Wireless

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 "worldmode" 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.

I'm sure you've heard of Apple's App Store for the iPhone. But have you ever heard of an independent mobile app store called GetJar?

No? Well, that's not surprising. The tiny company now based in Silicon Valley has done virtually no marketing. And yet in the nearly five years it's been around, the company has managed to build the second largest application store front for mobile phones in the world, likely making it the biggest mobile app store you've never heard of.

The privately held Getjar claims it has nearly 57,000 applications in its store, making it second only to Apple in terms of total applications. Apple just announced this week that it now has more than 100,000 applications in its store.

Google's Android Market, which launched earlier this year has more than 10,000 applications. Research in Motion's BlackBerry App World has just more than 2,000 applications available today, according to estimates.

Since Getjar's virtual store went live in early 2005, about 650 million applications have been downloaded. And momentum has been growing. For the month of October, Getjar executives say the company saw its users download 55 million applications, which is a 267 percent increase over the same month a year ago when 15 million mobile applications were downloaded. And the company says that it has more than 300,000 registered developers uploading applications to its site.

Meanwhile, Apple's much-hyped and heavily marketed iTunes App Store, which is nearly twice the size of Getjar, as of September had more than 2 billion app downloads since the store was launched in July 2008. And executives at Apple recently said the company had 125,000 developers on its roster. By comparison, the Android Market has had an estimated 40 million downloads since it went live earlier this year.

GetJar got its start not as an application store but as a beta testing Web site for mobile developers. GetJar founder and CEO Ilja Laurs had started the site to allow developers a way to test their applications on a variety of handsets.

"Originally, we were trying to help developers who couldn't get access to certain phones for testing," he said. "But then developers came to us and asked if they could use the site to also distribute their applications."

And so the GetJar application store was born in early 2005. At first, the site attracted mostly hard-core mobile application fans. But over the years, word of the site has spread, and users all over the world come to GetJar to download different applications.

Unlike most of the other application stores that have been announced recently, GetJar's store offers mobile applications for almost any phone.

"With the GetJar store, consumers don't have to worry about whether they have an Android phone or a Java phone," said Patrick Mork, vice president of marketing for GetJar. "They don't need to know which model Nokia they have. We take the fragmentation out of the equation by auto-detecting what apps can run on which phones and offering consumers those applications."

The way it works is that GetJar is able to detect the type of phone a wireless subscriber is using when they connect to the GetJar mobile Web site. It can also detect the type of phone used from the regular Web site using a wireless subscriber's phone number.

A screen shot of a GetJar download page for the Facebook shortcut link.

(Credit: GetJar)

Based on this information, GetJar is able to direct app shoppers to the applications that will work on their phones.

"If there is a BlackBerry app available and you are using a BlackBerry you will get that application," Mork said. "But if you're on a feature phone, you'll likely get a shortcut link."

This is yet another important differentiator for GetJar. Unlike device or operating system specific app stores, such as Apple's App Store or Android Market, GetJar also provides millions of consumers using basic feature phones an app-like experience, even if a specific application hasn't been developed for their particular phone.

For example, GetJar has worked with Facebook to provide a downloadable shortcut link that leads to the Facebook mobile Web site for wireless subscribers who are not using a smartphone for which a special Facebook application has been developed.

While the link is not really a native application for that specific device, the link appears on the phone's menu and provides access via the phone's browser to a mobile Web site. For consumers, the experience is very similar to that of a native application that has been downloaded to a smartphone.

"Facebook didn't have a strategy for developing applications for Motorola Razrs and Samsung Instincts" Mork said. "So they teamed up with us to get around that problem by providing short cut links. It's really not an app. But the beauty of it is that it allows any company to play in the app game from a shortcut."

And for brands, such as Facebook, the shortcut increases their mobile presence. Before it started working with GetJar, Facebook would get between 100,000 and 150,000 downloads per week from its mobile site. After the shortcut, links were available on the GetJar site and on Facebook's site, Facebook started to see 1.5 million mobile downloads per week, Mork said.

But GetJar does have some limitations. One major limitation for consumers in the U.S. is that GetJar cannot offer applications to most phones operating on Verizon Wireless's network. The reason is that Verizon uses a closed platform called BREW on many of its phones. And there is no way for third-party application developers to create applications for these devices without going through Verizon's BREW approval process. But BREW is a legacy platform for Verizon, and newer smartphones on Verizon, such as BlackBerry devices and the new Android phones, will be able to access applications from GetJar.

GetJar also doesn't explicitly serve apps to iPhone users, again because the iPhone platform is closed. But iPhone users can use the GetJar store to discover new applications and GetJar can redirect those users to the Apple App Store, where they can download the applications.

Yet another limitation is that GetJar does not offer developers the ability to charge for applications. The company has not yet figured out how to bill for these applications. Instead, application developers can monetize their applications by incorporating advertising into the application or using the app on GetJar to up-sell consumers to a more robust application in a different application store.

But GetJar does allow developers to promote their applications, and the company has developed a marketplace so that developers can bid for top promotional spots on the Web site. GetJar gets paid based on how many users download these applications. Most other application stores today do not offer developers a way to promote their applications, which makes it difficult for smaller developers to get their applications noticed.

While there is no question that Apple dominates the mobile application market today, Mork admits that Apple's push into applications has been a boon for GetJar, and likely for other app stores.

