Wireless

An FCC commissioner has sent an open letter to Verizon Wireless, scolding the carrier for its new early termination fees.

Mignon Clyburn,
FCC commissioner

(Credit: FCC)

Mignon Clyburn, one of five members of the Federal Communications Commission, was responding to the defense that Verizon sent the FCC last week about early termination fees, or EFTs.

"The company's answers...are unsatisfying and, in some cases, troubling. In particular, I am concerned about what appears to be a shifting and tenuous rationale for ETFs," she said in a statement (PDF) released Wednesday by the FCC. "No longer is the claim that ETFs are tied solely to the true cost of the wireless device; rather, they are now also used to foot the bill for 'advertising costs, commissions for sales personnel, and store costs.'"

Verizon's early termination fees recently climbed from $175 to $350 for smartphones and other "advanced devices." In early December, the FCC asked Verizon to explain itself.

Among its defenses, Verizon asserted that the fees enable the company to sell phones at lower upfront prices and to reduce losses if customers break their contracts early. The carrier also noted that it prorates the fees and that the additional revenue helps keep its broadband network strong.

Clyburn asserted that consumers already pay hefty amounts to carriers. "So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served," she said.

"I am also alarmed by the fact that many consumers have been charged phantom fees for inadvertently pressing a key on their phones thereby launching Verizon Wireless's mobile Internet service. The company asserted in its response...that it 'does not charge users when the browser is launched,' but recent press reports and consumer complaints strongly suggest otherwise."

A Verizon representative told Bloomberg that the company will "take a good hard look at her concerns and address them in an appropriate fashion."

As a company that has built a business model atop trust, Google is in a sticky position as it prepares to formally introduce the Nexus One phone.

Google's Nexus One phone could be a sea change in how Google works with Android partners who might turn into competitors.

(Credit: Cory O'Brien via Twitter)

Google employees were given free Nexus One phones at a company party Friday night, and the Internet went into a tizzy. Reports surfaced later in the weekend that this device was the long-awaited Google phone, the company's answer to Apple's strategy of controlling the hardware, software, and distribution model with the iPhone, rather than the partner-oriented strategy of developing the guts of the operating system and letting partners each put their own stamp on the finished product.

Just two months ago, Google's Andy Rubin rolled his eyes when asked about an analyst report picked up by TheStreet.com that said Google planned to pursue this exact strategy. He said Google had no plans to make its own hardware--which is one thing since smartphones are almost exclusively manufactured by contractors in China and Taiwan--but he took a further step in spending about 10 minutes arguing why it would be a bad idea for Google to design its own phone and sell it outside of carrier channels.

That line of thinking resonated with many who follow Google and the mobile industry. After all, Google's stated goal for Android ever since the project was revealed in November 2007 was to create an "ecosystem" of multiple phones that would help improve access to the mobile Internet. And Google seemed to finally reach that goal this year, with over a dozen phones in the wild and more promised from some of the world's leading phone makers and wireless carriers.

But if the reports are correct, Google is about to make a radical departure from that strategy. And Google's new course would take it down a path that could sow distrust among the company's Open Handset Alliance partners, who must now be wondering if they're about to get into a marketing war with one of the tech industry's richest companies.

Katie Watson, a Google representative, said on Sunday that the company has confirmed nothing about its plans for the Nexus One, described as a "dogfooding" experiment for internal testing by the company in a blog post Saturday.

In the rush to anoint the Nexus One as the Google Phone, it's quite possible that the tech industry glossed over the fact that Google already sells Android phones, albeit on a limited basis. For quite some time, registered Android developers have been able to buy completely unlocked versions of the G1 and the T-Mobile MyTouch3G (also known as the Google Ion) for $399.

Google does sell some phones, such as the Google Ion, but only to developers for Android testing purposes.

(Credit: Stephen Shankland/CNET)

So there is a solid chance that the Nexus One is merely the Android Dev Phone 3, following the Dev Phone 1 (G1) and Dev Phone 2 (MyTouch or Ion). Just this year, Google handed out Dev Phone 2 models branded as the Google Ion to attendees at Google I/O 2009, but if regular people want to buy that particular phone they have to get the MyTouch3G from T-Mobile with a two-year contract.

It does seem clear that Google has played the premier role in designing the software for the Nexus One. In the company's blog post over the weekend, it said "we recently came up with the concept of a mobile lab, which is a device that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities, and we shared this device with Google employees across the globe."

