April 17, 2007 by Roger Entner.

The tale of two companies – Motorola and Sprint – is also the tale of the approach of two activist shareholders, Carl Icahn and Ralph Whitworth. While Mr. Icahn’s approach to unlock shareholder value might be threatening to the status quo, his approach has also the longer term health of the company in mind. Mr. Icahn has simply asked that the roughly $12 billion cash mountain should be returned to the shareholders through a stock buy back. When it became apparent that the company has to work through its current operational difficulties, he even announced that the company should not buy back stocks until these problems have been corrected. He has offered his help and insight, but has not demanded (yet?) the company to change course, divest business units, or make any other radical changes. An approach like Mr. Icahn’s has truly the long-term health of the company and therefore the maximum benefit of investors in mind.

Mr. Whitworth on the other side, is according to the Wall Street Journal more interested in changing the course of the company such as a reduction in capital investment, sale of its fiber-optic network or long-distance operation. While there have been certainly made mistakes before, during, and after the merger of Sprint and Nextel, all the above mentioned options would surely be only beneficial in the short term and disastrous in the long term.
Reduction in capital investment: Sprint is already lagging behind the other wireless carriers in perceived wireless call quality, while having two wireless networks and greater geographical coverage than the other carriers. Spending less money on network will only widen the gap and make perception, which is sometimes correct, a certainty. I was present at the bell ringing ceremony at the New York Stock Exchange when the new Sprint was for the first time publicly traded. In the following press conference I asked what Sprint’s plans were in terms of capital expenditure and Paul Saleh, CFO, replied that the company would reduce its capital expenditure because it thought it was not a wise use of shareholder money. I just replied that the last guy who said that to me was John Zeglis and we all know how that story ended. A few months later, Sprint, in my opinion, correctly changed its attitude and increased capital expenditure. This is a critical investment in the future of Sprint and the company cannot afford to let Verizon and AT&T outspend them on the wireless network and increase the gap in perception and subsequently in net subscriber additions. All the cool phones and services are worth nothing if the call doesn’t go through.
Sale of the fiber-optic and long-distance network: Sprint is backhauling the vast majority of its own traffic over its own network. This is a core asset that helps to lower its operating cost. While it is true that there is a glut of fiber available in the major routes between most hubs, there is a relative scarcity in the smaller markets. Selling off these assets would only provide a short term boost to profitability but most likely put Sprint at an disadvantage when at the same time their two larger competitors can rely on their own fiber-optic and long-distance networks they either had already in territory or acquired when they purchased the old AT&T and MCI respectively.

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April 10, 2007 by Roger Entner.

On April 9, 2007, Nextwave announced that it would purchase IP Wireless for up to $235 million – the stress is on “up to” not on “$235 million.” If you look under the hood of the deal, IP Wireless investors who put in $200 in cash are getting back $25 million in cash, $75 million in Nextwave stock – which may go up or down – and the hope to get another $135 million if certain revenue milestones are being met. Well, well, well…

Lets look at this from the perspective of the investors in IP Wireless: So the investors basically sold the company for half of what they put in. You usually don’t do that because you are a firm believer in the prospects of the company. It also means that the chances of hitting the $135 million revenue accelerator are rather slim. This is a cut and run move in my opinion.
From Nextwave’s perspective this makes very little sense whatsoever. Nextwave has turned into a WiMax shop with a trunk full of dubious superfluous technologies. Nextwave needs a technology with economies of scale or at least the potential of economies of scale to reduce the cost of the RAN and CPE equipment. The quote from Roy Berger, EVP of Marketing and Communications in FierceWireless is a gem: “The mission at Nextwave is to develop technology and products that meet the needs of our customers: We’re customer driven. Different customers have different needs, and while we are totally committed to WiMAX technology, we went out and acquired GoNetworks for its mobile WIFi product and now we’ve acquired IPWireless with its TD-CDMA. From our perspective, this acquisition allows us to be even more customer-driven, by fulfilling every potential customer need.” This sounds all and good, but lets face it, IP Wireless did not sell because it had many customers, it has extremely few and lost in every major beauty contest. The customers have driven away from the technology – well, a completely new way of thinking of being customer driven and hence that “potential” is rather small. (I am sure if someone from Nextwave reads this they will contact me and protest that its all different.) On one hand they are completely committed to WiMax but then they buy a technology very few people seem to want for a bargain price that replicates what they are completely committed to. That’s like a husband who proclaims that he is completely committed to his wife after he told his friends that he just got a new girlfriend on the side… On the bright side, Nextwave still sits on a boat load of money and they can afford to spend it on little hobbies like that. It just doesn’t help the investors who own the stock.

