CTIA show

Thursday I told you about the launch of Zer01, a new VoIP carrier. At the time, however, information was slim since the carrier's Web site was out of service, which isn't a great sign. But it's back up and running now, and I got a chance to meet with CEO Benjamin Piilani at CTIA.

First on my list was to ask how the carrier isn't a Mobile Virtual Network Operator (MVNO), even though it depends on major wireless carriers to operate its services. As Piilani explained it, while MVNOs buy capacity from a carrier and resell it later, Zer01 has its own IP backbone and only uses carrier networks to interconnect or roam.

As I mentioned in my previous post, starting July 1 Zer01 will offer unlimited voice, data and messaging for $69.95. According to Piilani, unlimited will mean just that--you'll even be able to use Zer01 devices for laptop tethering. The price includes all takes and fees less a $30 activation fee. Zer01 will not require a contract or credit check.

Use the HTC Touch Diamond with Zer01.

If it foes live, the $69 price would be cheaper than major carriers. Only T-Mobile charges a bit less with an unlimited plan of $85 per month. The service will be nationwide, though Piilani acknowledged that like a standard wireless carrier, coverage will not be perfect everywhere.

All Zer01 services operate as data, which means that you won't be interacting with a standard cellular network. Also, each Zer01 device gets a fixed IP address and it opens a separate VPN session to the company's servers when placing calls or using data.

Partner carriers will get a share of Zer01's revenues, though Piilani declined to give details on the carriers and the revenue split. Zer01's services will work across the entire GSM spectrum including GPRS, EDGE, UMTS and HSDPA.

At present, Zer01 supports only Windows Mobile smartphones, but it promises to support more operating systems in the future. Also, while it has just five devices in its lineup for now--the Pharos Traveler 117, the Pharos Traveler 127, the HTV TyTN II (aka the HTC Kaiser), the HTC Touch, and the HTC Touch Diamond, you can use your own unlocked smartphone if you wish. All that's needed is a Zer01 SIM card.

After a second pass, I have to admit that Zer01 certainly sounds intriguing. I still wonder how exactly they're going to pull it off, so we'll have to wait and see what happens.

LAS VEGAS--In the-not-so-distant future, your cell phone provider will likely also be providing wireless Internet access for your digital camera, electronic book reader, or any other electronic gadget you may own.

During the CTIA Wireless 2009 trade show here this week executives from AT&T and Verizon Wireless described a new era in wireless in which their networks would be used not only for cell phones but also to provide network connectivity to everything from e-readers to personal navigation devices to heart monitors.

At a press event here on Thursday Ralph de la Vega, president for AT&T mobility, said that in a few years retail chains, such as Best Buy and Wal-Mart Stores, will be stocked with electronic devices that wirelessly connect to Internet.

"In the next few years, portable devices that aren't connected wirelessly to the Web won't sell," he said. "Wireless connectivity significantly increases the value of devices. And it's what people want."

De la Vega pointed to growth in the smartphone market as an indication that consumers are increasingly becoming more accustomed to always connected devices.

"It's like the PDA market," he said. "When you added wireless to a PDA, it became more useful. And the smartphone market was born. The same will be true of cameras, personal navigation devices or e-readers. And the companies that don't add wireless to their product won't be successful."

While an everything-connected world may sound cool, there are still lingering questions about how much this access will cost consumers and how users will actually pay for it. And if it wireless operators aren't willing to adapt their business models, it may be difficult to get consumers to sign up for pricey data services with lengthy contracts.

Glenn Lurie, president of AT&T's emerging devices business, said he realizes that that wireless operators will have to change how they do business.

"This is going to require a different business model," he said. "And we are going to have to break some rules to bring these devices to market in a customer friendly way."

An untapped market awaits
Today, nearly 85 percent of the U.S. population owns a cell phone. As this penetration rate approaches 100 percent, it's unlikely that cell phone operators will experience much new growth simply by adding new cell phone subscribers. Adding new devices, such as electronic readers and cameras, to the network greatly increases the addressable market. AT&T executives believe the market for connecting devices other than phones to their wireless networks could be as big $90 billion over the next five years.

