An Ignoble Experiment

2. Microsoft commits to basic phone category, introduces Nokia 130

FCC Chairman Tom Wheeler said that just because other wireless carriers also throttle customers' data speeds does not mean that Verizon Wireless (NYSE: VZ) is in the clear in doing so for some of its customers on legacy unlimited data plans. He said he is concerned that such plans have commercial motives and indicated that the FCC has asked all Tier 1 carriers about their throttling practices.

Wheeler

In response to an inquiry initiated by Wheeler, Verizon said in a letter earlier this month to the FCC that its new "network optimization" policy on its LTE network is "a measured and fair step" that will ensure that heavy wireless data users do not "disadvantage all others in the sharing of network resources during times of high demand." The carrier also said the practice is widely used among wireless carriers.

Wheeler indicated that he was not persuaded by those arguments. "My concern in this instance--and it's not just with Verizon, by the way, we've written to all the carriers--is that it (network management) is moving from a technology and engineering issue to the business issues ... such as choosing between different subscribers based on your economic relationship with them," he said Friday at a news conference, according to Reuters.

Wheeler had earlier said he was "deeply troubled" by Verizon's recent decision to start slowing down the speeds of some customers who still have legacy unlimited data plans and who cross into the top 5 percent of heavy data users on Verizon's LTE network when they are on high-traffic cell sites.

In the letter, Verizon said the policy is not a move to get more money from customers. Instead, wrote Kathleen Grillo, senior vice president of federal regulatory affairs at Verizon, "the type of network optimization policy that we follow has been endorsed by the FCC as a narrowly targeted way to ensure a fair allocation of capacity during times of congestion."

"In short this practice has been widely accepted with little or no controversy," Grillo wrote, noting that some customers were using a "disproportionate amount of network resources and have an out-sized effect on the network. Not surprisingly, many of these heaviest users of the network are on unlimited data plans."

A Verizon spokesman declined to comment, according to the Wall Street Journal. An FCC spokesman told the Journal that after the initial Verizon inquiry, other Tier 1 wireless carriers also received letters with similar questions about their throttling policies.

"'All the kids do it' was never something that worked with me when I was growing up and didn't work with my kids," Wheeler said Friday, saying Verizon's response was an attempt to "reframe the issue."

Other carriers, including AT&T Mobility (NYSE: T), Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS), have blunt throttling policies. AT&T said in 2012 that it would throttle the speeds of customers with grandfathered unlimited data plans after 3 GB of usage on its HSPA network and after 5 GB on its LTE network. The speeds are slowed for the rest of the customers' billing cycle. AT&T and Verizon have stopped selling unlimited smartphone data plans, but Sprint and T-Mobile still offer them.

On T-Mobile's Simple Choice plans, once a customer has used all of the LTE data included in their plan, their data speeds are automatically slowed to 2G speeds for the rest of their billing cycle. The exception is T-Mobile's $80-a-month unlimited plan. On Sprint's postpaid service, the carrier notes that for its Unlimited, My Way or My All-in plans "other plans may receive prioritized bandwidth availability" and "streaming video speeds may be limited to 1 Mbps."

According to Reuters, AT&T representatives did not immediately comment. A Sprint spokeswoman told Reuters that the carrier "goes to great lengths to be transparent about its network management practices" and will respond to Wheeler's letter as appropriate.

"Our network practices are consistent with the Commission's rules on the open Internet, are innovative and are good for consumers and competition," a T-Mobile spokeswoman told Reuters.

For more:
- see this WSJ article (sub. req.)
- see this Washington Post article
- see this Reuters article

Related Articles:
Verizon defends new network management policy as 'measured and fair' in response to FCC
FCC's Wheeler calls Verizon's LTE 'network optimization' policy 'disturbing'
Verizon expands 'network optimization' policy to LTE customers with unlimited data plans
Verizon fine-tunes video optimization based on networks, devices and plans
Verizon's network optimization policy is about pricing as much as the network

Read more about: AT&T Mobility, Verizon
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3. Sprint CEO Claure takes the reins with great expectations - and challenges - ahead

Microsoft (NASDAQ: MSFT) is not planning on abandoning the entry-level phone market, according to a company executive, and to prove it the software giant has released a new basic phone under the Nokia brand.

Microsoft's Nokia 130. Click here for more information.

In an interview with Re/code, Jo Harlow, corporate vice president for Microsoft's phone unit, said the firm is committed to the entry-level phone business for the long term. "Microsoft doesn't have any other project that can reach these consumers," she said.

Harlow noted that more than 1 billion people around the globe still do not have any kind of mobile phone and that the basic-phone business is "stable and growing," unlike the declining feature-phone market.

"These consumers will create a Microsoft account and become part of the Microsoft ecosystem," Harlow said, noting that with Internet-connected basic phones, Microsoft can introduce consumers to its Bing search engine and OneDrive cloud storage.

Last month, as part of Microsoft's announcement of 18,000 job cuts—including 12,500 from the Nokia devices business it finished acquiring in April—Microsoft announced plans to scrap its Android-based X phones and focus instead on low-cost Lumia phones running Microsoft's Windows Phone platform.