But the key unconfirmed detail is how Google plans to sell this phone. According to The Wall Street Journal, Google plans to sell this phone unsubsidized on its own, with consumers able to choose a wireless service provider after the fact. However, according to corporate sibling Peter Kafka at All Things D's MediaMemo and Reuters, Google has plans to hook up with longtime mobile partner T-Mobile to help sell the Nexus One through Google's Web site for $199.

How will Google market this phone? Anyone with a television set has likely seen an ad over the last month for the Motorola Droid, an Android phone sold for Verizon's network that has been billed as one of the best Android phones to date. It was also the launch pad for a long-term pact between Google and Verizon that will supposedly produce a family of devices based on Android.

If Google plans to sell the Nexus One directly to consumers, will it insist upon using its brand as the lead brand, rather than the "With Google" branding found on the back of many Android phones? Will it blast the airwaves during the NFL playoffs in January to trumpet the arrival of the Nexus One, perhaps just in time for the Super Bowl? And how will that affect partners such as Motorola and Verizon that have sunk so much money into promoting the Droid, only to see rumors of a Google Phone leak out at the worst possible time: the height of the holiday shopping season?

This could be a very telling moment in Google's history. At the moment, Google's mobile division does not seem to be completely in control of the message it wants to send consumers, partners, and competitors.

If Google really does plan to sell the Nexus One directly to consumers and compete with its customers, it has chosen an interesting way to announce it to the world, keeping the Google Phone rumor mill alive for months while publicly denying such plans. Apple has employed such a marketing strategy for years, insisting on near-silence regarding future product plans but benefiting enormously from the frenzy of interest in every little morsel that mysteriously pops up regarding those plans.

However, Google is not Apple. Google public-relations representatives will sheepishly admit that they have little control over how Google rolls out its products: Google is a company run by engineers, and engineers push the button when the product is ready to ship.

But when you're working in an environment with multiple partners that have competing interests, any confusion over your future plans--especially plans that would appear to yank the floor away--can breed distrust among those partners. One of Google's largest problems right now is that it has built a business model geared around the notion that it can be trusted with almost unprecedented control over the flow of information across the globe, and any cracks in that wall of trust will be exploited by its enemies.

With the way details have trickled out about the Nexus One, Google has either alienated current and future Android partners by muscling in on their turf, or set up thousands of eager smartphone consumers looking for an open alternative to the iPhone for disappointment when they realize Google merely plans to sell an expensive unlocked phone to a limited audience, if at all.

After all, Google essentially declared in its blog post that employees are testing a product with "new mobile features and capabilities" that presumably can't be found on the current crop of phones. It's almost the same language Google used to introduce Chrome OS ("our attempt to re-think what operating systems should be") while insisting that it had no competitive reasons for introducing that Netbook operating system.

Few believed that line with Chrome OS, and fewer still will believe that Google is creating Android for the betterment of humanity if it really plans to sell its own phone.

If you were watching Florida impersonate a headless chicken against Alabama Saturday, you might have been aware that Luke Wilson, AT&T's disarming new pitchman, had also lost his head.

For the game was interrupted by Wilson's need to talk, with his filmic features and without.

The battle between AT&T and Verizon has been peppered by startling doses of objectivity. So to demonstrate the clear, obvious, incontrovertible fact that Verizon's 3G is but a Wendy's-stuffing, cake-loving, 15-beers-a-night slob when compared with AT&T's Usain Bolt, Wilson performs a side-by-side that would put the Pepsi Challenge to shame.

On AT&T's 3G, Wilson, finally not dressed in a painful shade of tree bark, downloads himself with the speed of an unfaithful, burglarizing vicar fleeing from the press.

When he tries using the Verizon 3G, which AT&T declares is very much slower, Wilson is up to his neck in it. There is no time to bring his head into the picture.

Naturally, AT&T's hope is that Wilson's charm will encourage people to use their hearts at least as much as their heads. No one using the latter will really believe he is using Verizon's 3G to materialize his headless self.

So smartphone seekers will be left trying to decide between a network that is allegedly everywhere, but is slow, and one which, according to critics, isn't remotely everywhere, but is faster and, oh, has that supposed digitally clueless pageant queen of an iPhone.

It's not quite George Clooney vs. Brad Pitt, is it? It's more, well, Luke Wilson vs. Owen Wilson.

Perhaps you have already become used to Verizon's Droid tossing names at the iPhone like an 8-year-old boy behind his teacher's back.

However, the latest ill feelings directed at Apple's little cutey seem beyond even anything heard in an elementary school.

