Executives from the nation's largest phone companies went to Capitol Hill Tuesday to defend themselves against allegations that they've been fixing prices on text messaging.
Executives from AT&T and Verizon Communications testified before the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights, saying their companies have not been involved in a conspiracy to hike text messaging rates. And they argued that competition is alive and well in the wireless market.
The hearing was called in response to a letter sent in September from Sen. Herb Kohl (D-Wis.) to the four major U.S. operators--Verizon, AT&T, Sprint Nextel, and T-Mobile USA--asking them to explain why their text rates had all increased to 20 cents per message. Kohl noted in his letter that these rates marked a 100 percent increase since 2005.
Shortly after the letter was sent, about 37 separate class action lawsuits were filed against wireless operators alleging price-fixing on text-messaging services.
Both AT&T and Verizon have denied these claims. And the companies came to Capitol Hill to clear their names.
"Especially in light of this litigation firestorm, we want to make it perfectly clear that AT&T sets the prices for all of its products on a unilateral basis," said Wayne Watts, general counsel for AT&T, in his written testimony. "There is no evidence to support an accusation that anyone at AT&T engaged in any inappropriate, much less illegal, behavior as alleged in these lawsuits."
Watts also noted that none of the lawsuits name a time, place, or person involved in the collusion, and all but one of the suits filed cite Kohl's letter as the basis for its allegations.
Plaintiffs in the lawsuits point to the fact that all four major U.S. carriers now charge customers 20 cents to send and receive a text message if they don't have a monthly texting plan. In his September letter, Kohl pointed to the 20 cent per text price tag and asked if this price hike really justified the cost of the service.
In his letter, Kohl also suggested that the wireless industry is not competitive enough. He noted that the four carriers combined currently serve more than 90 percent of wireless subscribers in the U.S.
AT&T and Verizon executives dispute that they have colluded to fix prices on texts, but they also deny that texting rates have increased. Instead, they claim that prices have fallen for text messaging as a result of robust competition.
Verizon's general counsel, Randal Milch, said in his written testimony that there are more differences in text-messaging prices among wireless competitors than there are similarities. And he noted that most Verizon Wireless customers subscribe to a texting plan, and as a result they "pay less than a penny per message," a reduction of almost two-thirds since 2006.
"As the result of the price cuts, usage has grown six-fold," he said.
Milch also called claims that the wireless companies were improperly setting rates "absolutely false." And he said that "market evidence shows fierce competition, not collusion, in text messaging and wireless generally."
The CTIA, the trade association representing wireless carriers, also said that competition in the wireless market is thriving.
"The U.S. wireless industry is the most competitive and innovative in the world. Third-party organizations and influentials--from Consumer Reports Magazine to former Vice President Al Gore--have echoed this statement," Steve Largent, head of the CTIA, said in statement.
Despite these claims, Kohl said he is still concerned about the state of competition in the wireless market, according to a report from the Dow Jones Newswire. Specifically, he pointed out exclusivity deals for popular cell phones, such as the Apple iPhone or the Palm Pre, that limit some consumers' ability to have access to those devices.
Cell phone taxes emerged yet again in Congress this week when Rep. Zoe Lofgren (D-Calif.) and Rep. Trent Franks (R-Ariz.) introduced the Cell Phone Tax Fairness Act of 2009 (HR 1521).
The bill, which has 20 additional cosponsors, would ban state or local jurisdictions from imposing "a new discriminatory tax on or with respect to mobile services, mobile service providers, or mobile service property, during the five-year period beginning on the date of enactment of this Act."
The legislation would not affect current state and local taxes, nor would it affect federal taxes, like the FCC Universal Charge. The Federal Excise Tax from the Spanish-American War was disconnected in 2006.
In statement, Lofgren said she hopes that the bill would further innovation and access in the wireless world. "The Cell Tax Fairness Act does not take away any existing revenue for state or local governments, it simply calls for a period of tax stabilization," she said. "This legislation will ensure that consumers make choices about communications technology based on the merits of that technology, rather than on the rate of taxation."
The wireless industry's lobbying arm, the Cellular Telecommunications Industry Association (CTIA), is supporting the bill. In its own statement, the association said it was glad to see "Congress moving ahead in the right direction to ease the tax burden on wireless customers." According to the CTIA, U.S. wireless subscribers paid $21 billion in federal, state, and local wireless taxes and fees during 2008.
The Tax Fairness Act is has been referred to the House Judiciary Committee. Wireless taxes were the subject of four similar bills introduced in the last Congress, one of which Lofgren drafted. None of the bills, however, emerged from committee for a full floor vote.
Microsoft is gearing up to take on rival Apple in the smartphone market.
The Wall Street Journal reported Monday that Microsoft is getting ready to launch an online marketplace akin to Apple's App Store. In August, Microsoft had started looking for people to head up the new application store. Microsoft is also readying a more sophisticated version of its mobile operating system called Windows Mobile 6.5, the Journal reported.