There were reports last month that Harlow indicated in an internal memo that Microsoft would wind down Nokia's Asha and Series 40 feature-phone businesses over the next 18 months to focus solely on Windows Phone devices, but for the time being it seems like Microsoft is at least sticking with basic phones.

The new phone, the Nokia 130, costs just €19 ($25), and although it lacks Internet connectivity, the candy-bar-style phone has a built-in video player and music player, a flashlight and an FM radio. The phone comes in single-SIM and dual-SIM variants and will begin shipping this quarter in China, Egypt, India, Indonesia, Kenya, Nigeria, Pakistan, the Philippines and Vietnam.

For more:
- see this release
- see this Re/code article
- see this The Next Web article
- see this The Verge article

Related Articles:
Analyst: With just 1.3% share in U.S., Microsoft may need to abandon smartphones
Report: Microsoft to wind down Nokia's feature-phone biz to focus on Windows Phone
Microsoft's Nokia job cuts reflect a shift away from devices
Microsoft to slash 18,000 jobs, many of them former Nokia workers
As Microsoft reportedly readies job cuts, Nadella promises to rethink core products
Microsoft's Nadella: There's room for us with Apple and Google in the consumer market

Read more about: Nokia 130, Microsoft
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By Phil Goldstein

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4. FCC mandates text-to-911 for all carriers and some OTT providers like iMessage, but big gaps remain

Sprint (NYSE: S) CEO Marcelo Claure formally took the helm of the nation's No. 3 carrier on Monday and is faced with immense challenges and strong expectations from Sprint Chairman and SoftBank CEO Masayoshi Son, who has put his faith in Claure to turn Sprint around.

Claure

The biggest challenges for Claure will be to return Sprint to subscriber growth, especially in the postpaid segment, and likely introduce more competitive rate plans. Sprint is in the process of testing new pricing options and could unveil new plans before the end of the year.

All the while, Son will be watching Claure, and he noted last week that Claure built wireless-device distributor Brightstar Corp. into a $10.5 billion business "from scratch." Analysts see Son and Claure, fellow entrepreneurs, as more kindred spirits than Son and former Sprint CEO Dan Hesse. Son has called Claure a "street fighter" who has what it takes to turn Sprint into a more formidable force in the industry.

Those challenges will be especially acute now that Son has given up on his ambition to merge Sprint with rival T-Mobile US (NYSE:TMUS). In essence, Son wants Claure to do for Sprint what T-Mobile CEO John Legere has done for the No. 4 carrier: give it some punch and momentum in the market. Legere and his lieutenants have done that by branding the company the "uncarrier" and capturing millions of net new customers with aggressive pricing, brash marketing and offers such as paying off subscribers' early-termination fees.

"The question is can Sprint's new management under Claure remain aggressive and innovative and basically out-dance T-Mobile," Berge Ayvazian, an industry consultant at UBM Tech, told the Kansas City Star.

Son indicated Friday that "price competition will heat up," perhaps foreshadowing a pricing war in the U.S. market, but Claure seems to be planning for more than just that, according to comments reported by Wells Fargo Securities analyst Jennifer Fritzsche.

"When asked what the game plan is in terms of pricing, he would not offer specifics but mentioned it was more about value than price and said to expect Sprint to be 'aggressive,'" Fritzsche wrote in a note to clients about Claure's brief comments last week during the Sprint's online shareholders meeting, according to the Star.

She quoted Claure: "We need everyone who is looking to re-up with their current carrier to give Sprint a good hard look before doing so."

Claure, who was born in Bolivia, could also try to spark growth by focusing more on the Hispanic market. T-Mobile indicated in May that it would do so more aggressively by unveiling a partnership with Spanish-language broadcaster and media company Univision to launch its own branded MVNO, Univision Mobile.

Javier Palomarez, a former Sprint official who worked in corporate communications at Sprint in the early 2000s and now heads the United States Hispanic Chamber of Commerce, told the Star that Sprint needs to reach out to the Hispanic community more.

"Marcelo brings a unique set of skills, a unique cultural affinity and understanding of a market that heretofore Sprint hasn't really focused on," Palomarez said. "Marcelo will bring that walking in the door because he understands that market."

For more:
- see this Kansas City Star article
- see this WSJ article (sub. req.)

Related Articles:
SoftBank's Son predicts rising U.S. price competition, calls Claure a 'street fighter'
Sprint's new CEO, Claure, seen by Son as natural choice to succeed Hesse
Will the collapse of the Sprint/T-Mobile merger usher in a U.S. price war?
Can Marcelo Claure reinvent Sprint?
Sprint officially names Claure to replace Hesse as CEO
Report: Sprint abandoning T-Mobile bid, replacing CEO Hesse with Brightstar's Claure

Read more about: T-Mobile USA, Marcelo Claure
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By Phil Goldstein

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5. Lawmakers urge FCC to consider national security in Neustar fight with Ericsson's Telcordia

The FCC voted to require all wireless carriers and certain over-the-top messaging providers support text-to-911 services by the end of the year. However, only a tiny number of 911-answering centers across the country currently support text-to-911 service, and wireless carriers are worried that too many OTT messaging apps will be exempted from the rules because of technical concerns.

