts of the country.

"You're going to fit right in here!" squeaks a strange little blue object with wings, a propeller and a hearty dose of gallows humor.

Can one ever imagine that Apple might create a version of the "Get a Mac" structure with a new human (Joss Stone, perhaps?) representing the iPhone and a rather more vulnerable human (Kirstie Alley, perhaps?) representing Verizon?

Somehow, that wouldn't quite fit, would it?

The new Verizon Droid, like many a high-profile smartphone just coming onto the market, has been hailed by some as a potential--you know what's coming--iPhone killer. (Chronicling the very first Droid sales in Manhattan the other day, CNET's Maggie Reardon observed that the gadget may actually turn out to be more of a BlackBerry killer.)

But does Verizon Wireless want to deliver a knockout to the iPhone? There's long been speculation that the carrier would sooner or later be offering the Apple smartphone, which since its launch has been solely in the hands of AT&T in the United States. (In some other countries, Apple has deals with multiple carriers.)

The latest posting to suggest an imminent rapprochement between Verizon and the iPhone comes from the AppleInsider blog, which on Friday said that it's gotten wind of Apple having contracted to build a Verizon iPhone that would debut in the third quarter of 2010.

More broadly, according to AppleInsider, the new "hybrid iPhone" will work on both the GSM/UMTS and the CDMA systems, meaning that Apple will be able "to sell a single global handset to all carriers, and specifically to Verizon Wireless in the US." In the U.S., carriers AT&T and T-Mobile are in the GSM/UMTS camp, while Verizon Wireless and Sprint Nextel are in the CDMA camp. (For more on that topic, see "Going abroad? Don't be afraid to pack the cell phone.")

The "world mode" phone reportedly would have a 2.8-inch screen--that is, roughly 20 percent smaller than the screen on the existing iPhone.

AppleInsider cites a report from the investment research firm OTR Global, which in turn cites "sources in the Taiwan handset supply chain." According to AppleInsider:

The report by OTR Global, provided to AppleInsider by an industry analyst, says the new "world mode" iPhone will gain compatibility with CDMA2000 networks (including Verizon's US network, which is currently incompatible with existing iPhone models) while retaining compatibility with UMTS 3G networks globally using a new hybrid chip produced by Qualcomm.

According to OTR's sources, Asustek subsidiary Pegatron will build the new hybrid phone devices for Apple rather than Hon Hai, the iPhone's current manufacturer. This decision was reportedly made to prevent the company from being "constrained by a single-source assembler."

In the third quarter of 2009, Apple shipped 7.4 million iPhones worldwide, raising its global market share slightly to 17 percent, according to market researcher IDC.

Apple, Verizon, and OTR were not immediately available for comment.

See also:
• Inside the Motorola Droid, an iPhone likeness
• Slow start for the Motorola Droid?
• Survey shows iPhone threatens BlackBerry; Palm holds steady

Beginning Nov. 15, Verizon subscribers looking to get out of their smart-phone contracts early will pay $350 for the privilege. That early-termination fee is double the current one, but Verizon insists it's justified because of the higher prices of today's phones.

"The cost of smart phones is considerably higher than feature phones for which the early termination fees were created years ago at $175," said Verizon spokesman Jim Gerace. He added that the new $350 ETF declines by $10 per month through the life of the contract and customers can avoid it by buying their devices off contract and paying full retail price.

(Credit: All Things Digital)

An interesting move for Verizon, which just last year agreed to pay $21 million to settle a class-action lawsuit filed by California consumers over the very early-termination fees it is now increasing. The plaintiffs in the suit alleged that Verizon's ETFs were illegal under California law and that they were designed to unfairly lock consumers into long-term contracts and prevent them from switching carriers. When Verizon settled the suit, it denied any wrongdoing, insisting that early-termination fees are simply a means of recovering legitimate costs. And to some extent Verizon does have a point.

Full retail price for the Motorola's new Droid is $559.99. With a two-year contract, Verizon sells the handset for $199.99. Theoretically, that's a $359.99 subsidy (I have no idea at what price Verizon purchases Droid from Motorola). So if Verizon allowed subscribers to break their contract after a month without paying an early-termination fee, the company would stand to lose money. And subscribers who did so could subsequently sell the device online and potentially make a profit, though a small one.

