Into Tech

A few years back, that I accidentally added an extra zero to a bill I paid for phone service. The company automatically credited the account, and a quick call got them to send a check with the overpaid amount. I know others who have accidentally paid a bill twice, or simply overpaid a bill because they didn’t have the exact amount of the bill handy and wasn’t able to look up the specifics. In most cases, the companies in question would just credit the difference. However, it turns out that Citibank had a different idea. It apparently decided that if you overpaid a bill, you really were just donating free money to Citibank executives’ bonus fund. The company actually had a “sweeping” software that would scan customer accounts for a positive credit and simply wipe it off their account, transferring the money to Citibank’s general account. This wasn’t just a small thing either — it went on for more than a decade, and the whistleblower who brought it up was fired. And, if you thought I was joking about the executive bonus fund, an executive from Citibank told investigators: “the sweep program could not be stopped because it would reduce the executive bonus pool.” Of course, now the state of California has “convinced” Citibank to pay back all that money, plus some interest.

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Ofcom wants to plug the remaining holes in Britain’s mobile phone network, bringing coverage to remote areas that have never received a mobile phone signal.

Launching its first ever comprehensive review of the mobile phone industry in Britain yesterday, the regulator also proposed scrapping the complex system of fees levied by mobile phone companies to connect calls, a move that could herald the sort of “all you can call” packages seen in the US and Germany and wipe billions from the networks’ revenues.

Mobile phones have become an everyday item in the UK, with Ofcom estimating that some time over the next two years, Britons will spend more time on their mobile phone than they do on a home phone. Already more people have a mobile phone than a fixed-line connection.

Coverage in parts of Britain is still patchy even for basic text and voice calls, with large areas of Scotland, west Wales and Yorkshire without a signal. When it comes to getting mobile broadband services, the networks have only covered 80% of the population, which means almost no coverage in most rural areas.

“As mobile becomes ever more important and ever more central to people’s lives, coverage is important,” Ofcom boss Ed Richards said yesterday.

In its consultation document, which the industry has until November to respond to, Ofcom suggests mobile users should be able to use any available network in remote areas, to avoid all five networks having to spend hundreds of millions of pounds carpeting the country with masts.

Already several operators, such as T-Mobile and 3, are sharing 3G networks or sites, but to get better coverage more cooperation is likely to be needed.

The news will be welcomed by local pressure groups and MPs whose constituents find themselves outside the mobile networks but do not want to see the countryside plastered with masts. Ofcom’s consultation document, meanwhile, also discusses the thorny issue of mobile termination rates - the charges the networks levy on each other and fixed-line providers such as BT to carry calls. These charges account for about 20% of the mobile companies’ revenues and Ofcom has already introduced a series of price caps.

The networks have launched legal challenges to these caps and the matter is also being investigated by the Competition Commission. Richards admitted yesterday that the whole issue needs a rethink before the current caps run out in 2011.

EU telecoms commissioner Viviane Reding recently suggested the rates should come down by 70% to the sort of levels charged by the fixed-line operators - around 2p a minute.

Richards said the industry needed to look at whether the charges should be scrapped, or a new system introduced such as that in the US, where the person called has to pick up part of the cost.

“We don’t want to just have a debate about whether the price should be five euro cents or 4 euro cents,” said Richards. “We have got to ask about the future. That may be uncomfortable for some people but I am not going to apologise for that.”

Ofcom hopes to publish its proposals in the spring.

In its consultation document the regulator also raises questions about the number of complaints consumers have about their mobile phone service. “While the vast majority of us are happy with our mobiles and enjoy the experience there is a small but significant number who are dissatisfied,” Richards said.

Californian internet telephony specialist Jajah has clinched an important deal with computer chip designer Intel which will put its cheap-rate telephone service in easy reach of consumers and potentially halt a decline in the take-up of so-called VoIP services.

Under a deal to be announced today, Jajah’s voice over the internet technology will be integrated into a new generation of Intel chips that include the company’s Remote Wake technology, meaning calls can be taken even when a computer is in standby mode.

Integrating the technology into the chip means computer manufacturers, and increasingly broadband providers who want to give PCs away to customers signing up to long-term contracts, can supply machines that can make cheap calls using the web straight out of the box.

Until now, VoIP services, such as Skype, have relied upon consumers downloading and correctly installing software. More than half of all computer users have never downloaded any software from the internet let alone experimented with VoIP.

Jajah has more than 10 million users across the world and is backed by the venture capitalists who put cash into Google and Apple.

The deal with Intel means manufacturers will be able to provide computers that have Jajah ready configured and use the machine’s own microphone, include a handset or even have a phone socket built-in which can be used with any existing phone. Jajah allows users to call any fixed or mobile phone anywhere in the world for a fraction of what they would normally pay.