Verizon Communications' CEO Ivan Seidenberg said during a press conference here this week that he believes people in the U.S. will own multiple wireless devices and that eventually wireless penetration could reach as much as 500 percent in the next few years.

"I'm not saying that people will be carrying around five mobile phones," he said. "But you might have something in your pocketbook that talks to a thermostat or any number of devices that are connected wirelessly across the global Internet."

AT&T has created a special business unit to identify and help get emerging consumer devices ready for its wireless network. Lurie heads up the new business unit and has spent the past five months talking to a wide range of device makers from garage start-ups to established consumer electronics makers.

Verizon Wireless is addressing this new market through its Open Network Initiative, which was launched last year and is designed to expedite the process of certifying devices for Verizon's network. Verizon has already certified some 36 devices, including a smart-grid device that monitors energy consumption and a wireless tablet for the health care industry that serves as a portable medical chart.

Tony Lewis, who leads Verizon's open network, said the company is also talking to consumer electronics makers.

One product category likely to make its way onto carrier networks first is the electronic book reader. Sprint Nextel provides wireless service for the Amazon Kindle. And the product, which allows people to download books, newspapers, and magazines over Sprint's 3G wireless network, has been a huge hit with consumers. Now other e-book manufacturers are looking for ways to wireless enable their devices.

Verizon is currently talking to five e-book makers about making their devices available on Verizon's network, Lewis confirmed. AT&T wouldn't provide details, but executives hinted that an e-book deal could be in the works its network as well.

New business models needed
The notion of providing wireless connectivity for consumer electronics devices has been around for a long time. Chipmakers like Qualcomm have been developing chips just for this purpose. And Wi-Fi is also finally making its way into many consumer electronics devices.

But connected consumer devices haven't taken off yet, mainly because the carriers' business models are too restrictive. Today, wireless operators typically offer wireless service for a single device. The phones are sold through the carrier. And the operator subsidizes the cost of the phone in exchange for consumers accepting a contract.

But if consumers are expected to own multiple devices that connect to a carrier's network, they're not going to be willing to sign up for multiple services. This means that mobile operators are going to have to change how they do business.

"We can't expect people to have five different accounts," Tony Melone, CTO of Verizon Wireless, said during an interview this week. "There needs to be a mechanism that allows people to have some kind of account for multiple."

Executives from AT&T and Verizon acknowledged that multiple business models will likely co-exist. For example, Amazon, which uses Sprint Nextel's network for wireless service on the Kindle, pays Sprint for the data access and bundles that price into the cost of the product. As a result, Kindle users don't sign up to for an account with Sprint Nextel nor do they pay a dime for downloading books over the Net.

"The Kindle has a great business model," said Verizon's Lewis. "But it's not the only one out there."

AT&T's Lurrie said that how the service is monetized will depend on the device that is using the network. For example, Lurie said that most consumers would not want to spend an additional $10 a month for wireless service to upload photos to a digital picture frame. But they might be willing to pay for one-time use or even pay for several uses.

For all its talk of new business models and breaking rules, so far, AT&T seems to be following its traditional business model when it comes to selling Netbooks. Just as it does with smartphones, AT&T is subsidizing the cost of these mini-computers in order to get subscribers to agree to a data service contract.

And it appears the carrier is willing to deeply discount these devices just to get people using the network. Earlier this week, it announced a pilot program in Atlanta and Philadelphia where it will sell Netbooks for the cost of $50 to consumers who already subscribe to its broadband service. In exchange for this rock-bottom price, subscribers must agree to a two year contract for its $59.95 per month data service, which also provides access to AT&T's 3G network as well as its 20,000 Wi-Fi hotspots around the country.

But Lurie said that the company will not rely on subsidies alone to fuel adoption of these services.

"I don't think the subsidy model will drive the business," he said. "We will provide some subsidies, but we will be experimenting with all kinds of different business models."

De la Vega said the company is still in the early stages of figuring out the best way to monetize its services. But he said the old model alone will not be enough to grow AT&T's business in the new era of wireless where every device will be wirelessly connected.

"We need to be more flexible," he said. "This is a new frontier. And we need to approach it with new ideas. We can't be forced to go down an old path."