In a new TV spot, Droid asks an important question: "Should a phone be pretty?" To which many sane people would say "yes," and many emotionally challenged beings made of metal would say, "Huh? What?"

Its answer--the latest in its presentation of the Droid as a robotphone--is to hurl metallic-tasting custard pies as if the Apple store was a state fair.

"Should it be a tiara-wearing digitally clueless beauty pageant queen?" belches the ad's rhetoric, clearly referencing the iPhone, while wrapping the pie in a question.

I know many Socratically-inclined Apple fanpersons will object to the notion that beauty is only skin deep. But they will surely rail against the mere suggestion that the iPhone is digitally clueless.

Of course, this ad implicitly suggests that the Droid is, well, one of Cinderella's sisters, which might well affect its abilities to entice certain sectors of the populace.

Actually, the suggestion is more than implicit, for the deeply hirsute voice declares: "Is it a precious porcelain figurine of a phone? In truth, no."

So do you wait for a design that is pretty and is, as this ad so elegantly puts it, "racehorse duct-taped to a Scud missile fast" or do you have to compromise?

I know they say you can't have everything in life, but surely there must be some very attractive engineer out there who can give us everything in a few square inches of cell phone.

Verizon Wireless and AT&T have ended their public legal spat over advertising, and have thus agreed to stop complaining about each other's advertising campaigns.

On Wednesday AT&T announced it dropped its suit against Verizon Wireless for allegedly misleading customers by showing its weak 3G coverage. And Verizon said it agreed to drop a suit it filed earlier this year against AT&T for claiming it had the "More Bars in More Places," the "Best Coverage," and the "Best Worldwide Coverage."

In its amended suit filed in August, Verizon said that AT&T had no basis to refer to its network as the best, because Verizon claims in its own advertising to have "America's Most Reliable 3G Network" and "America's Best 3G Network."

"Through these advertisements, AT&T claims to have a wireless network that is superior, both qualitatively ("More Bars") and quantitatively ("More Places") to the wireless networks of all other U.S. wireless carriers, including Verizon Wireless, both in the United States and worldwide, when in fact, none of those claims is true," Verizon said in its complaint.

But now it looks like AT&T and Verizon have made peace with one another, as AT&T dropped its case in Atlanta and Verizon dismissed its case filed in New York.

However, the lawsuits bring up an interesting trend that was noted recently in an article published by The New York Times. Increasingly, companies are suing each other over claims made in their advertising campaigns.

In addition to AT&T and Verizon Wireless, other longtime foes, such as shampoo and soap makers Pantene and Dove, dog food makers Science Diet and Iams, and soup companies Campbell Soup and Progresso have all haggled over ads, challenging competitors to prove their claims.

Some complaints over "misleading" advertising are filed with the National Advertising Division of the Council of Better Business Bureaus, which is the industry's main self-regulatory program for national ads. But others go to court and file lawsuits under the Lanham Act, which was passed in 1946 to strengthen trademark law. Verizon's lawsuit cited the Lanham Act.

While these lawsuits and complaints may be legitimate, the truth is that most consumers take these advertisements claiming to be the "best" or the "strongest" at anything with a grain of salt. And there is some indication that the mere publicity from these lawsuits can backfire on companies, giving consumers a negative impression of the company that files the lawsuit.

It can be argued that this has happened to AT&T. There have already been numerous reports about problems with AT&T's network, particularly for iPhone users. And when the company filed its lawsuit against Verizon, many consumers expressed anger at AT&T for whining about the advertisement, when many felt that the claims expressed in the advertisement were true.

By contrast, Verizon's lawsuit against AT&T was not well-publicized. In fact, most technology reporters and bloggers hadn't even known about or mentioned the suit until Wednesday when the two companies agreed to drop litigation against each other. It remains to be seen if consumers will also deem the dismissed Verizon lawsuit a bit whiny.

If you thought that all wireless carriers know just how good their competitors' networks are, you might be suffering from a dropped conception.

In a recent speech to the Association of National Advertisers, posted on the AdAge Web site, Verizon Chief Marketing Officer John Stratton explained that his company couldn't get hold of any good data on just how reliable AT&T's network is. So it commissioned a third-party survey, one that seems to have sent it giddy with joy.

"What we saw, we sort of suspected, but it was almost astounding," he said.

So almost astounding, in fact, that Stratton said the company canned its fourth-quarter holiday campaign, which had already been produced but not yet aired (and presumably did not mention AT&T), and began mapping out its besmirchment of its rival's alleged network deficiencies.