Smartphones are sophisticated mobile phones that offer users access to the Web and e-mail, as well as, provide phone calling and all kinds of other messaging options. This category of device is the hottest thing going in the mobile market and is seen as the biggest growth engine for mobile devices over the next few years.
Microsoft, which only makes the operating software for these devices, holds third place in terms of worldwide market share, according to research firm IDC. Symbian, which powers Nokia's smartphones, is by far the leader, followed by Research In Motion with its BlackBerry devices. Even though Apple seems to be the most talked about smartphone on the market these days, it's only in fifth place in terms of overall market share for 2008, IDC said.
But Apple is quickly gobbling up market share and has become a serious threat to Microsoft and every other company competing in the smartphone market. With the release of the iPhone 3G last summer, Apple has tripled its market share from 3 percent in 2007 to 9 percent in 2008, according to IDC. Meanwhile, Microsoft only grew from 11 percent market share in 2007 to 12.3 percent in 2008.
Microsoft is facing several challenges as it tries to catch Apple's growth rate. For one, the company's business model is based primarily on licensing software to hardware vendors. While this business model worked fine just a couple of years ago, it's difficult to justify now given that device makers can get free software from Symbian, Google Android, and Linux.
The second problem that Microsoft faces is that the company has been almost exclusively focused on business customers. Over the past year, smartphone users have gravitated toward more consumer applications. In addition, to their work e-mail, they want multimedia functionality and social-networking applications on their phones.
"Microsoft is in a really tough spot," said Ryan Reith, an analyst with IDC. "It has to change its value proposition. And a big part of that is refreshing its user interface and making the device more consumer-friendly."
Reith believes this is why it's critical for Microsoft to develop an application marketplace that can compete with Apple's App Store. The App Store went live last summer and offers thousands of applications for the iPhone and iPod Touch music player. The store has been very successful with users downloading thousands of free and fee-based applications.
Microsoft already has a developer community creating applications for Windows Mobile devices. But the problem is that many of these applications have been geared toward business users. And there is not a single destination that makes it easy for users to discover and download different applications.
"Clearly smartphones are not just for business users anymore," Reith said. "Microsoft needs to work with the developer community to get more consumer applications out there."
Microsoft's executives have gotten the message that consumer functionality is hot. And Andy Lees, head of Microsoft's mobile business unit, told the Journal that the company is about to put more emphasis on multimedia and other consumer functions like music and photos.
Microsoft is expected to unveil its new offerings next week at the Mobile World Congress trade show in Barcelona, Spain. Chief Executive Steve Ballmer will be delivering a keynote speech there on February 16. I will be there next week covering the news from the show, as will my CNET Reviews colleagues Bonnie Cha and Kent German.
But even with these enhancements, Microsoft has a tough road ahead of it. Competition in the smartphone market is increasing. And several competitors, including Android and RIM, are launching their own version of an application store.
On the handset and operating system side, new devices are coming to market that could provide stiff competition for Windows Mobile devices. For example, smartphone pioneer Palm is coming out with new mobile software and a device called Pre later this year. And even though critics have been writing the company's obituary for the last year, the new device, which was unveiled last month at the Consumer Electronics Show in Las Vegas, has been getting a lot of buzz.
But Microsoft thinks it has the right enhancements lined up to take on these competitors, especially Apple.
The Journal also reported that Microsoft is talking about a new synchronized data storage service called My Phone. This new service is supposed to make it easier for people to back up their mobile contacts, calendar appointments, photos and text messages, to a Web site. The service is similar to a service that Apple calls MobileMe. The biggest difference will be that Microsoft will offer My Phone for free whereas Apple charges $99 a year for MobileMe.
It's too soon to know how Microsoft's new software and application store will stack up against Apple's offering. But one thing is certain, Apple isn't sitting still either. And if Microsoft or any other competitors want to hasten Apple's rise in this market, they'll have to leap-frog Apple with something truly revolutionary.
This was originally posted at ZDNet's Between the Lines.
The LiMo Foundation on Monday said the second release of its Linux-based handset platform is on target. LiMo added that it will show off the latest platform at the Mobile World Congress in Barcelona, Spain, next week.
According to LiMo, its members are introducing reference implementations of the latest release (statement). The primary goals are to make the platform easier to deploy and add Web 2.0 features.
LiMo (all resources) is an open platform supported by a bevy of wireless-industry players.
Access, Azingo, LG Electronics, Purple Labs, and Samsung Electronics contributed code to the LiMo Platform R2. LiMo maintains that it isn't going head-to-head with mobile platforms like Google's Android because it is focused more on the middleware side of the equation.
Separately, LiMo said it will endorse the OMTP (Open Mobile Terminal Platform) Bondi specification, which allows Web applications and widgets to use native functionality such as calendars, contact lists, and cameras. LiMo said in a statement:
The mobile industry has lacked a common specification that allows for easy reuse and portability of Web applications and widgets--often forcing developers to repeatedly rewrite their code in order for their program to run on the many different types of mobile handsets.