LAS VEGAS--The new 4G wireless broadband network that Verizon Wireless plans to launch in 2010 could be rural America's answer to its broadband access prayers. But extending the network to every nook and cranny in the U.S. will likely take years.

Tony Melone, senior vice president and chief technology officer for Verizon Wireless, said during an interview at the CTIA Wireless 2009 tradeshow here Wednesday that the new 4G network that the company is building will blanket the entire continental United States, including the far corners of rural America.

"The licenses we bought in the 700MHz auction cover the whole U.S.," Melone said. "And we plan to roll out LTE throughout the entire country, including places where we don't offer our CDMA cell phone service today."

If Verizon makes good on this promise, it will be helping to bridge a widening gap between broadband haves and have-nots in this country. While Verizon Wireless' parent company Verizon Communications and other broadband providers have concentrated on building wireline broadband infrastructure in densely populated areas, such as cities and sprawling suburbs, they have not done a good job of extending that infrastructure to rural America.

The problem has been that building infrastructure for land-based broadband networks is expensive. And companies, such as AT&T, Verizon and Comcast say they can't make profits by offering service in sparsely populated regions because the cost to build these networks is too high and the number of potential customers is too few. And even though the federal government has provided some $1.2 billion in loans aimed at helping operators in the private sector build broadband networks in remote areas, the money hasn't been stretched to reach every community.

While broadband penetration has increased in rural areas over recent years, it's still not nearly at the same level as more densely populated regions. Only about 38 percent of rural American households have access to high-speed Internet connections, according to a study published by Pew Internet & American Life Project in July. This compares with about 57 percent of city dwellers who have access to broadband and 60 percent of people living in suburbs.

The result has been small towns and communities throughout the country that still have no access to high-speed Internet services. These communities have been stuck in dial-up limbo, waiting for the 21st century technology revolution to reach them. It's made it harder for businesses to grow and compete in the increasingly connected and tech savvy market. It's meant that workers have had a harder time finding jobs. And it's left an entire population less connected to important news and information that is increasingly found online.

Melone said that the spectrum Verizon acquired in last year's Federal Communications Commission's auction is ideally suited to help solve this problem. The spectrum that is being used to build the new network is in the 700 MHz band. Up until now, it has been used to broadcast analog TV.

Because the spectrum is in a lower frequency, it can transmit signals over longer distances and penetrate through obstacles. And because the signals travel longer distances, Verizon can deploy fewer cell towers than if it used spectrum from a higher frequency band, which means it can provide coverage at a lower cost.

Even though Verizon is primarily building the 4G wireless network to provide faster service for mobile devices, Melone said the network could also be used to provide fixed broadband access to rural homes.

"I can't pre-announce any products or services," he said. "But I can envision offering devices that are geared toward putting wireless broadband in the home. And then people could use Wi-Fi to share the connection with multiple devices like they do today with router connected to their DSL or cable modem service."

President Obama's administration is well aware of the high-speed Internet divide that exists today, and he has vowed to do something about it. As part of the overall economic stimulus package passed by Congress, the government is allocating $7.2 billion for projects that bring broadband Internet access to rural towns and communities.

Melone said it's too early to say if Verizon will request money from the government as part of the package to fund building its network in rural communities. But he said that with or without government money, Verizon is committed to providing service in rural areas via its 4G network.

"At this point we haven't made any attempt to get stimulus money for the LTE build-out," he said. "But it's still early in that process and there's not enough clarity around the stimulus package. We don't know what strings will be attached to that money. Regardless, we plan to blanket the country over a period of time with 4G. We bought the licenses to cover the entire continental U.S., and we plan on building the network where ever we have a license."

Still, rural Americans may have to wait years before Verizon's 4G network comes to them. Dick Lynch, CTO for Verizon Communications, said in February during an interview that the 4G network deployment would likely follow the plan used to build Verizon's 3G network. Under that plan, Verizon started with large metropolitan areas and filled out coverage from there. Verizon has said it plans to reach 20 to 30 markets by the end of 2010. And it will continue to add more coverage steadily after that, Melone said.