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April 4, 2007 by Roger Entner.

It was nice being back in Orlando, the convention city where taxi drivers charge more to drive you around than anywhere else and complain that there is too much business. The show this year was busy but did not have the same exuberance as the last two shows. Maybe the exuberance was all expended in Barcelona a few weeks earlier at 3GSM, which was jam-packed with big announcements.

Maybe it’s just my new angle from looking at things, but the big themes were as expected mobile television and content in general combined with advertising. To be honest, what else is there? Plain old voice or the next esoteric wireless abbreviation technology does not really excite that much after all. Consumers are completely technology agnostic but want this device to eliminate the last bit of white space from their lives – may it be through increased efficiency or through entertainment. Just go into a meeting five minutes early and you will see half of the people checking their email and the other half either listening to music on their device or playing a game. Someone will satisfy this almost pathological need and either it is going to be the carrier or a third-party content provider. The wireless carrier is better positioned to exploit this opportunity than anybody else due to their existing business relationship, established billing system and the legal hurdles around the sharing of customer information.

Some interesting observations:

Verizon Wireless – The well-oiled machine is continuing to run on all cylinders and now with television. The two handset models that were given to selected journalists and analysts worked well. Picture quality was good, despite some forgivable coverage glitches here and there. The LG VX 9400 has very impressive battery life significantly in excess of the four hours I was told. On the other hand, this device is another proof that Korean usage patterns are not very different to US usage patters. The device was originally launched in Korea as a DMB (another mobile television standard) phone and consumers were logging the same complaints as Americans that you cannot dial a number without swiveling the screen. Gee, really Sherlock? The device makes it very easy to channel surf, which consumers and Verizon Wireless who wants to sell the subscription service delights. The flip side is that it might negatively impact advertising viewing, which is one of the revenue streams for MediaFlo. It’s early and we’ll see how that is going.
Has anyone realized during the changing of the guard at Verizon Wireless the South Area won big time? Jack Plating, new COO, ran the South Area, Mike Lanman, new CMO, ran the Florida region, Joe Saracino who is now overseeing both advertising and online was in a former life VP of Marketing for the South Area. The pre-existing familiarity of these new key decision makers will ensure that there is nothing falling between the cracks during this period of change.
Sprint – Finally an iconic device for Sprint. Combined with the new ad agency that was announced after the show, the Upstage should give Sprint some nice buzz and pick-up. Some of the critical reviews of the device comparing it to a Nano are quite unfair because they are focusing on the Nano’s strength while completely ignoring that the Nano is an abysmal mobile phone. I cannot tell you how hard it is to get decent coverage with the Nano. I’ve given up by now. After the umpteenth delay, the cable JV should go live pretty soon now too since they picked Pivot as a brand name – let’s hope they will not get dizzy from all the pivoting, especially since the FCC put a lot tighter restrictions of customer information sharing between JV partners.
AT&T – The two big news items at the show were mobile banking and mobile video sharing. I can see the value of checking your checking account balance on the phone, but this can only be the first step of turning your mobile device into a payment system – anything else is falling way short of what it should become. Also, while I am sure that there are going to be many uplifting experiences to be shared with Video Share, I can see already some of the less than savory headlines. Just imagine the average American college campus with two male friends sharing their sexual exploits with each other live while the third participant is not even aware that their tender loving moments have become a live show. You know it will happen and you know when the involuntary video star finds out there will be a law suit and someone will make some sleazy comment about “raising the bar.”
What is a bit more concerning is the apparent adjustment issues that Cingular is going through now that it is becoming AT&T. While the preparations have been on-going to structure the company in the AT&T way, the full impact of changing a wide array of business practices is just now hitting home. In addition to new practices, a number of departures of key individuals either switching over to AT&T such as Ralph de la Vega, former COO of Cingular or into retirement such as Ed Reynolds, former President of Network Operations, combined with many effective middle managers leaving the firm, is slowing down internal operations. It remains to be seen how long this internal adjustment process will last and how it will impact customer facing operations and thereby the quarterly numbers. On the positive side, promotions such as Kris Rinne’s to oversee all technology development for the combined AT&T will certainly reap long-term rewards.

