Wireless

The Department of Justice is looking into whether big U.S. phone companies such as AT&T and Verizon Communications are abusing their market power, according to a report in The Wall Street Journal on Monday.

The newspaper cited unnamed sources who said that the Justice Department is reviewing potential anticompetitive practices. No formal investigation has been launched, and the review is in its early stages, the Journal article said. It's not clear yet if a formal investigation will follow.

Part of the inquiry is likely to focus on whether wireless carriers are harming smaller competitors by striking exclusive deals with handset makers. AT&T has such an arrangement with Apple to sell the popular iPhone for its network alone in the U.S.

Other phone companies have struck similar deals with handset makers. For example, Sprint Nextel has an exclusive arrangement with Palm to sell the Palm Pre. And T-Mobile is the exclusive carrier for the first two Google Android phones made by HTC that are on the market.

Recently, lawmakers and regulators have raised questions over the practice. Doug Hutcheson, CEO of Leap Wireless, a small regional prepaid wireless provider, believes that these deals are not good for the industry.

"I don't think those exclusive deals are good for competition," he said in a recent interview with CNET News. "If it's a good phone, we generally think it should be available on anyone's network. Carriers should compete on the basis of their service plans, which is why people buy these services. "

Andrew Sherrard, a vice president at T-Mobile, said that most of the phones that it sells are not exclusive, but that having a few exclusive deals is actually reasonable. He doesn't see the practice as harmful and thinks that despite the recent government inquiries, it will continue to be a normal practice.

"I think that some devices will be exclusive to certain carriers," he said. "But the vast majority of phones, especially those below a smartphone, are pretty wide open. In the long run, we have a strong commitment to open platforms and will expand choice for our customers."

Restricting services and apps
The Justice Department may also review whether telecom carriers are restricting certain services that can be offered on devices that run on their network, The Wall Street Journal reported. Some carriers disable features on certain phones. And they also restrict different services. For example, the mobile version of Skype, a voice-over-IP calling service, is restricted from use by most U.S. operators.

Also, AT&T has been criticized for limiting the use of certain applications, such as the SlingPlayer for the iPhone. This application, which lets people use their phones to watch streaming TV from their cable service at home, is only allowed to work in Wi-Fi hot spots using the iPhone. AT&T argues it must limit usage to Wi-Fi because allowing the service to operate over its 3G wireless network violates its terms of service and would degrade service for other wireless customers.

But the carrier offers similar functionality over its 3G wireless service for other iPhone Apps, including one from Major League Baseball that allows people to stream live baseball games onto their phone.

The DOJ's investigation of the telecom industry could be an indication of a heavier hand from the Obama administration on enforcing antitrust issues. The Wall Street Journal said that "the Justice Department's antitrust chief, Christine Varney, has said she wants to reassert the government's role in policing monopolistic and anti-competitive practices by powerful companies."

The Obama administration's interest in potential antitrust violations is in contrast to that of the Bush administration, which did not push forward with any major antitrust case. It was also under the Bush administration that many of the major telecom mergers were approved, starting with Sprint's acquisition of Nextel in 2005. Later, local phone company SBC Communications bought long-distance provider AT&T, and then the new company bought BellSouth. During this time, Verizon Communications also bought long-distance operator MCI.

While these mergers have not created a single dominant phone company in the U.S., as there had been decades ago with the old AT&T, it has concentrated the power of the communications industry into the hands of only a few. Over the years, the industry has consolidated down to two major forces: the new AT&T and Verizon Communications. These two phone companies control 90 million landline customers and 60 percent of the 270 million U.S. wireless subscribers. These companies also control and operate most of the nation's Internet backbone, which shuttles Internet traffic as well as phone calls throughout the country and throughout the world.

The Justice Department declined to comment for the Wall Street Journal article, and was unable to be reached for comment from CNET News.

It would likely be difficult to prove that telecom providers have violated the antitrust Sherman Act, experts say. Newer technology and new competitors like cable companies are now jockeying against traditional phone companies. But the phone companies do wield a great deal of power, in terms of both assets and political clout.

One thing seems clear, halfway into President Obama's first year in office--major phone companies may be scrutinized more than they had been during the previous administration.

The next version but one of Nokia's Maemo mobile Linux operating system will use Qt rather than GTK+ for its application development framework.

Basing Maemo Harmattan on Qt will make it easier for developers to write applications for both Maemo and Symbian, Nokia's smartphone platform, the Finnish company's development platform product manager Quim Gil said Saturday at the Gran Canaria Desktop Summit.

