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A judge in California has ruled that Sprint Nextel's early termination fees are illegal and said the wireless operator should pay back $18.2 million in collected fees to consumers, a decision that could help sway decisions on similar cases throughout the country.

The preliminary decision released earlier this week is a major blow to Sprint and to other phone companies in their battle to defend themselves against angry consumers who say the fees imposed on them when they leave the companies' services are unlawful.

Verizon Wireless, which was also being sued in California, has already settled its case, agreeing to pay $21 million to settle all claims against the company. And after the decision against Sprint, there's a chance that cases against T-Mobile and AT&T could also be settled.

T-Mobile USA is the latest mobile operator to make it easier to get out of those dreaded cell phone contracts.

On Monday the company said that it will pro-rate or reduce the cost over time of its early termination fees for contract customers. This means that customers will pay less to terminate their subscription as the end of their contract nears.

Beginning on June 28, customers with a one-year or two-year contract with T-Mobile will see their early termination fee drop from $200 to $100 if they end their contract with 91 to 180 days remaining on their agreement. If they end a contract with fewer than 91 days left on it, they will pay a termination of fee of $50. For customers who terminate their service in the last 30 days of their contract they will either pay the $50 fee or their standard monthly charge, depending on which one is cheaper.

The new policy only applies to new T-Mobile subscribers and subscribers who are renewing their contracts on or after June 28.

The battle over early termination fees has heated up recently as wireless operators face multimillion-dollar class action suits from consumers who say these fees are unfair and deter competition. Earlier this month a California state jury ruled that Sprint Nextel's fees were indeed legal in the first of these class action lawsuits.

Now the Federal Communications Commission is looking to get involved, and is considering making rules about early termination fees. Chairman Kevin Martin has included pro-rated contracts in his proposal, which he is hoping the commission will consider later this summer. Congress has also weighed in with proposed legislation.

Cell phone operators seem to have gotten the message. And the major players are starting to make changes. Verizon Wireless was the first major carrier to adopt a pro-rated policy almost two years ago. AT&T also announced it had changed its policy in October. Starting May 25 new AT&T subscribers will have their termination fees pro-rated over the life of their contract. The early termination fee will start at $175 and it will be reduced by $5 every month over the life of the one- and two-year contracts.

Sprint Nextel also said it will change its early termination fees. But the carrier has not implemented the new policy yet.

In addition to the new early termination policy, T-Mobile has also recently announced more options for customers who don't want a contract. The T-Mobile FlexPay plan offers T-Mobile customers its typical cell phone packages that include long-distance calling, roaming, and special rate offerings like MyFaves with no contract. Subscribers simply pay the retail cost of the phone and the regular monthly service charge for the service.

T-Mobile has also added more options for its pre-pay and pay-as-you-go customers. Consumers can choose a Pay By the Day plan. Under this plan, users pay $1 for every day they use their phone. They are given unlimited T-Mobile to T-Mobile calling and unlimited night calling from 7 p.m. to 6:59 a.m. For all other calls, users are charged 10 cents a minute. And they're charged 10 cents a minute for outgoing text messages and 5 cents a minute for incoming text messages.

T-Mobile also offers a Pay As You Go plan, which had previously been called T-Mobile To Go. This plan allows customers to pay for minutes they use. If they top off their account with $100, they get a 15 percent discount.

And finally, T-Mobile renamed its Sidekick To Go plan simply the Sidekick Prepaid plan. This plan offers users unlimited domestic e-mailing, Web surfing, instant messaging, and text messaging for $1 a day. And nationwide calling under this plan is 15 cents per minute.

The Federal Communications Commission will discuss a proposal at an open meeting Thursday that could reduce the cost of getting out of your cell phone contract.

The industry-sponsored proposal would give new cell phone customers a 30-day grace period to cancel their contracts without penalty. After those 30 days, early termination charges would then be pro-rated over the life of the contract. This means customers who want out of their contract in month 20 would pay less than those cancelling their service after only four months.

Cell phone operators have argued that they must impose early termination penalties on contracts because they subsidize the cost of the handsets. And to recoup the cost, the operators must be guaranteed a certain amount of service revenue.

