Tech Untangled

T-Mobile, the mobile arm of Deutsche Telekom, has announced plans to launch the MyFaves service in Germany this October. Similar launches will happen in the U.K. and Czech Republic some time in the fourth quarter.

MyFaves was developed by T-Mobile’s U.S. subsidiary, where it has attracted more than 2.5 million users.  The U.S. MyFaves service allows customers to make unlimited domestic calls within the U.S. and send text messages to five selected numbers. These numbers can be a mix and match of any landline or mobile numbers. The MyFaves service requires a compatible phone. Numbers in MyFaves can be updated as often as once per calendar month. When two or more people in a family plan sign up, they can have their own Fave 5. Plans start at just $39.99per month.

MyFaves service in Germany will cost a base fee of Euro 15 (approximately US$20) per month and Euro 0.05 per call or SMS (Short Message Service). MyFaves users making or receiving calls outside of Germany must pay roaming fees.

Overall, MyFaves service make senses for a lot of people because more than two-thirds of mobile phone calls are made to the same five people/numbers.

Jaxtr has raised a $10 million Series A round led by August Capital with Mayfield Fund, Draper Richards, Draper Fisher Jurvetson and Luxemburg-based Mangrove Capital participating. Jaxtr’s registered user base has been doubling every month since its March launch. Most recently, it jumped from 500,000 to 1 million in just 27 days. So, it’s no surprise that Jaxtr needs more money to continue its expansion.

The interesting thing is that three of the investors, Draper Richards, Draper Fisher Jurvetson and Luxemburg-based Mangrove Capital, were early investors in Skype. Overall, there’s a lot of venture capital flowing into voice startups. Rebtel grabbed $20 million, Truphone collected $23.4 million, Jajah hauled $20 million, and last month newcomer Ooma topped the list with $27 million.

Why would the same folks invest in Jaxtr? Does Jaxtr have a better future than Skype? The investments indicate that Venture Capitalists, who have insight into these companies and know the market, feel that the voice market is still up for grabs. Perhaps they feel that Skype can be beaten at its game, especially since Skype is not a great solution for mobile phones and seems to be losing its way at EBay.

Here’s the thing. In the voice world, the mobile phone is king, primarily because of the anywhere, anytime convenience of mobile service. Whoever makes voice easy to use (and cheap-er) on mobile phones will be king.

It’s clear that Skype is not this king. Skype has made little progress with being on mobile devices because Skype requires a special client and it is very difficult to facilitate mobile clients. For one, users don’t know how to and cannot be bothered to download and install a client on their mobile device. Second, a lot of wireless phones are pretty much closed to unsanctioned 3rd party applications. More reasons can be found at 4 Reasons You Won’t Have Skype On Cell Phones Anytime Soon.

On the other hand, Jaxtr gives users a unique phone number and web address, so a mobile user can make and receive calls without any special software on a cellular phone, like Skype, or without having to access a web browser, like Jajah. The numbers show this too - Apparently, between 70 and 80 % Jaxtr calls involve a mobile phone.

Jaxtr will incorporate advertising into its services and may also pursue new services on social networks. Longer term, Jaxtr plans tiered monthly minute plans like that kind available today with cell phones. Jaxtr also plans advertising within user accounts. Jaxtr hopes to get 20 million users in the next twelve months and expects around one percent to purchase for additional minutes.

This indicates that Jaxtr has an uptapped market that Skype cannot easily reach. Especially with EBay fumbling with the Skype acquisition (EBay’s acquisition of Skype never made much sense to me). My bet is that Jaxtr will give Skype a run for its money!

When we first talked about Apple going with T-Mobile as the wireless service provider for the iPhone in Germany, it was just a rumor. Now, T-Mobile, the wireless arm of Deutsche Telekom has confirmed that they have had talks with Apple about selling the iPhone in Germany.

Discussion of the iPhone’s arrival in Europe intensified following reports last week about a deal between Apple and mobile phone operators in three key European markets: Germany’s T-Mobile, France’s Orange SA and Britain’s O2 (UK).

Not that a deal has been confirmed, but Apple is expected to announce its German wireless partner soon. The holiday season, where a significant amount of wireless phones are purchased, is just around the corner, so we can expect a deal to be announced within the next 1.5 months.