On a personal note, it was nice having two Presidents as the opening act to your panel. President George H. Bush and President Bill Clinton ended their keynote right before my 11am panel and I was really impressed with the turnout to our panel. The room was more than two-thirds full which is quite amazing when you consider that we were the last panel standing between the attendees and the airport.

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April 3, 2007 by Roger Entner.

Professor Tim Wu, a Professor from Columbia University, who popularized the concept of Net Neutrality recently wrote a paper called Wireless Net Neutrality (http://www.Professor Wuwu.org/log/), a catchy but ultimately misleading name. Just as a preliminary disclaimer, I am a general supporter of the Net Neutrality principles articulated by the FCC, but not of the concepts as laid out in Professor Wu’s Wireless Net Neutrality paper.

Professor Wu discusses four areas that he describers as warranting attention:
1.    Network Attachment
2.    Product Design and Feature Crippling
3.    Discriminatory Broadband Services
4.    Application Stall

While Professor Wu’s concepts are sexy, popular and well intended, there are serious flaws in both his facts and his analysis, which make his recommendations difficult or even counterproductive to implement in the real world. Due to the space constrain of this column I will discuss just the first two areas of Network Attachment and Product Design of Professor Wu’s paper.

Professor Wu proposes that any wireless device should freely attach itself to any network. There are several holes in his argument. He criticizes that wireless carriers are locking their devices and make it impossible to get the phone to work on a different network. What Professor Wu here conveniently downplays that wireless carriers are subsidizing handsets to a significant degree and that American consumers are benefiting substantially through this practice. Mobile handsets are not being made by little elves on the North Pole and come for free. Typically, handset subsidies are between $80 and $200. These subsidies make it possible for Americans to get a phone that they would otherwise not purchase. Also, please note that when you go into a store it typically gives you three prices: No contract, one year contract, and two year contracts. If the consumer chooses the no contract price, s/he can have the phone immediately unlocked. When the customer chooses a subsidized cost, the carrier, in my opinion rightfully, expects a term of exclusivity to recoup that subsidy. Otherwise, as many prepaid carriers experience, criminal gangs purchase the phones at subsidized prices and resell it overseas for a handsome profit. Especially in the prepaid market, which significantly caters to the least wealthy Americans, handset subsidies open up the world of wireless telecommunications to a segment of the population that would find a $100 handset simply unaffordable. But also on the top end the same is valid. Just as an illustration, the Apple iPhone Professor Wu mentions will sell for $500 and $600 with a two year contract from Cingular. By accident, Amazon.com had an unlocked version up for offer for a day – and the price on that page was 999 Euro or $1,300. So Cingular is here the bad guy? I don’t get it… Professor Wu also laments that consumers are choosing the subsidized phones and thereby distort the market place. How could they? I always thought choice was good and that the consumer was ultimately right. Maybe Adam Smith was wrong after all. Also, please note Apple chose not to build the phone with a landline modem or any other technology. Thank goodness, they chose to design a phone at all - lets just hope it works as advertised.
Furthermore, Professor Wu would like to see a Carterphone. Well, in the standards-based GSM voice ecosphere, we have that already. If you have an unlocked phone, its voice capability will work on every GSM network. Professor Wu complains that consumers do not know they can get their phones unlocked, but a simple search on Google or Yahoo entering terms like “gsm phone different carrier” gives you the answer to how to get your phone unlocked. If people have no initiative to find a solution for their problems, then why complain that they have none. Initiative goes a long way.
In the rest of the US wireless ecosphere, things look a bit different. While CDMA is a radio air interface standard, its actual implementation has significant variations that make each CDMA implementation the equivalent of a cockney slang or southern twang. The basics are there but you have trouble understanding unless you have an ear for it.
In the wireless data world, every carrier exercised their entrepreneurial right to differentiate their approach of how for providing data service to their customer base, one unfortunate side effect each company’s approach is different. The only remedy for that would have been state intervention akin to planned economy – and we all know how that usually ends.
Professor Wu furthermore complains that while Nokia launches more than 50 phones in a given year, US wireless carriers have only chosen to offer a handful. The average wireless carrier “only” offers around 25 handsets at any given Professor Wu. Why do they do that? Limited shelf space, just like in a supermarket where you get 25 different detergents. Wait! I don’t get 25 different detergents in my supermarket, but maybe 10 – and they are the same in virtually all competing supermarkets. Why should wireless carriers be held to a higher standard than supermarkets?
What Professor Wu also did not mention is that there are Nokia stores in this country. One of them, just around the corner from Columbia University is on East 57th and 5th. He can’t even get all 50 phones at Nokia’s own store – even though many phones are there that are not sold by US carriers and will work on a US carrier’s network - and when someone wants to buy one he will get sticker shock- $350 and up for a phone, because its unsubsidized and Nokia needs to make a profit in order to stay in business and make all these handsets Americans don’t have enough of. I am sure if Nokia would see a major business in selling its phones this way in the US, it would open more stores that just two – the one in New York and one in Chicago.