Harmattan will be the successor to the upcoming Fremantle, which is also known as Maemo 5. (Nokia code-names its Maemo versions after the names of winds.)

Gil said that Qt, acquired in Nokia's purchase of Trolltech a year ago, will not come "out of the box" in Fremantle, but it will have community support. This will open Maemo up to developers who work with the KDE desktop environment, which uses Qt, he said. Maemo is currently based largely on Gnome, a rival environment, which uses GTK+.

"For Harmattan, we will make a switch," Gil said. "It's not an easy switch. If you look at the platform, the Fremantle middleware will stay more or less the same, but now Qt will come as officially supported."

The Gnome community is being invited to work with the Maemo community to get Gnome applications working on this new, Qt-based version, he added.

There is a "good push inside Nokia to bring Maemo further to mainstream audiences", Gil noted. However, he conceded that Maemo-based devices such as the N810 tablet are aimed at a small, high-end market, which is an unattractive scenario for many developers.

"There is an interesting possibility of getting a common API based on Qt for Maemo and Symbian," Gil said. "If you're developing for a platform like Maemo, which doesn't bring you millions of users, with that work you can then do a Symbian port and then have a much wider reach on Symbian devices, using the common Qt API," Gil said.

Nokia will continue to contribute to the Gnome project and provide support for GTK+ libraries, he added.

Meanwhile, on Monday Nokia denied speculation it was working on an Android device, a development that would have meant the company was supporting three open-source platforms.

David Meyer of ZDNet UK reported from London.

Nokia has strongly denied working on an Android-based handset, following a report early on Monday that it's planning to do so.

The report, carried in The Guardian, took a cue from "industry insiders" to predict the launch of a touch-screen Android device at Nokia World in September. When contacted by ZDNet UK later Monday morning, a Nokia representative issued an "outright denial" of the piece.

"There is no truth to this story whatsoever," a statement from the company read. "It is a well-known fact that Symbian is our platform of choice for smartphones."

Going for Android would certainly have been a surprising move for Nokia, given the time and money it has put into opening up Symbian. Nokia's operating system (since it bought out Symbian's other stakeholders last year) is likely to reappear in its new, open-source guise next year.

Nokia also has another open-source mobile platform in Maemo, which it is actively promoting as part of its Intel partnership.

Meanwhile, fairly realistic-looking images have been leaked of Sony Ericsson's Android phone, currently code-named "Rachael." The device appears to be part of SE's high-end Xperia line and is said to run on Qualcomm's 1GHz Snapdragon processor.

David Meyer of ZDNet UK reported from London.

Net neutrality advocates got a boost of support Wednesday from the Obama administration when it released grant guidelines for spending the government's $7.2 billion broadband stimulus package.

Companies winning grants to help build new broadband infrastructure will have to follow the Federal Communications Commission's Internet Policy statement, which prohibits companies from deliberately blocking or slowing Internet traffic on their networks.

Proponents of that concept, Net neutrality, have been pushing the government to pass laws or set stricter requirements to ensure that consumers get access to content they want and that competitors are not run out of business by network operators.

The phone companies and cable operators have opposed such legislation, a sentiment that seemed to be shared by the Republican-controlled FCC under the previous presidential administration. But now that Democrats are in charge, Net neutrality advocates have been looking for indications of how the new FCC led by recently sworn-in Chairman Julius Genachowski will handle the issue.

It is still too early to know whether Democrats will push for new laws. But it's becoming more clear that protecting access on the Internet is an important issue to many.

Consumer and advocacy groups, such as Public Knowledge and Free Press, applauded the decision to make Net neutrality a condition of the grants.

The Obama administration released guidelines Wednesday for companies and other groups applying for the first of three batches of grants that will be distributed to promote broadband as part of the economic stimulus package passed by Congress earlier this year.

The first batch of funds is about $4 billion and represents more than half the $7.2 billion that the government has allotted to fund broadband infrastructure investment over the next two years. About $4.7 billion of that money will be doled out by the National Telecommunications and Information Administration for grants to build broadband infrastructure in unserved or underserved areas and to further develop public safety as well as stimulate demand for broadband. The remaining $2.5 billion will be allocated by the Department of Agriculture (USDA) to provide loans to service providers building broadband infrastructure in rural areas.

Other important aspects of the rules that came out this week include the government's definition of broadband. The rules for the grants define broadband transmission speeds to be no less than 768Kbps downstream and at least 200Kbps upstream to end users. These speeds hardly seem like broadband to most consumers used to cable model services and other high-speed Internet services like Verizon's Fios service.