"It's undeniable that Apple has had a positive effect on our business, especially in the U.S.," he said. "But we don't really compete with Apple. Still, it's clear that the mass market is just starting to catch on. And that is largely thanks to the success of Apple and its App Store."

NEW YORK--More than a hundred people were lined up at midnight outside a Verizon Wireless store in midtown Manhattan to be among the first people to buy the new Motorola Droid.

More than a hundred people showed up at a Verizon Wireless store in New York City at midnight to buy the new Motorola Droid Thursday night.

(Credit: Marguerite Reardon/CNET)

About 65 eager shoppers lined the south side of West 34th Street across from Macy's in Manhattan at 11:30 p.m. Thursday waiting for the store to open. Verizon opened the store from midnight to 2 a.m. to give people in the Big Apple a head start on the morning cell phone rush. By midnight, when the doors officially opened, about 100 people stood in line as Verizon officials ushered in customers 25 at a time.

Once inside the store, about 13 sales representatives and another four or five device specialists milled around, helping customers and demonstrating the phone's features. Representative were also helping customers transfer contacts to their new phone.

Verizon Wireless spokesman David Samberg said he felt confident that Verizon would be able to meet customer demand for the new Droid in New York City. The 34th Street store alone had at least 500 Droids as well as some HTC Android Eris phones, and Samberg said he expects anyone wanting to buy a Droid on Friday in New York City will be able to get one.

"Five hundred phones is a lot of phones to sell in one day," he said.

Most people standing in line for the new Motorola Droid are long time, loyal Verizon Wireless customers.

(Credit: Marguerite Reardon/CNET)

Most of the people standing in line at midnight for a Droid were loyal Verizon Wireless customers. Geoffrey Aravallis, who stopped to pick up his Droid on his way home from a dance club in the city, said he has been a Verizon Wireless customer for nine years.

He said he had been tempted to switch to AT&T for the iPhone but didn't because he felt Verizon has a better network than AT&T. Now that the Droid is out, he is glad he waited.

"I use Gmail and all kinds of Google services, so it's nice to be able to have all that on my phone," he said. "And the Droid is much more open than the iPhone."

Gabrielle Dahms admitted she had also been tempted to get the iPhone. But she had heard terrible things about AT&T's network and was leery about making the switch. Instead, she decided to wait for the Droid.

"It has all the features I like on the iPhone," she said. "Plus it has a real keyboard, which sold me."

Many people have been comparing the new Droid to the iPhone, and some have even called the new device the true iPhone killer. But judging from the people I talked with who were buying the Droid, it looks like it might be more of a BlackBerry killer.

Dahms and her boyfriend, Will Welch, had been BlackBerry Curve users. Welch said he had tried the BlackBerry Storm last year when it first came out, but he didn't like it. He also thought the iPhone was cool, but was unwilling to switch carriers for it. And he said he would have probably upgraded to the BlackBerry Tour if the Droid hadn't come along.

The Droid will hit store shelves nationally starting at 7 a.m. Friday in many stores around the country. CNET News will be covering the launch, so stay tuned for updates.

In the battle between LTE and WiMax for wireless broadband, LTE may have just gotten another boost.

A group of leading telecom service and equipment providers, including AT&T, Verizon, Nokia, and Samsung, announced a new standard Thursday for delivering compatible voice and messaging services using Long Term Evolution (LTE) networks.

The standard, dubbed the One Voice initiative, offers a set of technical functionalities that telecommunication companies can use in their LTE services and products to provide both voice and Short Message Services (SMS).

The group of companies setting up One Voice (which also includes LTE proponents Orange, Telefonica, TeliaSonera, Vodafone, Alcatel-Lucent, Ericsson, Nokia Siemens Networks, and Sony Ericsson), see the standard as a way to provide interoperability for broadband voice and SMS services. The goal is to give telecom providers and manufacturers a convenient technical profile for working with each other and save customers from wrestling with different and conflicting LTE technologies.

LTE has been fine at supporting data, which uses IP-based packet switching. But it's faced challenges trying to incorporate traditional circuit-based switching voice and SMS services onto IP-based networks. One Voice is the group's attempt to resolve that issue.

The new specification will use existing functionality known as IP Multimedia Subsystem (IMS), which already defines how to provide data, voice, and other content over an IP-based network. IMS was established by the 3rd Generation Partnership Project (3GPP), a group comprised of telecom industry associations trying to set standards for 3G mobile networks.

"Open collaborative discussions have concluded that the IP Multimedia Subsystem-based solution as defined by 3GPP, is the most applicable approach to meeting the consumers' expectations," said One Group in a statement.

In recent years, LTE has been duking it out with WiMax to be crowned the upcoming broadband wireless standard. In one corner has been telecom giants like AT&T and Verizon, both of which have announced plans to deploy 4G wireless networks using LTE.

In the other corner has been Sprint, which is eyeing a rollout of its own 4G network using WiMax. Sprint owns a majority stake in WiMax provider Clearwire, a wholesale distributor of 4G services. Clearwire recently unveiled a huge WiMax testing sandbox in Silicon Valley where developers could play with the technology.

However, Clearwire has been waffling on the choice between LTE and WiMax. In a recent interview with Dow Jones Newswires, Clearwire CEO Bill Morrow said he would be willing to switch to LTE if helped the company.