Airvana, a wireless equipment vendor, has successfully completed a multi-carrier CDMA2000 1xEV-DO Revision B (Rev B) call in its lab, which a major step towards commercialization.Rev B is a multi-carrier system that combines multiple 1.25 MHz channels into one super channel, allowing users to share the compounded capacity of the combined spectrum. Several months ago, Qualcomm has shown a live demonstration of Rev. B that achieved a 9.3 Mbps downlink data rate in 5 MHz. Rev B can provide speeds of 5.4 Mbps on the reverse link (uplink) using three carriers (3x). The Rev B standard supports peak data rates of rates of 14.9 Mbps on the 3 carriers and 73.5 Mbps by aggregating 15 carriers within 20 MHz of bandwidth.

Rev B is a software upgrade to Rev A, so wireless providers can offer 4G-like services at a fraction of the capital investment required to build 4G networks. Rev B is fully backward compatible with Rev 0 and Rev A and provides seamless handoff between Rev. B and Rev. A/Rel. 0. Also, by upgrading to Rev B, operators will be able to boost data speeds for Rev A and Rev 0 users by reducing the overall load on the radio network.

Multi-carrier EV-DO is also expected to allow operators to increase the number of Rev A VoIP and push-to-talk users they could serve without affecting the experience of data users. In fact, in March Qualcomm demonstrated 114 simultaneous Voice over Internet protocol (VoIP) calls over a single 1.25 MHz channel in a single Rev. A Sector. In commercial deployment scenarios, EV-DO Rev. A’s capacity is expected to be up to 68 users in a 1.25 MHz single embedded sector, or about 475 simultaneous users in 10 MHz (a single embedded sector with seven 1.25 MHz carriers).

This VoIP field test employed a number of advanced Rev. A techniques including mobile receive diversity, equalization, interference cancellation, IP header reduction, End-to-end quality of service, and enhanced speech-processing algorithms to achieve voice quality and capacity comparable to traditional circuit-switched voice.

With WiMax on the horizon, it should be no surprise that wireless carriers who have no WiMax assets, will ramp up their efforts to increase the bandwidth offered to customers. Airvana expects to begin operator trials of Rev B multi-carrier EV-DO in Q3 2007.

The U.S. Federal Communications Commission recently enacted rules dictating that mobile carriers provide roaming services on a nondiscriminatory basis. That is, cellular telephone service providers must allow customers of competitors to connect to their networks at a “reasonable” cost, when the equipment is technologically compatible.

The new rule stopped short of setting roaming rates or investigating roaming fee violations. Also, it is limited to voice calls, text-messaging, and push-to-talk services. The FCC didn’t include broadband data services in the roaming order, despite the urging by the Rural Cellular Association to set roaming rules for both voice and data. After all, mobile handsets are used not just for voice, but for a wide array of data services. This didn’t happened probably because the republicans in the FCC put to stop to that. Given that the FCC has declined to set roaming rules three times since 1996, this is a step forward and a victory for consumers and for those smaller (and mostly) rural cellular carriers.

In contrast, the Europeans recently went further - the European Union requires cellular operators to provide a so-called Eurotariff of 0.49 euro cents per minute for making calls and 0.24 cents a minute for receiving calls in another country by 30 July 2007. This makes sense because Europeans frequently travel among the many countries in Europe, most of which have technologically compatible wireless networks.

Large mobile carriers like Sprint Nextel argued against new roaming rules, saying a competitive market place was resolving the issue. Sprint Nextel also argued that more than 8 percent of wireless calls were roaming calls in 1996, compared to less than 2 percent in 2006, and that average roaming charges have dropped from $0.82 per minute in 1995 to $0.04 in 2006.

Frankly, big companies liked the status quo because they made good money from roaming fees to subscribers of small carriers. Big wireless companies such as AT&T (Cingular), Sprint, and Verizon Wireless provide coverage over huge swaths of populated areas, so they command more “roaming” clout over a smaller carrier. As a result, roaming charges are particularly high for subscribers of small, rural carriers accessing large carriers’ networks. In fact, the complaint is that large carriers are charging heavy roaming fees to customers of smaller competitors.

The ruling fell short, but another good move by the FCC nonetheless!

Qualcomm has lots of friends, but Nokia is not one of them. In fact, Nokia is almost an arch enemy; this club includes Texas Instruments (TI), who with Nokia, was trying to develop CDMA chips for Nokia phones (mostly), but this didn’t work out because Qualcomm apparently was charging too much to license its patents for TI. That was several years ago, and TI’s quietly gave up on developing CDMA chips.

Fast forward and there’s a new squabble between Nokia and Qualcomm. The licensing agreement that allows Nokia to use Qualcomm’s CDMA (Code Division Multiple Access) patents expired in April 2007, and the two are struggling to extend this agreement. Without licensing Qualcomm’s patents, Nokia cannot sell 3rd Generation (3G) phones or other handsets that use Qualcomm’s CDMA technology. Likewise, Qualcomm will also have to stop selling chips that rely on Nokia patents. So its in both parties interest to eventually work out an agreement. Apparently, Qualcomm CEO Paul Jacobs thinks a final deal with Nokia will take several years.