But the lower speed definition is to ensure that companies addressing rural markets that may only be able to be served by slower DSL connections or wireless services can still receive grants. In an effort to promote higher speed services, however, the government will give preference to companies planning to deliver high-speed services.

The government also outlined what it means when referring to an "underserved" region. Areas where less than 50 percent of households have no access to broadband will be considered underserved and eligible for grants.

More specific rules to help companies write grant proposals for getting these funds will be released next week.

The unlimited monthly plan wars continue to get hotter following a new service from TracFone. The Mobile Virtual Network Operator recently debuted StraightTalk, a prepaid, no-contract wireless brand that offers 30MB of data plus unlimited calling and messaging for $45 per month. Alternatively, you can get 1,000 anytime minutes and 1,000 text or multimedia messages for $30 per month.

Boost Mobile has offered a $50 per month plan that includes unlimited data since January, but StraightTalk now ties with MetroPCS for a calling and texting option. Yet, it is worth noting that Boost Mobile pays taxes while other carriers do not.

StraightTalk's coverage via Verizon Wireless isn't entirely nationwide (we spotted some gaps on the coverage map) and its phone selection is hardly impressive--you're limited to the LG200CM, Motorola W385, and Motorola Razr V3 (yes, it's back)--but beating this price will be difficult--at least for now.

(Credit: Apple)

The first day the Apple iPhone 3GS went on sale was the biggest sales day ever for AT&T, according to an internal memo sent to company employees that has since been published in various blogs.

That's right, iPhone Day 2009 beat out the two previous iPhone launch days, as well as surpassed traditionally heavy retail sales days such as Black Friday, the day after Thanksgiving, and December 26th, the day after Christmas.

The new iPhone may not have added a whole bunch of new bells and whistles, but it seems to have certainly been a crowd pleaser. It took Apple and AT&T about two and half months to sell one million phones. The iPhone 3GS hit that milestone in just the first weekend.

But it's hard to say for sure how many iPhones have been sold to date. Apple won't divulge sales figures until later this month when it reports its quarterly earnings. And AT&T has only said that it sold "hundreds of thousands" of iPhones during its pre-order process. But the company has indicated that iPhone 3GS sales were off the charts.

Of course, I may have found the one guy who went to an AT&T store to buy something other than an iPhone. Collins Osei, who had bought an iPhone 3G last year, came to the AT&T store on iPhone launch day not to buy the iPhone 3GS, but instead he wanted to downgrade to a less expensive Nokia phone.

British Airways will not extend in-flight mobile communication to any of its aircraft already in service, CEO Willie Walsh says.

The airline is planning to launch a mobile e-mail, Web browsing, and texting service from OnAir on two new Airbus A318 aircrafts in September.

However, it would cost the airline too much to fit similar systems to its current aircraft, Walsh said Wednesday at the Sita Air Transport IT Summit 2009 conference in Cannes, France.

(Credit: British Airways)

"We are not planning to retrofit the equipment to existing aircraft because we believe it will be too expensive," he said.

He added the airline currently has no plans to let travelers make mobile phone calls during its flights because its customers are not interested in such a service.

"The research we have done on voice tells us that the vast majority of customers do not want it," he said.

Sita, a company that specializes in airline IT and communication, said that its 2009 survey shows 70 percent of the 116 global aircraft carriers surveyed plan to introduce Wi-Fi and GSM/GPRS connectivity for short flights by 2012, and around 65 percent for long flights.

British Airways CIO Paul Coby predicted "exciting" new developments in in-flight passenger communications on new aircraft but warned it is essential for these communications to be "firewalled and separate from the cockpit."

He added that Sita is looking at how modern telecommunications capabilities could be used to automatically transmit and log flight data, such as that currently recorded on black box recorders, to airline databases.

"That is something we really want to be thinking seriously about with the new technology that is available," he said.

Nick Heath of Silicon.com reported from London.

Apple's recently released iPhone 3GS pulled out a victory in Consumer Reports' latest smartphone showdown.

(Credit: Apple)

In handing the iPhone the top spot in this year's smartphone list, Consumer Reports on Wednesday praised the iPhone 3GS for its "superior display, reinforced by top-notch multimedia, navigation, Web browsing, and battery life." However, the iPhone didn't win in all of the categories.

Consumer Reports gave high marks to the Palm Pre and BlackBerry for their messaging functionality. The organization also praised the Pre as a "superior multitasker" for its "deck-of-cards handling of multiple applications."

In light of the changing features and needs of the smartphone category, Consumer Reports changed some of the criteria for this year's showdown. The changes helped some older phones--like the iPhone 3G--move up in the rankings, while other phones--like the Samsung Blackjack II and BlackBerry Pearl Flip--dropped due to the changes.