AT&T and Apple just announced this week that the new iPhone 3G will be offered in this way. AT&T customers will be required to sign a two-year contract in exchange for the subsidy, which brings the cost of the new 8GB of the phone down to $199.

Customers who bought the first iPhone were also required to have a two-year contract with AT&T despite the fact that the phones were not subsidized.

In the eyes of many consumers these early termination restrictions are unfair and hamper competition. And thousands of them have banded together to file class-action lawsuits.

Check back on Thursday for coverage of the FCC hearing, which begins at 7 a.m. PDT.

The Federal Communications Commission slapped heavy fines on several retailers Thursday for failing to properly label analog TVs that will have to be retrofitted next year for digital TV when broadcasters turn off their analog signals in February.

In total, the FCC levied fines of $3.9 million on big retailers such as Sears, Wal-Mart, and Best Buy. The agency also fined other companies roughly $2.7 million for violating other digital TV rules, such as shipping analog equipment and blocking technologies such as V-chip.

Sears Holding, which operates Sears and Kmart retail stores, was fined nearly $1.1 million for failing to label products properly. Wal-Mart was fined $992,000. Circuit City Stores got a $712,000 fine. Target, Best Buy, CompUSA and Fry's Electronics were all given fines as well.

In February 2009 TV broadcasters will vacate wireless spectrum used to broadcast analog TV signals. Instead broadcasters will transmit digital TV signals, which use spectrum more efficiently and provide better picture quality. The transition to digital means that some older TVs and TVs with analog-only tuners will have to be retrofitted to tune digital signals.

Most new TVs manufactured now are ready to handle digital broadcast. But there are some TVs that are being sold that only handle analog TV signals. Last May the FCC adopted a rule requiring retailers to put some kind of label or alert on analog-only products that tells consumers that it will not receive digital TV signals without a special converter box.

The rule is part of a wider effort by the FCC to provide a smooth transition for consumers. The agency has been working with broadcasters to help educate the public. And it's providing coupon vouchers for converter boxes that will allow people to use their older analog-only TVs.

For more information on the digital TV transition, check out an FAQ on CNET News.com. And if you're looking for a digital converter box, you can check out the CNET reviews of these devices.

Could satellite TV provider Dish Network be planning to build a mobile TV service with its newly won 700Mhz spectrum?

That's the question that many analysts were asking after it was disclosed this week that the company, also known as EchoStar Communications, spent $711 million for a block of licenses in the auction that is ideal for offering mobile broadcast TV, according to a Reuters story.

The much-talked about auction ended Tuesday raising about $19.6 billion for the government. Wireless carriers AT&T and Verizon Wireless won the bulk of the spectrum.

The licenses that Dish bought were in the 6MHz sliver of spectrum called the E-Block. Because these licenses cover such a narrow band of spectrum, it would be hard for Dish to build a broadband wireless service to transmit two-way communication. This means that building a cellular phone or wireless broadband service using this spectrum is nearly impossible. But the spectrum could be used to send communications one-way, making it ideal for services such as broadcast TV.

Qualcomm already owns spectrum that is adjacent to the spectrum that Dish bought. Qualcomm uses its spectrum to deliver its MediaFlo TV mobile broadcast TV service. Qualcomm had also been bidding in the auction and was attempting to get the E-Block licenses. The fact that it wasn't able to get those licenses is a negative for the mobile technology company.

"It makes more sense for one provider to operate both pieces of spectrum," Steve Clement, an analyst at Pacific Crest Securities told Reuters.

Dish hasn't said yet what it plans to do with the spectrum. Some analysts in the Reuters story speculate that it could cost the company between $3 billion and $5 billion to build a mobile TV network. The company said in a financial filing with the Securities and Exchange Commission in February that it might "make investments in or partner with others to expand our business into mobile and portable video, data and voice services."

There's also a possibility the company could work with Qualcomm.

Dish bid on the spectrum through its partner Frontier Wireless.

As News.com's Maggie Reardon has told us, the FCC's ongoing 700MHz auction is proceeding along, albeit a bit slower than the FCC would like.