For a few years, we’ve been covering the various lawsuits over mobile phone unlocking, mostly involving the company TracFone. TracFone focuses on the “prepaid” mobile phone market. That is, rather than selling long term contracts to people with various total minutes, it just sells phones with a certain number of minutes already on them that can then be re-upped at the buyer’s discretion. However, like typical mobile phone service providers, TracFone subsidizes the price of the phone in order to make it seem quite cheap (sometimes as low as $10 or $15). The idea is to hook people and make money on selling the minutes. However, there’s no requirement that people buy more minutes.

What’s happened, of course, is that people figured out a huge arbitrage opportunity. They buy TracFone phones on the cheap, unlock them, and then resell them for a higher price (often outside the country). The problem here is TracFone’s choice of a business model. It decided to subsidize the phones and it set up a business model that doesn’t require people to sign a long term contract or ever agree to buy more minutes. However, if you listen to TracFone tell the story, this is a case of felony interference of a business model, and anyone unlocking those phones must be stopped.

For a while it was abusing the DMCA for this purpose — using it to claim that the unlocking was circumvention of copy protection. Of course, that’s exactly how the DMCA is not supposed to be used — and that was made even more clear when the Library of Congress explicitly carved out an exemption for mobile phone unlocking, making it quite clear that this is perfectly legal. TracFone has whined about this, but it still doesn’t amount to much more than that the company just picked a bad business model.

However, the situation keeps getting more bizarre. Some folks involved in one of these arbitrage opportunities were eventually arrested for terrorism, after US officials assumed that anyone buying so many prepaid phones must be planning some sort of attack (don’t ask). This had companies in the space suddenly claiming that this action of unlocking prepaid phones was a national security threat (seriously). What’s scary is that some officials seem to believe it.

It turns out that TracFone actually is winning a bunch of the lawsuits it’s filing, using both questionable copyright and trademark claims. However, the real kicker is that one man is actually facing jailtime for this. It’s a little unclear from the wording in the article, as the jailtime may actually be as a result of him ignoring a judge’s order to stop the practice of reselling unlocked TracFones — but it’s still not clear why it’s illegal to unlock these phones that were legally purchased. The DMCA exemptions say that unlocking a phone is perfectly legal, and as long as the phone was legally purchased, it’s now the possession of the buyer, who should be allowed to tinker with the software and resell it without having to worry about lawsuits or (worse) jailtime. Yes, TracFone is upset that it wipes out their business model, but the law isn’t designed to protect their own poor choice of business models.

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BT is in talks to buy Silicon Valley internet-phone software developer Ribbit as it looks to create a one-number web-based communications platform to take on the likes of Google and Skype in the burgeoning online telecoms market.

Ribbit, founded two years ago and based near Google’s headquarters in Mountain View, claims to be “Silicon Valley’s first phone company”. It has created software that allows programmers to design applications that tie together mobile phones, fixed-line phones and even social networking sites into a single online communications hub.

Ribbit allows any software developer to use its technology to create applications, in the same way as Google has opened up its soon to launch mobile phone operating system android and Apple has allowed other people to develop software for the iPhone.

There are a number of communications tools such as Evernote - which allows forgetful iPhone users to access their “to do” lists from their phone or computer - which are designed to integrate the mobile phone with internet-based services.

Bringing together the information stored on the web with mobile phones, a trend known as unified communications, has been mooted for many years. But the take-up of broadband and the creation of fast mobile phone networks has made it easier to achieve. Last year Google snapped up another Californian company involved in this area, called GrandCentral, for about $50m.

BT is understood to have offered as much as $55m (£28m) for Ribbit, although a deal has not yet been signed. BT refused to comment yesterday.

Ribbit’s technology has already been used by a number of third party application developers. American business communications group Salesforce.com has a Ribbit-based application that lets the company’s sales people keep track of all their calls and contacts through a single web page.

Ribbit is also testing a consumer platform called amphibian, which looks like a social networking site with a phone attached. It allows users to convert voicemail messages left on their mobile into text which can be read online, so users can search for keywords. Calls can be patched through from a mobile to a computer; not only will the caller’s number be displayed but amphibian can pull up their profile and latest postings from sites such as Flickr, LinkedIn and Twitter. Calls from other web-based telephone services such as GoogleTalk and Skype can also be accessed.

There’s been a fair amount of complaining about the pricing of the new iPhone 3G over the last few weeks. While plenty of people were initially enamored by the cheaper price for the actual phone in the US (and in some other countries), this subsidized low price often hid higher service fees (with a locked contract) that came with it. However, it appears that the folks at Rogers Communication up in Canada really went overboard in its service pricing: offering very expensive service fees that have excessively limited data amounts (and no unlimited data offering). Users also get less talk time. Basically, these service plans make the iPhone a hell of a lot less appealing — but since Rogers is the only carrier offering the iPhone in Canada, it feels it can get away with such high prices. But, the impressive thing is that people are trying to fight back, putting together a petition against Rogers’ decision. While online petitions are notorious for their ineffectiveness, this one seems to be getting an awful lot of attention — creating a ton of negative publicity for Rogers. If the company has any sense of the harm negative publicity can do, perhaps it will rethink its pricing strategy.