Changes include putting more emphasis on things like the display, navigation, multimedia, and messaging, while putting less of an emphasis on features such as talk time and voice quality.

It's unclear how the iPhone 3GS would have rated, had MMS messaging been available from AT&T at the time of the tests. AT&T said functionality would be available sometime this summer.

The full report is available to Consumer Reports subscribers.

The Sony Ericsson W995a is packed with features, but at about $600 it may not provoke much of a clamoring among U.S. consumers.

(Credit: Sony Ericsson)

Nokia and Sony Ericsson are targeting the U.S. with a new set of unlocked phones. But without hefty carrier subsidies, will they ever be able to crack the U.S. market?

There's no question that when it comes to features, Nokia and Sony Ericsson's new U.S.-ready phones can easily compete against the hottest new phones on the market.

Nokia's N97, a touch-screen phone that supports both 3G and Wi-Fi, has a 5-megapixel camera and 32GB of memory. It's a clear competitor to the new Apple iPhone 3G S and the Palm Pre.

The Sony Ericsson W995a, also a 3G and Wi-Fi enabled phone, comes with an 8.1-megapixel camera, a brilliant display screen, a good media player and features such as stereo Bluetooth, and GPS. In terms of features and functionality, this phone could easily compete with other high-end feature phones like the LG enV3, which is sold by Verizon Wireless or the Samsung Memoir T929, sold for T-Mobile USA's network.

But even though these phones may have the features to compete, they're not sold through a wireless operator, which means that they are not subsidized, making them too expensive for most mainstream customers. The N97's suggested retail price is $700, and Sony plans to start selling the W995a for $600.

Meanwhile AT&T charges $99 for the 8GB iPhone 3G, $199 for the 16GB iPhone 3GS, and $299 for the 32GB iPhone 3GS. In exchange for the subsidy, AT&T requires that customers sign a two-year service contract. The price of the service, which includes voice and data services, is a minimum of $70 per month. But regardless of whether a device is subsidized, users will have to purchase some kind of voice and/or data plan, depending on the type of device they buy.

"In the U.S. market, price is a huge factor in determining which phones people buy," said Will Stofego, an analyst with the market research firm IDC. "Why pay $500 or more for a phone when you can get an iPhone for $100? Of course you have to agree to the two-year service plan, but I think that's a trade-off most consumers are OK with."

Up until recently, unlocked phones--handsets that can be used on multiple carrier networks--were only available in "gray" markets where Americans bought phones from overseas. Now manufacturers are selling them on their Web sites, in their own retail stores, and through some big retail chains, such as Best Buy. Nokia has opened several retail stores in the U.S. And Sony Ericsson sells unlocked phones through Sony Electronic retail channels.

As part of their push to address the U.S. market, Nokia and Sony Ericsson are also making sure that the phones they sell in the U.S. operate in the frequency bands used by AT&T and T-Mobile, the two main GSM carriers in the U.S. While these operators have built GSM networks just like carriers in Europe and parts of Asia, not all GSM networks operate on the same frequency, which means that some unlocked GSM phones bought in Europe or Asia won't work in the U.S. on a GSM network.

Another benefit to buying a U.S.-friendly unlocked phone is that Sony Ericsson is now offering warranties for customers who buy their U.S. unlocked phones through a Sony retail channel. The company doesn't offer a warranty for phones designed for other countries and brought to the U.S. through the gray market.

Roadblocks for unlocked phones
Despite these efforts to create a stronger retail presence for these unlocked phones, the market remains small. In the U.S., only about 5 percent of the phones sold each year are unlocked and available from somewhere other than a carrier. This differs greatly from other markets. Worldwide, unlocked phones account for about 50 percent of phones sold. In Asia, about 80 percent of cell phones are sold independently of a carrier. And in Europe, roughly 70 percent of cell phones are sold unlocked.

There are several reasons for this difference. For one, two of the four big nationwide U.S. cell phone operators in the U.S. use CDMA, which does not use SIM cards that can be interchanged between phones. Most of the world's cell phone carriers use GSM, which does allow for SIM cards. And because people buy unlocked phones in order to swap out SIM cards to use on other carrier networks, phones made by manufacturers such as Nokia and Sony Ericsson, which have concentrated efforts on developing GSM phones, can only be used on two of the big four nationwide wireless networks in the U.S.: AT&T and T-Mobile.

Nokia's N97 features a touch screen, supports both 3G and Wi-Fi, and has a 5-megapixel camera and 32GB of memory. It'll set you back $700.