Much has been made about Google's entry into the bidding process (as Google Airwaves), but the tech giant is hardly the only company onboard. As a review, the other big bidders include AT&T Mobility, Verizon Wireless, Cox Communications, Cablevision Systems, U.S. Cellular, Leap Wireless, MetroPCS, Alltel, and Qualcomm. Also on the list is Vulcan Ventures, which is controlled by Microsoft co-founder Paul Allen. It's also interesting to see who's sitting out the auction. T-Mobile is not participating, perhaps because the carrier says it already has the spectrum it needs to launch its promised 3G network, nor are Sprint Nextel, Comcast, or Time Warner. Also, it appears that Apple is not bidding, even though it was suggested last autumn that the company was interested in joining the auction.

Unlike in previous auctions, the FCC is not identifying the names of top bidders at the close of each round. Yet, a look at the full list of bidders does reveal a few interesting tidbits. Chevron was one company I didn't expect to see. The idea of an oil company clamoring for wireless spectrum certainly seems a bit odd until you realize that one of the FCC's Cellular Market Areas (PDF) covers the Gulf of Mexico. Maybe it's because Chevron has a few oil rigs in the area that might need to communicate back to the mainland. Or on the other hand, it could be another reason entirely but it's unlikely that Chevron would start its own wireless network. Like Google, I would guess it just wants to own some spectrum. As for the other bidders, it's clear most are communications firms but a few cryptically named entrants caught me eye. There's The World Company (only the world and not the universe too?), I-700 LLC (that sounds like an interstate highway), Continuum 700 LLC, and the 585 Consortium. Five individuals are also the bidding list. They include David Miller, Scott D. Reiter, Jack E. Robinson, Thomas K. Kurian, and Laurence B. Glass (perhaps related to George Glass?). What those folks plan to do with the spectrum if they indeed win is beyond me.

Advertisements educating people about the switch in February 2009 from analog-TV to digital-TV signals could soon be airing more often, according to a story in The Wall Street Journal.

The Federal Communications Commission, along with some folks in Congress, say more public-service advertisements and announcements are needed to educate people about the switch to digital broadcasts. They fear that people still using old TV sets that get TV signals over the air will be upset when, come February 17, 2009, their TVs don't work. According to the FCC, in January 2007, some 15.5 million U.S. households still relied on the traditional over-the-air analog broadcasts.

Together with the cable industry, broadcasters have already committed to spending $900 million on educating the public about the digital transition. And they've already been airing some public-service announcements about the switch. But the FCC argues that most of those public-service announcements are aired between 12 a.m. and 6 a.m., when most people aren't watching TV.

The FCC would like to see at least four 30-second public-service ads a day about the digital transition, the Journal article said. And the agency also proposes increasing the number to as many as 12 ads a day on each station as the deadline gets closer.

Broadcasters are obviously not very happy about this proposal, since it would require them to give up valuable airtime. They have proposed an alternative plan that wouldn't require ads to run as frequently.

As a TV viewer myself, I must admit that I haven't seen any TV ads about the digital transition. And I'm sure that I'm not alone. Still, the National Association of Broadcasters has said awareness is increasing. According to a new survey by the trade organization, almost 80 percent of households with a TV have at least some knowledge of the digital transition, up from 38 percent a year ago.

But I think the bigger problem that the industry faces is confusion about what the transition means. While TVs made after March 2007 will have digital tuners built-in, TVs made before then won't. This means that some folks will have to either buy a new TV or get a digital-tuner box that costs about $40. The government is already offering vouchers to help people buy these boxes.

But having an old TV doesn't necessarily mean that a special digital-converter box is needed. People who subscribe to cable or satellite won't have to worry about the transition, regardless of when their TV was made, because their set-top boxes will do the conversion. So the only people this affects are people who still use the old rabbit ears to watch TV.

Update 10:53 a.m. PST: This blog was updated to add information about a third petition related to antidiscrimination rules for text messaging.

As foreshadowed at the Consumer Electronics Show last week, federal regulators this week took the first formal step into investigating complaints about how Internet service providers, such as Comcast, manage peer-to-peer file-sharing traffic on their networks.

The Federal Communications Commission late on Monday posted requests for public comment about two such petitions, both of which deal with the question of what practices constitute "reasonable network management"--and therefore jibe with the FCC's policies. The agency is also seeking feedback on how to handle a third petition dealing with wireless companies' policies for shuttling text messages.