"There was a bit of fact here that needed to be expressed aggressively to the marketplace," he added.

The bit of fact, which AT&T feels has been stretched into the part of the bookstore entitled "fiction," revolved around the accusation that AT&T's network has more holes than your average chunk of emmental.

The new Verizon ads seem certainly to have stirred a girding of loins in the marketplace and perhaps helped sales of the Droid, which are approaching 1 million.

Stratton added that because people are using cell phones in so many more ways, the strength of a company's network will be an increasingly important factor in consumer choice.

Strangely, he said nothing about Verizon one day offering the iPhone on its network.

There again, with the agility the company showed in producing the anti-AT&T ads so quickly, perhaps they're already shooting some happy Verizon iPhone ads. You know, just in case. You know, somewhere in Fiji, perhaps. You know, with the money they're saving now that AT&T has dropped its lawsuit against the map ads.

AT&T has dismissed its lawsuit against Verizon Wireless for using an advertisement that AT&T complained confused customers about its 3G wireless coverage.

(Credit: Verizon Wireless)

On Wednesday, AT&T formally dismissed the lawsuit. Last month, the wireless operator suffered a major legal setback when a judge rejected the company's request to force Verizon to pull its "There's A Map For That" advertising campaign.

AT&T filed its lawsuit in federal court in Atlanta in early November asserting that Verizon Wireless' advertisements mislead customers by suggesting that AT&T subscribers cannot access wireless Internet services throughout its network. AT&T has called the ads blatantly false and has said that the commercials have caused irreparable harm to the company.

The advertisements that Verizon is running show two maps that each indicate 3G wireless coverage. One map shows coverage for Verizon and the other depicts AT&T's coverage. Verizon just recently started airing another commercial that depicts Santa Claus' reindeer referring to Verizon's and AT&T's 3G coverage maps.

AT&T has also started running its own advertisements that are critical of Verizon Wireless. The ads feature Luke Wilson and slam Verizon for not allowing users to talk and surf the Web at the same time, something that wireless subscribers can do on AT&T smartphones.

Verizon Wireless declined to comment on the news of the dismissal. And AT&T also declined to comment further on the matter.

Motorola's and Verizon Wireless' $100 million marketing campaign for the Motorola Droid seems to be paying off with strong sales that will likely result in more than 1 million devices being sold by the end of the year.

The Droid, the only smartphone currently on the market that uses Google Android's 2.0 operating system, is Motorola's second Android device and it's available only on Verizon Wireless's network. The device is turning out to be the hit phone of the season, thanks in large part to an expensive and extensive advertising campaign.

Motorola Droid

(Credit: Motorola)

Neither company is reporting sales figures. But analysts say sales look good. The companies have likely sold between 700,000 and 800,000 Droids since the device was launched in early November, according to equity analyst Mark Sue of RBC Capital Markets.

"Verizon's big marketing push for the Droid is strengthening as we close in on the holidays, and following our round of checks, we believe about 700,000 to 800,000 Droids have been sold, making our hurdle of 1 [million] Motorola Droids achievable for 4Q09 [ending December 31]," Sue said in his research note. "Motorola, for its part, has done a good job on the production side, and our survey of over 100 stores indicates strong demand, limited stock outs, and very few returns."

John Stratton, executive vice president and chief marketing officer for Verizon Wireless, said when the device was launched in late October that Verizon would be pouring in more money to market this device than any other phone it has ever sold. And now it looks like the money has been well spent. From advertisements that specifically highlight the Droid to ones that focus on Verizon's extensive and reliable 3G wireless network, it's clear that the company has AT&T and the Apple iPhone in its crosshairs.

AT&T has actually sued Verizon over the advertisements about its 3G wireless network coverage.

Some Verizon Wireless stores, especially in major cities, are selling between 100 and 200 Droids per week since the launch in early November, Sue added.

The success of the Droid is good news both for Motorola and for Verizon Wireless.

Motorola comeback
For Motorola, the Droid represents a chance to make a comeback in the cell phone market. The iconic American company that practically invented the cell phone market has struggled for the past several years now. After the runaway success of the ultra-thin Motorola Razr in 2004, the company has been unable to come up with a hit phone. And it has steadily lost market share to other competitors, such as Nokia, Samsung, and LG Electronics. It's also ceded market share in the fastest growing segment of the market, smartphones, to newcomers like Apple and Research In Motion.