LAS VEGAS--Wireless industry executives at the CTIA Wireless 2009 trade show here say that despite the economic meltdown, the cell phone industry remains strong. And they're confident that it will be a driving force in pulling the nation out of the current financial crisis.

Verizon CEO Ivan Seidenberg

(Credit: Marguerite Reardon/CNET )

Verizon Communications CEO Ivan Seidenberg and Robert Dotson, CEO of T-Mobile USA, which is owned by Deutsche Telekom, took the stage on Wednesday, the opening day of the trade show, with a similar message.

These executives said that despite the economic troubles facing the nation and the world, the wireless market is thriving and innovation is flourishing. They also agreed that as the nation moves through the current crisis that the wireless industry could play a significant role in the economic recovery of the country. But they also warned that reluctant investors and overzealous regulators could stunt its potential and harm the recovery.

"I do not mean to minimize the challenges we face--as an industry or a country--as we try to get our economy going again," Seidenberg said during his speech. "But wireless innovation has been a foundation of our country's prosperity for the last 25 years, and I'm confident that this great and vibrant industry will continue to be a leader as we put our economy back on the path to growth."

Indeed, Seidenberg went so far as to say that the rest of the economy could take a lesson from the wireless industry. Instead of companies and investors pulling back and hoarding their money as they've done thus far, he said that businesses should be continuing to invest.

"I wish everybody in America could taste the wireless special sauce," he said. "It seems the rest of the country has forgotten how to grow, but the mobile industry keeps reminding us."

Seidenberg emphasized that the way the communications industry has done this is by investing in building new infrastructure. Verizon Communications, which has a majority stake in Verizon Wireless, has already begun spending billions of dollars to lay new fiber for its fiber-to-the-home broadband service known as Fios.

And now it plans to invest in improving its wireless network. The company is about to embark on another major infrastructure project to build a new 4G wireless broadband network. The wireless operator announced its network suppliers and strategy for building the network in February at the GSMA Mobile World Congress in Barcelona, Spain. It plans to start testing the network this year, and it will have 4G wireless deployed in 25 to 30 markets by the end of 2010.

"Our country can't afford to slow down growth and momentum," Seidenberg said.

Even though Seidenberg emphasized the need for investment, he tried to quell worries that the company is over-spending. During a press conference after his speech, he insisted the investments the company is making to build its 4G network are not much more than what the company was already spending to upgrade and maintain its existing 3G network.

"It's not that expensive," he said. While he wouldn't get specific about the company's spending plans for the new network, he said the overall budget would not be increased too much. Instead, he said that spending would shift from the current network, known as EV-DO, to the new network.

Dotson, T-Mobile USA's CEO, had the same message during his keynote speech. Dotson said that the wireless industry must be the driving force to get the economy moving again. And he urged the financial community to open its wallets to keep innovation moving. He also warned the new presidential administration to not over-regulate the industry.

T-Mobile USA CEO Robert Dotson

(Credit: Marguerite Reardon/CNET )

"Now more than ever we must make certain that financial fuel flows to the wireless innovators, entrepreneurs and the garage geniuses, who will drive the next economic business cycle," he said during his speech. "In these times of needed financial regulation, we should be united to ensure the light regulatory touch that has successfully guided this highly innovative and vibrant industry for the past 26 years continues."

Seidenberg added that the government should reduce taxes on wireless services. And he called for a five-year moratorium on adding new taxes to wireless services so that the industry can work with local and state authorities . He said that from 2003 to 2007, taxes on wireless services rose four times faster than taxes on other goods and services. And he said that in some states taxation on cell phone service is over 15 percent.

"All of us understand the pressures that policymakers face in an era of big deficits and slow growth," he said during his speech. "But we need to be very careful that government does not to try to fix short-term needs at the expense of long-term growth, which happens every time it raises taxes or imposes new regulations."

Still, the wireless industry is facing its own troubles. Handset manufacturers, in particular, are hurting. Nokia, the world's largest maker of cell phones, has drastically reduced expectations for 2009 and has already begun laying off workers and shutting down production facilities. Motorola, which was already on shaky ground, is also suffering, as are other manufacturers such as Samsung and LG.