One petition was filed in November by a collection of consumer advocacy groups that supports Net neutrality regulations, including Free Press, Public Knowledge, Media Access Project, and Consumers Union. Responding to reports that Comcast was throttling BitTorrent traffic, they asked the FCC to declare that "degrading peer-to-peer traffic" violates the FCC's Internet policy statement, which says consumers can generally use the applications and access the Web sites of their choosing, with an exception for "reasonable network management."

Comcast, for its part, has maintained all along that it abides by those principles and that any traffic management falls within that exception.

The second related petition came from Vuze, a file-sharing application that specializes in videos. The firm asked the FCC to "clarify" what it means by "reasonable network management" and, clearly in an attempt to protect its service, "to establish that such network management does not permit network operators to block, degrade or unreasonably discriminate against lawful Internet applications, content or technologies."

A third petition, filed jointly by many of the same consumer groups that filed the peer-to-peer petition, asks the FCC to declare that text-messaging services are subject to a portion of federal communications law that bars telecommunications companies from engaging in "any unjust or unreasonable discrimination" related to charges, services, and other practices. The request, filed in December, appears to stem primarily from a situation in which Verizon Wireless initially refused to carry text messages from a prominent reproductive rights activist group.

Anyone who has something to say about the petitions will have until February 13 to do so at the FCC's Web site or by postal mail. After reviewing the comments, the FCC is expected to decide whether to grant what the petitioners are requesting.

"These inquiries will go a long way to setting out a road map for determining who will control the Internet," said Gigi Sohn, president of Public Knowledge.

The petitions being addressed are fairly broad, but FCC Chairman Kevin Martin said at CES last week that the agency would also be looking into the specific situations involving Comcast Verizon Wireless. According to an Associated Press report from Monday, Comcast confirmed receiving a "letter of inquiry" from the FCC and said it looked forward to responding.

What will actually emerge from the inquiry--for instance, what sort of penalties would be imposed on companies found to have violated the FCC's principles--seems less clear.

"We don't comment on potential enforcement matters," FCC spokesman Clyde Ensslin said Tuesday.

Google is lining up financing to bid on wireless spectrum in the Federal Communication Commission's upcoming 700MHz auction, and it's already built a small high-speed wireless network at its headquarters in Mountain View, Calif., to test out what it could do with the spectrum, the Wall Street Journal reported Friday.

The Journal cited sources saying the company is planning on bidding in the auction, set to take place early next year. Google has obtained a test license from the FCC that it's using to test technology on a small wireless network on its campus, the article said. And it's supposedly using prototypes of handsets that use the company's newly announced Android software.

The Journal's revelation that Google will bid on the spectrum shouldn't come as a huge shock. Google's CEO Eric Schmidt has said before the company would likely bid in the upcoming auction.

After all the fuss and hoopla surrounding Google and the auction, it would seem ridiculous if the company didn't bid. Google lobbied the FCC hard for rules to be passed as part of the auction that would require license winners to allow open devices on that part of their network.

So what happens if Google actually wins some of this spectrum? That's the big question everyone is asking. It could build its own wireless network to compete against other operators like AT&T and Verizon Communications.

But building and operating a network is hard work and very expensive. I've said from the very first time Google was mentioned as a possible bidder in this auction that I don't think it will acquire spectrum to offer consumer wireless service. It just doesn't fit into the company's business model.

Google develops and delivers applications. It makes money via advertising. And all of this can be done without taking on the expense of becoming a wireless operator.

That said, it makes a lot of sense for Google to lease spectrum to other service providers that can put up the cash to build and operate the wireless service. In this scenario, Google maintains control of the asset without having to deal with the maintenance, management and customer service issues of running the network.

If you think about it, this approach makes a lot of sense given how Google has already positioned itself in the wireless market. The Android software was not designed for any single phone developed by a particular handset maker. It also wasn't designed to operate exclusively on a single carrier's network. Instead it is an open software platform that the company hopes will be on hundreds of different cell phone models running on dozens of carrier networks.

So while I know it sounds a lot sexier to think of Google as an alternative to AT&T and Verizon Wireless, I think it's not very likely. Of course, I could be completely wrong. But I was right about the Gphone not really being a phone, and instead being a software platform.