The biggest likely reason for the holdout is that Nokia wants to reduce the licensing fee it pays Qualcomm, especially since Nokia has inserted some of its intellectual property into 3G standards. While Nokia has a stronger hand than before, Qualcomm has the ultimate upper hand.

Now, Nokia is trying other means to tame the tiger called Qualcomm.

For one, Nokia and others have filed complaints with the European Commission late last year, charging Qualcomm with anti-competitive behavior, accusing Qualcomm of charging the same rate to license its patents for WCDMA as it does for CDMA2000 even though its contribution to WCDMA is much smaller.

Next, Nokia filed a complaint with the U.S. International Trade Commission alleging that Qualcomm’s products infringe on 5 Nokia patents that improve the performance and efficiency of cell phones, as well as enable lower manufacturing costs, smaller product size and increased battery life. Nokia is asking for a ban on Qualcomm chips in the United States. Interestingly, Qualcomm has filed its own patent-infringement charge against Nokia with the ITC, and the issue is scheduled to go to trial next month.

If Qualcomm gives into Nokia, Qualcomm’s other patent licensees such as Samsung Electronics and LG Electronics will likely push for cheaper licensing deals with Qualcomm !

In the least, this whole patent thing seems to be taking new twists and turns every month!

Earlier this week, Qualcomm’s General Counsel Lou Lupin resigned in the face of mounting legal battles related to Intellectual Property in 3rd Generation Wireless systems. Rightfully so, because Qualcomm has had several setbacks in its patent disputes with Broadcom and Lou was responsible for directing these battles. Moreover, for a company like Qualcomm that has been so successful so far and collected so much royalty from patents, Broadcom has to be a big thorn on its ego (I contend that any company as successful as Qualcomm has sufficient corporate big-ego and arrogance)

First, Qualcomm lost its patent dispute to Broadcom (Qualcomm is appealing). On top of it, Broadcom had the nerve to ask for $6 for each handset sold with a Qualcomm chip (See Broadcom gives Qualcomm a taste of its own medicine for some background).

Second, the U.S. International Trade Commission on June 7th banned the import of future models of 3G handsets with Qualcomm chips that infringes a Broadcom patent. Qualcomm’s pursuit of a stay of the import ban hasn’t materialized so far.

Third, the Presidential veto that Qualcomm was seeking was rejected (see Sticking it to Qualcomm).

Fourth, Verizon Wireless, Qualcomm’s biggest partner in the U.S., does U-turn and pays Broadcom to import EV-DO mobile devices. As part of the deal, Verizon also will drop its part in the effort to overturn the ruling.

Fifth, a federal judge in San Diego last week excoriated Qualcomm for “gross litigation misconduct” in another dispute with Broadcom, saying Qualcomm waived rights to enforce two patents on compressing video signals because it deliberately concealed them from an industry standard-setting group.

Sixth, a judge last Friday tentatively doubled Broadcom’s $19.64 million damages awarded against Qualcomm in May for the patent infringement.

And now, seventh, the head-honcho of Qualcomm’s patent battles has resigned (No need to feel too bad, he made $2.5 million in stock options on Fed-20-20007 and another $1 million in march-06)

In addition, Qualcomm is also involved in another legal dispute with Nokia, the world’s biggest mobile phone maker.

All this bad news, and there’s probably more to come, makes it more likely that Qualcomm will come down from its high throne and settle with Broadcom. Of course, it’ll be billed as a mutual agreement in the best interest of society!

Amp’d Mobile did two things great (and nothing else worth mentioning): one was to offer cool handsets. The other was to offer a really exciting deck of content (for example, Lil’ Bush). Well, now that Amp’d Mobile is no more, Clearwire has apparently acquired Amp’d Mobile’s 50-plus member content team to lead a new content offering under the Clearwire brand.

Thus far Clearwire has focused on building its WiMax-based fixed wireless broadband and on making marketing agreements with DIRECT and EchoStar and with Sprint, as well as moving from Fixed Wireless Broadband to Mobile Wireless Broadband. All this stuff is focused on building the WiMax-based infrastructure. Clearwire doesn’t have a significant content offering, so it would likely give Clearwire a major boost in content offerings.