(Credit: Nokia)

But the biggest reason that unlocked phones haven't taken off in the U.S. is that they are much more expensive to buy than locked phones that are subsidized and typically require a two-year service contract.

That said, Nokia and Sony Ericsson see opportunity in the U.S. market. And the consumers they're targeting are unlikely to be buying their first smartphone. Steve Medina, product and business manager for Sony Ericsson unlocked phones, says that unlocked phones in the U.S. appeal to a very niche market of tech-savvy consumers.

"Unlocked phones aren't for every consumer," he said. "They are really for the phone junkies; the geeks. It might seem crazy to some people that someone would drop $600 or $700 on a phone. But you'd be surprised at how many actually do."

Medina said a lot of the people buying unlocked phones either frequently travel internationally, or they have lived in Europe and Asia where people typically buy unlocked phones at full retail price. For these consumers, Medina says the benefits of an unlocked phone far outweigh the hefty price tag.

Swapping SIM cards
The biggest benefit of an unlocked phone is that users can simply pop in SIM card to get service. And unlike GSM phones bought through U.S. operators, these phones don't require a special unlock code to be able to swap SIM cards.

Medina says that's an important distinction, because when wireless subscribers from AT&T and T-Mobile unlock their phones, the locking software is still on the phone. The code that is used to unlock the device simply overrides that software. What this means is that when phones are updated, they can be relocked, forcing consumers to once again override the lock code.

Another big benefit of buying an unlocked phone is that all the features that the manufacturer has included on the phone will work. U.S. cell phone carriers sometimes disable some functionality on phones that they sell. And with many phones, they often integrate their own software and branding onto the phone.

But as Medina points out, unlocked phones are not for everyone. Aside from the cost, unlocked phones are often more difficult to set up. Users must configure their messaging functions and Internet functionality on their phones. Phones sold through carriers are already pre-configured for these functions.

And when a carrier upgrades its network and sends out an automated update to phones on the network, unlocked users must handle the updates on their own. And if there is ever a problem with the phone or the service, an AT&T or T-Mobile service representative may not be able to help because he or she isn't trained to deal with these specific phones.

While Sony Ericsson's Medina acknowledges that it's unlikely that the unlocked market will grow with respect to the overall cell phone market in the U.S. right now, he believes that eventually more U.S. consumers will buy unlocked phones.

"We believe that at some point, the U.S. market will become more like the European and Asian markets where unlocked phones are the norm," he said. "The U.S. wireless market will eventually evolve from a carrier-led market to one that is more open. And consumers will select a phone and then select a carrier."

But as long as mobile phone carriers continue to subsidize handsets, most consumers will opt for a subsidized phone rather than paying for a non-subsidized phone.

"The problem in the U.S. is that people have been trained to buy on price," Stofega said.

Government intervention looming?
But not all hope is lost for Sony Ericsson and Nokia in their quest to crack open the unlocked cell phone market in the U.S. These companies may get a little help from the government. Congress and the Federal Communications Commission are already investigating exclusive deals made between wireless carriers and handset makers. And some officials are even questioning the carrier practice of disabling certain features.

It's difficult to say if either the FCC or Congress will actually do something to limit this practice, which could help open up the unlocked market. While a move like this would certainly increase choice for consumers, it could also drive up costs for consumers. Given this consequences and the fact that the phone companies have a strong lobbying organization in Washington, it seems unlikely that government intervention will happen any time soon.

That said, the government has imposed unpopular rules on the phone companies previously. For example, wireless phone companies are now required to allow consumers to take their phone numbers with them when they switch carriers, which was a move that was initially highly unpopular with carriers.

The best solution for cracking the unlocked phone market is for phone manufacturers to develop new business models that will keep consumer costs low, but still reward carriers and phone manufacturers. Medina suggests that Sony Ericsson could subsidize the cost of its phones by charging for mobile games and applications. This is a model that has worked well in the game console market. And there are already indications that consumers are hungry for mobile applications. The success of Apple's App Store is proof of that.

But again price is a big factor in the success of such a plan. Through the App Store, consumers are already being conditioned to get applications for free or for 99 cents.

"Right now unlocked phones will likely not appeal to the mainstream market," Sony Ericsson's Medina admits. "Whenever you have a subsidized model, it is always going to be cheaper to buy a subsidized product. But there are different ways to address this, and we think right now we have a strong offering for hard core cell phone enthusiasts, who want the flexibility of an unlocked phone. But we are also looking at other revenue streams to subsidize unlocked phones."