Motorola's mobile devices CEO Sanjay Jha took a bold gamble more than a year ago when he decided to dedicate the company's resources to building phones using the Google Android operating system. The Droid and the Motorola Cliq, which is exclusively sold on T-Mobile USA's network, are the first two Motorola Android phones to hit the market.

But Jha said the Google Android operating system will not only be used in high-end devices like the Droid, but it will also be used to power less expensive phones, creating a new tier of smartphones that will eventually replace the basic feature phone category. Jha said the company will launch at least 20 more Android devices in 2010.

The success of the Droid is an important first step in getting Motorola back on track. But equity analyst Ittai Kidron of Oppenheimer said in a research note Monday that sales of the Motorola Cliq are falling short of expectations. Motorola is expected to sell 1.5 million smartphones in the fourth quarter. And two-thirds of them are expected to be Droids.

Kidron said the Cliq is not selling well mostly because of issues with battery life. Motorola is supposedly preparing a software patch to fix the problem. But he also noted that T-Mobile appears to be losing interest in the device and is not marketing it heavily.

But T-Mobile says that the Cliq is doing just fine. And the carrier said that it's committed to marketing the phone through the holiday season.

"The Motorola Cliq is very popular among our highly connected customers and is the only device with Motorola's innovative Motoblur solution," a company spokesman said. "T-Mobile is excited about the Motorola Cliq for the holidays and continues to showcase it prominently in T-Mobile retail stores and with recent holiday deals."

Verizon's iPhone alternative
The Droid's success is also important to Verizon Wireless, the nation's largest wireless operator in the country. It is the first device that offers a true challenge to Apple's iPhone, which runs exclusively in the U.S. on AT&T's network. While Verizon has a strong reputation for its network, consumers often complain about its lack of cool phones. Up to this point, Verizon has mainly competed against AT&T and the iPhone with RIM's BlackBerry devices. But RIM's touch-screen BlackBerry Storm, which was first introduced a year ago, was largely a disappointment.

The Droid offers Verizon customers an alternative to the iPhone on the Verizon network. This fact could help Verizon retain some consumers who were thinking of leaving for the iPhone. But it might also attract new customers who are either disappointed with AT&T's service or have heard bad things about the network.

Verizon Wireless representatives say the Droid is certainly an important part of the company's device line-up.

"We are pleased with sales over the holiday weekend," Brenda Raney, a spokeswoman for the carrier said in an e-mail. "This phone clearly fits the needs of a number of customers who are excited about its availability on the Verizon Wireless network."

But if analyst data is to be trusted, it is clear that the huge marketing budget for the Droid is at least part of the reason why the device has been so successful. The HTC Droid Eris, another Android device sold exclusively on Verizon's network, is not selling as well as the Droid, Sue said in his note. The HTC Droid Eris went on sale the same day the Droid was launched, but with much less fanfare.

Part of the problem is the fact that there are many Android devices coming to market. And the number will only increase next year. The lesson from the success of the Motorola Droid is clear. If device makers and carriers hope for break-out success, then they will have to spend big on marketing.

(Credit: Phandroid)

Oh, you knew someone was going to do this. So let's just get it over with. And though some might think of this as a battle between the Droid and the iPhone for the nation's morality, let's be open-source about it: someone's trying to make a lot of money from cell phone porn.

A company with the obtusely childlike name MiKandi has launched a mobile app store that will exclusively cater to adults whose brain food consists of content that reflects their age. Yes, the sort of stuff some prefer to refer to as porn.

MiKandi's publicity material naturally avoids this term, referring to the more PC phrase "adult only." However, there is a little kink in its offering. According to Android fanperson site, Phandroid, the MiKandi Market apps only work with Android phones and not with Apple's more morally minded handsets.

Cupertino steadfastly sticks to its policy of refusing to allow apps filled purely with adult content, though some might dispute whether its definition of "adult" isn't occasionally a little idiosyncratic.

Not for a moment would one suggest that Verizon or Motorola or the deities at Google are necessarily in favor of porn apps. However, MiKandi is attempting to take advantage of the fact that the Android system is more open than the iPhone's.

So while the Android Market itself doesn't offer porn, nothing on your Droid phone prevents you from using MiKandi's services. The wise people at Phandroid do, however, offer stern warnings about MiKandi's workings.

Despite attempting to use MiKandi's services, purely for scientific purposes, Phandroid failed to actually secure access to any mature content. Remember, children, this sort of thing will always be a somewhat risky business.