But the operators themselves have actually fared much better. AT&T has laid off some employees and Verizon has admitted that it is shedding workers who have worked on its traditional landline businesses. But these companies saw big growth in their wireless businesses during the fourth quarter of 2008. And that growth is expected to continue.

Seidenberg pointed out during his speech that more people are buying higher-end smartphones and signing up for more expensive data plans that allow them to surf the Net, check e-mail and connect to social-networking sites. And he said the new innovations around application stores, for example, would only help the industry become more efficient. He also emphasized the need to consolidate standards and operating systems to make the industry even more efficient.

But he admitted things could be better.

"My guess is that the industry as a whole is doing fine," he said during the press conference. "But if GDP were at 5 percent, we'd be that much better."

Verizon executives Lowell McAdam (left) and Ivan Seidenberg plan to keep Verizon on a software development path.

(Credit: Maggie Reardon/CNET)

LAS VEGAS--Verizon Wireless doesn't care who emerges from the coming mobile operating system wars because no matter who wins, Verizon will make sure its software runs on top of that operating system.

"I don't think I need to bet on an operating system," said Lowell McAdam, CEO of Verizon Wireless, in a question-and-answer session at CTIA 2009 Wednesday. "I need to bet on layers that will bridge those operating systems."

McAdam was referring to the news announced Wednesday that Verizon Wireless will join the Joint Innovation Lab (JIL) created by its corporate parent, Vodafone, along with China Mobile and Softbank. JIL plans to build "mobile widgets" for future phones that will apparently run on whatever operating systems Verizon decides to support on its future smartphones.

Seven organizations are currently jockeying for the inside track to run the mobile computer of the future. Symbian, Research in Motion, Apple, Google, Microsoft, Palm, and the LiMo Foundation are all fighting to get their software established as the platform of the future, and not all of them are going to make it: choice is a good thing, but too many choices overwhelms developers and carriers, not to mention users.

Earlier in his keynote address, Verizon Communications CEO Ivan Seidenberg predicted that the current list would get whittled down as the industry coalesces around "an open operating environment." He did not, of course, say which ones Verizon is eyeing, and neither Seidenberg nor McAdam took that bait in the Q&A session following the keynote.

McAdam did say, however, that "three, maybe four" would survive. Verizon's plan with JIL appears to be an extension of its historical strategy of putting its own software--things like VCast--on its phones, which gives it the ability to tightly control what applications run on its network and extend its brand into software and entertainment. For example, Verizon, as part of JIL, will create games for future phones on its network, McAdam said.

It will be interesting to see how Verizon's software works with the applications created by other developers, such as the ones that will appear on the BlackBerry Storm now that BlackBerry App World is up and running. Widgets by definition are pretty lightweight applications, but how Verizon chooses to prioritize those applications on its devices could determine how widely they are used versus applications created by third parties.

This probably also means that barring a major change on strategy, Apple and Verizon are unlikely to hook up any time soon. Right now, there's the obvious barrier in the different networking standards used by the iPhone and phones on Verizon's network, but the companies seem very philosophically opposed when it comes to software: it's hard to imagine Apple agreeing to let Verizon run its own widgets on the iPhone.

It also means Verizon is still bent on avoiding a fate as a "dumb pipe," leaving the software development to others and just making sure its network is running smoothly. As usual, it all comes down to money: people will spend a fortune over the next ten years on mobile software and services, and Verizon wants to make sure it is part of the action.

Though other carriers may be consolidating, a new wireless provider made its official debut at CTIA. Zer01 Mobile (yes, that actually is a zero in the name) promises a $69.95-per-month plan for unlimited voice and data service without a contract.

The service, which will launch July 1, will be entirely VoIP-based. Zer01 Mobile Virtual says it's not a Mobile Network Operator (MVNO), but it will be relying on other carriers to support the service. How that's not an MVNO, we're not quite sure.

Zer01 will only support Windows Mobile smartphones. Unfortunately, we're not certain which specific handsets will be available with the service. At the time of this writing, Zer01's Web site was down (not a good sign), but we'll check out the company's booth later today.