The FCC voted 3-2 to approve the new rules, which the commission said will ensure that all wireless carriers and certain IP-based text application providers like Apple's (NASDAQ: AAPL) iMessage are prepared to support text-to-911 by the end of 2014. After then, if a 911 call center requests text-to-911 capabilities, text messaging providers will have six months to deploy the service in that area.

Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T), Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) started offering text-to-911 service in mid-May under an agreement they struck in December 2012. However, smaller carriers and OTT messaging providers were not covered, and the FCC's new move brings them into the fold.

"Texting is now as important a function on a mobile device as talking. Some of those text messages are cries for help," said FCC Chairman Tom Wheeler. "Some of those are from people who can't hear or speak. Call 911 if you can. But if you can't, what are you going to do?"

The FCC's three Democratic commissioners hope the new rules will spur more Public Safety Answering Points (PSAPs) to support text-to-911 service. They said the new rules represented a significant improvement in public safety services for the deaf, according to The Hill.

"This is about people's lives," Wheeler said in impassioned remarks defending the order. "This is about the expectation that our first responsibility is to provide for the safety of Americans. This is a step to continue to fulfill that responsibility and it is not the final step."

However, according to the National Journal, only 122 counties in 18 states (including the entire states of Maine and Vermont) are able to handle text messages to 911. If a PSAP cannot handle text-to-911, carriers are required to send a "bounce back" message telling the subscriber to call 911.

Republican Commissioner Ajit Pai hammered this point home in his statement noting his vote against the rules. "Less than 2 percent of our nation's 911 call centers…accept text messages. So in your moment of need, if you try texting 911 in over 98 percent of the country, you won't reach emergency personnel no matter what application you use," he said.

Texting to 911 can be useful in situations where a natural disaster has made it tough to complete a wireless voice call or if a person is in a dangerous situation where they can't speak. However, there are many limitations to text-to-911, including the fact that it's often quicker to get information across to 911 dispatchers via calling, and the PSAPs often need more information about the situation and the location of the texter because text messages do not provide exact locations.

In addition to the new rules, the FCC is also seeking comment on the continued evolution of text-to-911, including the delivery of location information and support for text-to-911 when roaming.

Pai said the rules may actually set back the FCC's transition to Next-Generation-911 systems that use IP-based protocols and not SMS.

"By contrast, SMS has inherent limitations that, for 911 purposes, render it inappropriate for use as anything other than an interim, stop-gap measure. SMS messages can be delayed, lost, or delivered out of sequence," Pai said at FCC's open meeting. "I've experienced that when I send SMS messages, and I'm sure many of you have as well. These limitations might not matter for everyday communication. But they can have serious consequences in an emergency."

Another hiccup in the rules is that the FCC has limited authority to tell OTT messaging apps how to design their apps. The rules also only apply to Internet-based text messaging services that are set up to send texts to phone numbers, which could confuse consumers who do not know the difference between apps that do that and those that don't.

Pai said the FCC's rules leave too many fundamental questions unanswered. "Who is responsible for transmitting bounce-back messages to consumers now that over-the-top apps will be invoking the device's native SMS software--the OTT provider or the wireless carrier?" he asked. "Will any reply messages from a PSAP be delivered to the OTT app or will it go instead to the device's native text messaging app? Will consumers sending a 911 text from their OTT app really need to press send twice--once when they use their OTT app and then a second time when that app invokes the native SMS--as the item suggests? Will the FCC allow a migration from SMS to IP-based messaging if the only feasible method for delivering OTT texts relies on the SMS network? This decision offers no guidance at all on these and many other technical issues."

Bob Quinn, AT&T's senior vice president of federal regulatory, touched on the issues related to OTT apps in a company blog post ahead of the FCC's vote. "The problem is that a lot of the OTT apps actually used by consumers don't use telephone numbers but are instead 'closed' applications which only allow you to communicate with others who have downloaded the app," he wrote. "Moreover, even the applications that have integrated with SMS, like iMessage, only fit the definition so long as the SMS technology remains in service; once that technology is retired, those apps no longer fit the definition. So the 'Interconnected Text Provider' extension doesn't capture some of the larger applications out there and most of the OTT apps it does capture will lose those requirements when SMS technology goes away. The Commission has put off consideration of those issues into a Further Notice. Given that it has some hard decisions to make in that area and seeing how this market is in throes of a dramatic evolution, more analysis is probably not a bad thing."

For more:
- see this release
- see this Re/code article
- see this The Hill article
- see this National Journal article

Related Articles:
Carriers tell FCC OTT players should be responsible for their own text-to-911 implementations
FCC may soon mandate text-to-911 capabilities for all carriers, OTT apps
Text-to-911 set to go live by May 15
FCC: Carriers, OTT providers should provide text-to-911 capabilities
Verizon plows ahead on text-to-911, while AT&T 'resets' testing schedule

Read more about: Wireless Carriers, E911
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By Phil Goldstein

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