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Back in 2002, there was suddenly a lot of buzz about how MVNOs (Mobile Virtual Network Operators) were going to be the next big thing. The idea was that any brand could start offering mobile phone service just by slapping its brand on mobile phones that would work on someone else’s network. Then you could have a company with a huge brand jumping into the mobile phone space, adding various “synergies” (gag) from other business lines, without having to worry about the technical infrastructure of running a mobile network. The problem, which really was sort of obvious from early on, was that no one could explain why anyone would want to buy mobile phone service from a non-mobile phone company. And, indeed, all of the “big brand” MVNOs died rather gruesome deaths.

The second generation of MVNOs were supposed to be different however. Names like Amp’d and Helio weren’t building on existing brands, but planned to build up huge new brands by themselves, and would do so by focusing on the high end, offering all sorts of neat phones, applications and services that the big mobile operators were afraid to offer. Actually, the reality was that the big mobile phone operators knew enough to recognize that people just didn’t want those things, which is why they weren’t offered. Amp’d flamed out spectacularly, burning through $360 million and attracting a negligible number of customers.

And, now, Helio has basically given up the ghost as well, selling off to Virgin Mobile — about the only mobile phone MVNO that has managed to hang in there. From the sound of it, Virgin basically was doing a favor to Helio, to make its initial backers (Earthlink and SK Telecom) save a little face, rather than just shutting down the service.

So, with this, can we officially declare the era of the MVNO over? Or will we see breathless reports a year or two from now from new analysts in the space claiming a great new market in “branded” mobile phone services?

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Cable & Wireless received a boost in its bid to persuade Thus to come to the table and start takeover talks, with news yesterday that its Glasgow-based rival has lost a flagship deal with BSkyB.

The loss of the multimillion-pound contract to BT comes ahead of C&W’s self-imposed deadline of Monday, by which time, it has said, it will make a formal offer for Thus or walk away, having seen its initial, tentative approach rebuffed in May.

BT’s three-year contract to provide Sky customers with home phone services is worth between £200m and £300m in revenue, but Thus stressed yesterday it had not expected to retain the deal and that its loss “will have minimal impact” on profits and cashflow. Coming just days before the C&W decision, however, news that Thus has lost such a high-profile long-term client is a blow to the reputation of the company and chief executive, Bill Allan.

C&W approached Thus in May with an offer of 165p a share, valuing it at £300m. The board said this undervalued it. Since then, however, several Thus shareholders are understood to have approached C&W to say they would like a cash return on their investment in the business, which in nine years as a public company has never made a profit or paid a dividend.

C&W’s initial approach has been seen by many in the City as a low-ball bid. An indication of an offer at 175p to 185p would likely force the Thus board to the table. At those sorts of levels, Thus would be valued at between £320m and £340m.

Philip Rogerson, Thus chairman, has been in no rush to enter talks because of a letter he received from his opposite number at C&W, Richard Lapthorne. In the June 4 letter, Lapthorne said he was willing to seek agreement with the Thus board within a “narrow price band”. The board of Thus has taken this to mean C&W is unwilling to significantly raise its offer.

C&W is reviewing its options ahead of Monday’s deadline but advisers say it has no appetite to go hostile and take an offer direct to shareholders. A protracted takeover battle would distract management from the main focus of working on a possible demerger of C&W’s international assets from the rest of the business.

Instead, C&W remains hopeful that Thus shareholders will pressurise its management team to the table - the loss of the Sky deal may provide further impetus.

Under its deal, BT will provide Sky with a wholesale voice service for its 1.1 million Sky Talk customers. Sky’s customers will move to the BT platform over the next few months.

Delia Bushell, Sky’s director of broadband and telephony, said: “In the last year alone, over 740,000 new customers have joined Sky Talk for great value calls. This deal with BT will maintain our quality of service and ensure we enjoy increasing cost efficiencies as we continue to grow the service.”

Brian Fitzpatrick, managing director of BT wholesale markets, said: “In the highly competitive communications industry, providers are looking for ways to improve cost efficiencies. Our announcement with Sky is further evidence that BT Wholesale is the ideal partner to realise value as quickly as possible.”

TOKYO (Reuters) - Japan’s KDDI Corp. said on
Sunday it aims to offer a cellphone service in the United
States using a network operated by Sprint Nextel Corp. .

TOKYO (Reuters) - Japan’s KDDI Corp. said on
Sunday it aims to offer a cellphone service in the United
States using a network operated by Sprint Nextel Corp. .