As spring goes into full swing and April Fool's Day nears, the last event of the busy trade season is upon us. The Cellular Telecommunications Industry Association show (CTIA) is the nation's largest event dedicated to new cell phones, accessories, and services. This year it runs from April 1 through April 3 in Las Vegas.

Of course, a large CNET crew will be on-hand to bring you all the news from the show floor. On the Reviews side, I'll be in Vegas with Bonnie Cha and Nicole Lee. We'll bring you details on all the new handsets, and offer you lots of eye candy with photos and video. Nicole will also give you the dish on new Bluetooth headsets. Jessica Dolcourt of Download.com will scout out services, software, and applications, while Tom Krazit and Maggie Reardon of CNET News will bring you the latest news from the business side.

Though we're expecting a full show, we're also expecting that CTIA 2009 will be a little quieter than in past years. That has certainly been the case at the trade shows we've attended so far in 2009. At both CES and the GSMA World Congress, only a handful of new phones appeared on the show floor.

But don't worry, because if CTIA is anything like CES or GSMA, there will be plenty of cool gadgets on display. After all, CES gave us the Palm Pre and GSMA saw the birth of the Sony Ericsson Idou. In Las Vegas, the Palm Pre will be on display again, even if we're not expecting Sprint to announce a release date and pricing. And while Sony Ericsson will not be unveiling any new models, we will see new models from Motorola, Samsung, Nokia, Kyocera, and HTC.

Most eyes at CTIA, however, will be on Android. Rumors persist that HTC will deliver a second Android device for T-Mobile. Neither HTC nor T-Mobile are saying anything, but just three days ago the Federal Communications Commission approved a version of the HTC Magic that supports T-Mobile's 3G network. Without a doubt, a new Android device would satisfy anxious Android fans who have been waiting for an alternative to the T-Mobile G1. We thought that GSMA would offer a gallery of Android devices, but a Magic bound for Vodafone was the only such device to make an appearance in Barcelona.

Whatever happens, the CNET team will be on-hand in Las Vegas to bring you the latest news and the hottest devices from CTIA. Just don't expect any iPhone news, please. Sure, we may see some iPhone apps, but Apple is always a no-show at CTIA. We land in Sin City on Tuesday, March 31 and will be reporting through the end of the week. Check back often for the latest updates.

GPS and cell phone integration is an increasing trend as more handsets come equipped with the technology and location-based services get more advanced. AT&T, it seems, is particularly committed to the idea.

AAA Mobile Navigator

(Credit: Networks in Motion)

At CTIA Fall 2008, the carrier announced that it has deployed assisted GPS technology (A-GPS) to its network to speed up the time it takes a GPS-enabled mobile to get a fix on a user's location by using cell tower triangulation.

In addition to the A-GPS network, AT&T also revealed that it will launch several new location-based services to give its customer a choice in navigation software. The carrier currently only offers AT&T Navigator (also known as TeleNav Navigator), but it will soon be joined by MaqQuest Navigator and AAA Mobile, which is powered by Networks in Motion, the brains behind Verizon's VZ Navigator. Both applications are expected to be available in the coming weeks.

The One Click interface as seen on the Samsung Highnote. Here it's showing your latest horoscope as well as a news headline.

(Credit: Sprint)

Along with several new phone announcements today, Sprint has also launched One Click, a new user interface designed to be highly customizable and easy to use. The One Click interface consists of eight shortcut tiles lined up along the bottom of the screen, which then lead to any of 14 available applications. They include the texting interface, Web access, e-mail, Sprint Navigation, Sprint TV Sprint Music, and other features. As you flip through the different shortcut tiles, you get a short little pop-up of that application's submenu, or a brief preview of the application itself. You can also customize the home screen to show brief news headlines.

We managed to get some hands-on time with this new interface, and I have to say I like it quite a bit. It's nice to have instant access to an array of favorite applications, a design aspect that so far has only been available for higher-end smartphones. One particular shortcut I found intriguing was the Google shortcut tile, which provides instant access to Google search, Gmail, as well as YouTube.

The One Click interface is only available for the LG Lotus, the Samsung Rant, and the Samsung Highnote for now, and Sprint says the Sanyo Katana Eclipse will get this new interface in November. The carrier hopes to roll out the interface to more phones in the future.