Coercive product design – yeah right. I asked one of the three largest carriers a few weeks ago, why a given phone manufacturer had changed their charging interface again and if they could get the handset manufacture to standardize on just one interchangable charger. Wouldn’t that be sweet? The response was that the handset manufacturers do what they want to do and that the carrier has the choice to take it as-is or wait six months and be late to market compared to the carrier that chooses the standard design. How coercive is that? I have wireless service from almost a dozen wireless service providers and change handsets frequently and I can tell you that all of them have the supposedly missing call timers of how long I am on the call. Also, there is a nifty little feature called *MIN or *BAL that I can choose to get my minutes consumed. Just read the “friendly” manual.
The next complaint about paying $60 to $240 a year to be able to download pictures is flat out wrong. From day one I was able to send pictures directly to an email account for no extra charge. You just paid for the cost to send the picture, not for three plans. The reason why with some carriers picture sizes are restricted is that wireless bandwidth costs a lot more than wireline bandwidth. The megabyte costs the carrier somewhere between 5 cents and 20 cents depending on where the customer is. Rural areas are more expensive, urban areas are cheaper due to the overhead cost of the T-1s. Isn’t it natural that carriers want to avoid incurring losses on wireless picture mail? The reason why carriers pushed WAP (and by the way WAP is crap or at least in the early versions) is bandwidth constraints. A 20 kps (GPRS) or even 80 kps (1xRTT) connection will give you a really bad HTML experience. If the customer is always right, as I am told they are, carriers need to avoid giving a customer a bad experience.  Only now that networks can do 400 kps+ HTML can picture mail on a phone be a decent experience.
Then there is the ubiquitously mentioned “evil” Verizon decision to cripple Bluetooth. Outrageous! Well, here is the reason: Both the data card for the laptop and the phone download at the same speed. The average laptop user consumes around 100 MB a month, the average phone user around 40 MB per month. The data card costs $60 to $80 per month, the access to the web via the phone $40. If I can connect my phone via Bluetooth to the laptop, I save $20 and use 2 ½ times as much bandwidth without having to pay for it. How evil of Verizon to expect to be paid for the service they provide according to the expected usage profile. I want to pay for a gallon of gas, but get the whole tank full, too. Hmmm, that gets me back to that whole central planned economy thing…
Last, but not least Professor Wu goes on about WiFi phones or the lack thereof and how this cheats consumers. I guess T-Mobile’s trial – and somewhat lackluster feedback of the implementation – should refute that. Unless you believe that T-Mobile is in the business of selling sabotaged devices to deliberately disgruntle their customers. WiFi is just not ready yet for cell phones – and power consumption of WiFi is one major reason for it. WiFi was not designed with the power constraints of a cell phone in mind. You are trying to force a square peg into a round hole. Over time and with enough force you might succeed.

Professor Wu’s paper goes on a while further with more debatable points, but the space allotted for this column is more than exhausted.
This article first appeared in RCR Wireless News on February 20, 2007.

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April 3, 2007 by Roger Entner.