So it's certainly understandable that Verizon and other carriers want to protect the subsidies they dole out for these new smart phones. And as noted earlier, Verizon's new ETF drops by $10 each month a subscriber remains under contract. But at this rate, subscribers are still bound to pay a $110 termination fee in the 23rd month of a two-year contract. The contract is nearly over, the subscriber obligation to Verizon almost fulfilled, yet the company can still slap its customers with nearly a third of the full ETF if they break it at that time.

By month 23 of a two-year contract, does Verizon really stand to lose $110 if subscribers decide to switch carriers? Doesn't seem likely if subscribers can walk away just a month later without consequence, taking their handsets with them.

Since Verizon is pro-rating the ETF, why isn't it doing so in such a way that it zeroes out by the end of the contract?

And isn't the fast pace of innovation in the smart-phone sector such that prices-for both component and device-are dropping so quickly that high ETFs aren't really justified? Remember, you can get Apple's iPhone for $99 today. When the iPhone debuted in 2007, it commanded a price of $499/$599, depending on model.

I've put those same questions to Verizon and will update here when I hear back. In the meantime, here's what Consumers Union policy analyst Joel Kelsey has to say on the matter: "When people want to switch wireless services, the biggest cost they face is early termination fees. These fees are designed to lock people into long-term contracts and stop them from getting better deals. Early-termination fees make the marketplace less competitive. Verizon's move is painful proof that it's time for lawmakers to crack down on these fees."

UPDATE: Verizon Wireless spokesperson Nancy Stark offers the following answers to the questions I posed above:

Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so.

On your second question, while the pace of innovation plays a role in prices coming down somewhat, it also plays a role in driving up costs as more and more complexity that customers want is added to phones-from premium HTML browsers to high-resolution MP cameras with optical zoom; videoplayers; music players; dual processor chipsets; WiFi; very high display resolution, operating systems such as BlackBerry, Windows Mobile, Palm, Android-ALL with the added value (vs a desktop) of mobility, and ALL in one tiny device that ALSO allows you to talk to anyone from anywhere. phew! (by comparison, I recently paid $200 for a camera and all it can do is take pictures, and it has only middle of the road capabilities.)

But getting back to ETFs specifically. The most important point is that Verizon Wireless customers do not have to have an ETF at all if they do not want to. ETFs allow customers to have it either way: They can have no ETF and pay full retail for their device. OR, they can get a greatly discounted device by having an ETF.

Story Copyright (c) 2009 AllThingsD. All rights reserved.

Bert and Ernie shared space on Google's home page on Friday with an ad for Motorola's Droid, the Verizon Wireless smartphone that went on sale on Friday.

(Credit: Screenshot by Ina Fried/CNET News)

As the newsroom's biggest Sesame Street fan, I'd be remiss if I didn't highlight the tribute Google paid to the PBS show this week, on the occasion of its 40th anniversary.

On Wednesday, Big Bird's feet and lower body graced the home page, while Thursday saw Cookie Monster nibbling on the Google logo. On Friday, Bert and Ernie served as the O's in Google.

But Bert and Ernie had to share the home page on Friday, as Google also used a front-page link to tout the new Motorola Droid smartphone that went on sale at Verizon Wireless stores.

Although such promotional pitches aren't the norm for its homepage, Google has used them in the past to tout the Chrome browser as well as the first Android phone, T-Mobile's G1.

Big Bird's feet served as the "L" in the Google logo on Wednesday, as the search giant kicked off its tribute to Sesame Street.

(Credit: Google)

As for the Sesame Street "doodles," Google Vice President Marissa Mayer noted that "many Googlers grew up on Sesame Street."

"We're delighted to have partnered with Sesame Street to create this special series of doodles, particularly since we share the same values of education, diversity, and accessibility," Mayer said in a blog posting.

Lest anyone doubt my devotion to the show, here's a video interview I did with Elmo Live, when that toy came out last year.

Big lines didn't form outside most Verizon Wireless stores the day the new Droid hit the market.