Bondi creates a common interface between these applications and the underlying handset functionality to ensure seamless deployment of innovative Web applications. Any Web engine or browser can use the Bondi open interfaces to enable Web 2.0 applications and widgets to easily use the powerful capabilities of today's mobile devices.
The foundation also said Wind River will be the systems integrator of choice for deploying the LiMo platform.
Microsoft appears poised to officially unveil a Web-based service that will let users store, share, and back up data from their mobile phones.
Provided, that is, that the phones run Microsoft's Windows Mobile 6 phone operating system. And the service will be available as only a limited beta to start with.
Details of Microsoft's impending My Phone service slipped out inadvertently when the Web site went live ahead of its scheduled debut. The site appears to have been spotted first by Engadget Mobile, which also referred to the service as SkyBox.
Microsoft's My Phone service is intended to provide backup and other services for Windows Mobile 6 users.
According to the Microsoft My Phone site, the service will let users back up and restore the phone's data, access contact and scheduling information, and share photos. Users will get 200MB of free storage, but beware--a synchronization attempt that exceeds the limit will cut off any files beyond the 200MB mark.
... Read more
If you think the biggest problem with a camera phone is the poor quality of the photos, a member of Congress might make you think again. Earlier this month, Rep. Pete King (R-N.Y.) introduced a bill in the House of Representatives that would ban camera phones from having a silent mode when taking a picture.
The Camera Phone Predator Alert Act (H.R. 414) would "require any mobile phone containing a digital camera to sound a tone whenever a photograph is taken." What's more, the bill would prohibit such handsets from being equipped with a means of disabling or silencing the tone. Enforcement would be through the Consumer Product Safety Commission.
The text of the bill is short, and King's office has not released any public statements. Yet, the reasoning behind the legislation is clear. The text states that "Congress finds that children and adolescents have been exploited by photographs taken in dressing rooms and public places with the use of a camera phone."
At the time of this writing the bill has been referred to the House Energy and Commerce. The Camera Phone Predator Alert Act has no co-sponsors.
Updated at 4:45 p.m. PDT to clarify that portable receivers are capable of receiving live program signals.
The marriage of satellite radio providers Sirius and XM has finally received the blessing of the Federal Communications Commission on Friday. Now we can all finally get the game we want.
For many prospective customers, a key sticking point was the different selections of sports programming offered exclusively by each provider. A few years back, I wanted to make a present of a Sirius subscription to a friend who spends a lot of time driving around Northern California, especially in places that don't get AM/FM signals. After sampling XM and Sirius' music selections, I knew that she would enjoy the Sirius offerings over the XM offerings. But XM broadcasts more games of the sports she enjoyed--just not all of them. There really wasn't a clear winner. So, to keep from saddling her with the wrong or incomplete service, I opted against the gift. Basically, the lack of a comprehensive offering cost the industry a customer.
I suspect that this was a dilemma faced by many listeners who were in search of more than their local radio stations could offer. But the merger means that listeners will be able to choose from a menu to add programming a la carte. For subscribers, this is a big win in programming. You can also bet that the prospect of replacing existing receivers will irritate early adopters.
Critics, however, will tell you that the merger will result in a monopoly. While the elimination of immediate industry competition will create a de facto monopoly, satellite radio is not the only source of music, talk, or sports broadcasting available to consumers. People are getting their music from many sources today. Besides satellite radio, people are finding their favorite tunes on Internet radio, MP3 players, music-playing cell phones and even traditional terrestrial radio.
To tell the truth, I don't listen to terrestrial radio, or traditional free radio, much anymore, unless there is a game I can't get on television. Indeed, "free radio" offers one of the more exciting and attractive music options in the form of HD radio. Unfortunately, some four years after HD radio hit airwaves, consumers have not embraced the new format, which ultimately suffers in comparison with satellite radio because of its limited range. If I weren't so pleased with Sirius' music programming and the fact that it's offered as part of my Dish subscription, I would probably spring for an HD receiver to plug into my A/V home receiver. But I keep waiting for an affordable A/V receiver to come on the market that has HD radio built in as part of the tuner. When that happens, expect home satellite subscriptions to wane a little.
(Disclosure: I listen to music-only Sirius at home via Dish Network and a complete subscription in my wife's car. The only financial interest I have in either company comes in the form of monthly subscription bills.)
You might think that the satellite industry has the upper hand in broadcasting. But while we're on the topic of things we're waiting for, let's look at some of the things the satellite industry can improve. While Sirius now touts portable units as being capable of receiving live signals, many users complain of spotty or poor reception while on the go. Also, while traffic and weather reports for a few metropolitan areas is great, satellite radio can't provide the same content as local news radio stations, so it would be nice have a portable unit that also gets AM/FM radio stations.
As a prerequisite for FCC approval, the companies agreed to freeze subscription rates for three years. If they try to jack the prices on consumers, expect consumers to change the dial, especially with the wide variety of options that are available to consumers today.
How will this merger affect your listening habits? Write in to TalkBack and let us know.
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