Santa was good to several wireless executives this year – they are doing now more than just wireless. During the month of December, first Verizon announced that Denny Strigl, formerly CEO of Verizon Wireless, was now COO in charge of Verizon Wireless, Verizon Telecom, and Verizon Business. John Stratton, who was CMO for Verizon Wireless had similarly expanded his portfolio to be now CMO for the entire Verizon Communications portfolio. Just a few weeks later, with the close of the AT&T acquisition of Bell South, Ralph de la Vega, COO of Cingular, was promoted to Group President, Regional Wireline Properties, making him the master of the most local lines in the country.
All of these appointments are well deserved. From the early days of Bell Atlantic Mobile (BAM), Denny had a vision of creating a nationwide carrier that excelled in network performance. The first tag line I remember from BAM was “The Difference is in the Network” - as you can see things haven’t changed that much in the last 15 years. Through several acquisitions the small regional BAM made quite the bang as Verizon Wireless. What most people don’t realize the bang was much louder on the inside than the outside. Network quality, company performance, and execution at the acquired companies were not up to the exacting standards of what Denny was used to be. Quickly, quarterly reviews involving Area and Regional Presidents were expanded to incorporate the whole organization. For a full day every quarter, the 24 highest sales and marketing executives, with the assistance of just one aide, of the company were peppered by the company leadership why their area and region was performing well or not well, what the reasons were and how the company can perform better. A former Regional President described to me that these top level executives cram like college students for these quarterly reviews where literally a second “I don’t know” answer can cost them their job. Denny’s people are expected to be at the top of their game and the results show the wisdom of these exacting standards.
John Stratton transformed a previously understated and performance driven Verizon Wireless into one of the leading marketers in the telecommunications industry. Under John’s leadership, stars like P. Diddy and Christina Aguilera have promoted Verizon Wireless’ products and signature products like the Chocolate have been signed. But what I would consider the true hall mark of a great CMO is that Verizon Wireless has both the leading unaided advertising recall rate in the industry but more importantly the leading unaided recall rate per dollar spent as well. He does not only get the message out, but does it cost efficiently.
Before Ralph de la Vega joined a decrepit wireless operator sometimes jokingly called “Bubba Wireless” he had already quite the illustrious career as turnaround specialist behind him. First fixing BellSouth’s underperforming DSL business, and then taking over Bell South’s Latin American organization. From 2001 to 2004 he turned Bell South’s worst performing group into the company’s best performing group. Cingular at the time was, at best, an also ran wireless carrier plagued by centralism that paralyzed the organization. A good indicator for how much things went awry was that Cingular was regularly unable to deliver in time the necessary signage and documentation into stores for the promotions that the company was running in newspapers and on television. Under Ralph’s leadership, the organization was quickly decentralized with VP-GMs running each region as well as new marketing talent was hired with Marc Lefar as CMO. Furthermore, Cingular put its money where its mouth is and spent significantly on improving its wireless network and was able to acquire AT&T Wireless, which did not live up to the same standards. Only one executive from AT&T Wireless survived the acquisition, the President of the Business Markets Group, Kent Mathy. The same high standards were and are being applied to their top regional managers, the VP-GMs. Performance was emphasized and judging from quarterly press release congratulating a new VP-GM to his or her position, the tolerance for non-performance is low.
Why do I tell you all of this? Well, these guys, who used to run the fastest moving organization of their companies, are now in charge of the slowest moving organizations of the respective companies. Their employees and even more so competitors are in for a massive shock. New high standards and procedures that were developed and honed in the ultra-competitive wireless market will be unleashed on the workforce in a fashion that will create a culture shock, but one that is sorely needed. These executives will shake up their companies, figure out who can perform and who not, and create top notch competitors out of these sleeping beauties that until now have largely played dead against the threat of the cable companies. The employees should take this as an opportunity to shine, and I mean really shine.
If convergence ever has a chance - and to be honest I am not perfectly sure if it’s not a solution looking for a problem - Ralph and Denny can make it a reality and if necessary through their sheer force of will and drive. My recommendation to the cable companies would be to keep the warm clothes that have been so handy during the current ice storms close by. You will need them. Two more relentless forces of nature have been unleashed upon you.
This article originally appeared in RCR Wireless News on January 29, 2007

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April 3, 2007 by Roger Entner.

Every year when it’s getting colder we all start pulling out our Santa Claus wish lists. My five year old son John’s list is especially large because all year long when we go to a toy store and he wants something instead of telling him “No” I tell him to put it on the List for Santa. It works great but his memory is getting better and better. My list for the Wireless Santa is much shorter than his, but I hope he does not forget what I want either. Maybe if I am good next year (oh, I can wish, now can’t I?) Santa will grant me some of my wishes:

My first wish is a basic phone for seniors. I see how my 72 year old mother is struggling with phones that my five year old is having no problem handling. Unfortunately, the wireless industry and senior citizens are increasingly drifting apart, which is even more tragic because the senior segment is the least penetrated segment left in the population. The older you get the more your eye sight, hearing, and manual dexterity diminishes; at the same time wireless phones are becoming smaller and smaller and increasingly loaded with functionality. As much as I love the added power in a smaller unit I recognize that not everyone shares my enthusiasm. A lot of people would just like to have a basic phone that makes calls really well without all the additions like cameras, music players, etc. Larger buttons, larger letters, and better speakers in a since size form factor would do the job. As Le Corbusier once famously said “Less is more.”