However, I don’t see why Clearwire would build a content offering. While at Amp’d, the content team was focused on bringing together content for mobile handsets. in other words, short-form content highly adapted to the small-screen. Clearwire’s primary business (currently) is in the PC-centric broadband data and the non-mobile VoIP environment. Clearwire will have a mobile service offering soon, but I believe this “soon” won’t happen for a while. On the other hand, creating compelling content for the PC-Centric environments is probably a big no-no when there’s plenty of competition from big-pocket, large-mass players like Yahoo! and AOL. Plus, without owning the PC-Centric environment, Clearwire will not have a stranglehold on what content a user can access over a PC.

Some people see a synergy, but there’s really none. Perhaps, Clearwire is thinking long term when it will have a mobile offering and Clearwire got the content team quite cheap (after all, those folks need jobs right?).

3rd Generation (3G) wireless systems, whose primary focus is wireless broadband (data), arrived on the scene a few years ago. You can say that it’s still at its early stages, but the customer uptake shows a very rosy picture for wireless broadband.

There are many factors driving this. One is mobile music downloading. Following behind but catching up fast is mobile video. Recently, I reported that mobile video subscriptions are surging. On top of that, wireless service providers such as Verizon Wireless are taking advantage of the YouTube craze by Enabling YouTube Video Uploads directly from VCAST enabled phones. Not to be left behind, Veoh Video also recently inked an agreement to provide a Veoh Channel on Verizon Wireless’ VCAST video service. Even handset manufacturers such as LG are joining the fray and enabling YouTube uploads directly from the mobile phone.

In the U.S., Sprint and Verizon Wireless are the unheralded leaders in the quest to build 3G networks. They both cover more than 210 million pops (in other words, a significant part of the U.S. wireless coverage area). Then there’s AT&T, which just rolled out 3G service in 160 markets in the U.S. AT&T recently launched a video calling service that runs on the 3G network, although I doubt that its currently driving much customer demand for 3G.

Another driver of 3G is for use as a broadband link for laptops and personal computers (call them wireless modems and wireless routers).

So How fast is the 3G Broadband Wireless growth? According to Wireless Intelligence, as shown in 3G Today, there are 486 million reported 3G CDMA customers. This is counting CDMA2000 1xRTT customers, which in my mind is not 3G, but perhaps 2.5G.

Counting “real 3G” customers, there are 68 million CDMA2000 1xEV-DO customers and 127 million W-CDMA (UMTS) customers worldwide, for a total of 195 million. That’s still a small penetration rate, when you consider the overall cellular landscape. However, the 3G numbers are growing at an annual rate of 70%, which points to a very rosy picture for wireless carriers.

Not surprisingly, the Bush administration has upheld the ban on importing new models of cell 3G phones that have chips from Qualcomm. The Department of Homeland Security review found insufficient justification for overturning the order on grounds that it would create problems for public safety agencies. I have to applaud the Bush Administration for doing something right!!

In June, the U.S. International Trade Commission banned imports of new mobile devices that carry chips from Qualcomm, as a result of patent dispute between Qualcomm and Broadcom where Qualcomm chips were found to infringe on several patents held by Broadcom, most notably on a patent on conserving battery power. This applies to chips for the high-speed EV-DO (cdma2000) and WCDMA (UMTS) wireless technologies. Qualcomm had appealed to the Bush administration on grounds that a ban on imports of new models of mobile phones would be harmful to national security.

This has to be another great turn of events for Broadcom who has been asking for $6 per phone to settle the dispute (turns out to be a big chunk of dough).

While Verizon Wireless can import new models of EV-DO phones per its paid agreement with Broadcom, Sprint, AT&T, U.S. Cellular, and Alltel cannot import new phones that are infringing. This is a very serious issue since a lot of (if not most) new models of EV-DO and UMTS phones are manufactured outside the United States by manufacturers such as Samsung, LG Electronics, and Motorola. AT&T has limited 3G or UMTS or HSDPA coverage, so it’s a smaller issue for the largest wireless operator in the U.S. than for Verizon Wireless or Sprint.

Qualcomm has, however, developed a software-based workaround that will allow importation of new handset models with EV-DO and UMTS technology, and Sprint is apparently using this method to maintain its stream of new handsets. But Verizon Wireless’s deal with Broadcom raises questions whether this workaround truly bypasses Broadcom’s patent. Olga Kharif of BusinessWeek has a good analysis of this.

Interestingly, Qualcomm is not giving up that easy. Big QC will ask the U.S. Court of Appeals for the Federal Circuit in Washington to reverse the ban and put it on hold while its appeal is considered. Another sign that QC itself doesn’t have much faith in the workaround.