(Credit: Marguerite Reardon/CNET)

NEW YORK--The new Motorola Droid got a sleepy reception on Friday morning when it officially went on sale across the country in Verizon Wireless stores starting at 7 a.m. in some places.

From New York to San Francisco, most stores around the country had few if any lines when doors opened Friday morning. There was a handful of people waiting outside at the Verizon Wireless store on West 34th Street here in Manhattan. And about 20 people waited in line outside a store here on Sixth Avenue, as well as at one in Clifton, N.J., Verizon officials said.

CNET reporters in San Francisco reported they saw only about 15 customers lined up for the device before a Verizon Wireless store opened there Friday.

The scene was somewhat more lively last night, when Verizon Wireless opened its West 34th Street in New York City from midnight to 2 a.m. About 100 eager Droid customers were in line when the store opened last night. Verizon spokesman David Samberg said the company sold 85 Droids in the first 45 minutes the store was open on Thursday night.

But even though the Droid didn't stir enough enthusiasm to get people to stand outside on a cold November morning, there appeared to be a steady stream of customers in several Verizon Wireless stores. Many customers were interested in the Droid, while some were checking out the new HTC Android Eris, which also went on sale Friday.

Lines are overrated
Samberg said that a lack of a long line or shortage of devices is actually a good thing. And he urged people to not prejudge the phone's success on that alone.

Consumer demand for smartphones seems to be unstoppable.

In the third quarter, vendors shipped a record 43.3 million devices, up 4.2 percent from last year's third quarter and up 3.2 percent from this year's second quarter, says a report released Thursday by market researcher IDC.

(Credit: IDC)

Among smartphone vendors, Nokia still enjoys the greatest market share, according to IDC, with a 37.9 percent slice for the third quarter. ... Read more

Online auction giant eBay announced Friday that its sale of a controlling interest in its Skype unit will proceed, following the settlement of litigation over the proposed transaction.

The settlement restructures the deal with an investor group led by Silver Lake and puts an end to a dispute with software maker Joltid over the licensing of software that underlies Skype's Internet telephony service.

In addition, the settlement brings Skype and Joltid founders Niklas Zennström and Janus Friis, into the investor group. The duo will take a 14 percent stake in Skype in exchange for contributing Joltid software and a "significant capital investment."

Silver Lake and other investors will now hold 56 percent of Skype, and eBay will retain 30 percent. Those other investors include the venture capital firm Andreessen Horowitz--started by Marc Andreessen, the man behind the early Web browser Netscape--and the Canada Pension Plan Investment Board.

Venture capital firm Index Ventures, which had been embroiled in the legal action, has withdrawn from participation in the investor group.

As in the initial agreement, eBay will receive approximately $1.9 billion in cash when the sale is completed, along with a note from the buyer in the principal amount of $125 million.

The deal, which eBay says puts Skype's value at $2.75 billion, is expected to close during the current quarter.

Under the settlement agreement, which involves the Silver Lake investor group, Joltid, and online video company Joost, Skype will have ownership over all software previously licensed from Joltid. All related litigation now pending against the investor group and eBay will cease at the closing of the acquisition.

Zennström and Friis had sold Skype to eBay for $2.6 billion in 2006, but they had also retained the rights to Skype's peer-to-peer technology via Joltid, a separate company that they had also founded. In its lawsuit filed in September of this year, Joltid raised charges of copyright infringement, alleging that Skype had acquired unauthorized versions of the source code, made unauthorized modifications, and disclosed the software to third persons.

Also in September, Joost--yet another company started by Zennström and Friis--filed a lawsuit against former Joost CEO Mike Volpi, who two months earlier had become partner at Index Ventures, which also was named in the lawsuit. Joost claimed that Volpi, who had done a stint on Skype's board of directors, had used confidential information as part of Index Ventures' participation in the Silver Lake-led effort to buy a majority share in Skype.

In the third quarter, Skype contributed $185 million in revenue to eBay, up nearly 30 percent from the year-earlier period. It has more than 520 million registered users.

Update at 8:10 a.m. PST: More details of the settlement have been added.