Edit: A few days afterwards I was informed that there was a senior-centric MVNO called Jitterbug that would make my wish come true. www.jitterbug.com

My second wish would be cross-carrier consistency. I understand the need for differentiation and supposed stickiness of applications, but why turn this into a combination of the Tower of Babel and a massive pain in the neck. My favorite pet peeve right now is “ring back tones.” Oh wait, aren’t they Callback Tones, or Answer Tones, or whatever concoction someone utterly bored at a wireless carrier or branding firm has come up with. Is it messaging, texting, SMS? While it is part of the beauty of a language to be able to say the same thing in many different ways, it confuses the heck out of customers wanting to buy something. If everyone uses the same name service adoption levels might very well increase because of the cross carrier halo effect. The same applies to things like voicemail menus. Virtually every voicemail provider has a different menu structure which filters through to the carrier. If it looks like a duck, walks like a duck, talks like a duck, then it could be a Drake or a Hen? Maybe CTIA could bring some cross-carrier consistency that would benefit consumers over all and I don’t think someone will be more or less likely churning just because the voicemail menu structure is identical across the industry.

My third wish would be clear marketing messages. In my opinion just marketing messaging and especially tag lines have to answer the “So What?” question right away. The better the “so what” question is answered and the more it rings true with customers, the more powerful the message. I understand “It’s the Network”; I understand “Least dropped calls”; I understand “Nextel Done” – unfortunately in more than one way; I understand “Get more for less”. Where I am starting to lose it is “most powerful network” and “stick together.” One gives me the impression of getting jolted by my phone and the other reminds me of overcooked rice.

My fourth wish is stuff that actually works as expected. Welcome back to the basics. When I did a informal poll among my friends who are not connected to the wireless industry and I asked them what they wanted from their Wireless Santa the response was in unison “Less dropped calls and better coverage.” After these decades of wireless service, the industry is still sorely lagging behind customer expectations. It’s partly the industry’s fault by letting expectations race ahead of the ability to deliver, combined with the fact that there are still local zoning boards that in blatant violation of federal law are delaying or even blocking the building of cell sites.
With ever more capable connected devices it becomes ever more difficult to get the thing to work. For example, the handset manufacturers and wireless carriers across the board have done a good job in delivering a usable music software on the handset. The moment the phone is connected to the PC all hell breaks loose. Some are integrated very well, some offer a bare bone utilitarian approach, and others I am still struggling to get to work and when the PC software upgraded everything went FUBAR (you sure you want to use FUBAR? – how about “haywire”.

My fifth wish is less hype, especially from the WiMAX crowd. The more waves one has to make, the less substance there is. Making unrealistic claims may impress lay people, but make you lose all credibility. Nobody is going to repeal the laws of nature (and some claims certainly require that), and if you do please concentrate on feeding the hungry and bringing world peace – it’s a worthwhile goal. Just be able to deliver on what you promise. Also while we are at it, could we stop the religious wars about technology in general? We have been good for a while but things have been heating up again in 2006. These wars are about as senseless and silly as it gets.

My sixth wish is a TV reality series with wireless executives as main characters. The two most despised professions in America are lawyers and doctors – and look what’s on TV. Shows about lawyers and doctors. About time that the mediocre reputation of the industry translates into some prime time TV show.

But in closing what I would like most is peace, health and happiness to all of you and your families. May Santa make all your wishes and dreams come true.

This article first appeared in its original form in RCR Wireless News on December 11, 2006.

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April 3, 2007 by Roger Entner.

One of our founding fathers, Benjamin Franklin, famously said that the man that trades freedom for security does not deserve nor will he ever receive either. Up until a few days ago, I did not know that his observation also applied to cell phones.
Lawmakers in four states, Georgia, Massachusetts, New Jersey, and Michigan have introduced legislation and another lawmaker in Pennsylvania and on Capitol Hill are rumored to currently write a bill that would require identification when purchasing a prepaid cell phone. To make it even better, we have actually two lawmakers in Georgia that have introduced competing bills covering the topic. More than two years after the Madrid Bombings that claimed the lives of 191 people and the 2002 Bali Bombings that claimed the lives of 202 people, the first bills get intoduced that target the prepaid phones that have been used as triggering devices for the bomb detonators. While it is important to protect people from terrorist activities, requiring ID to buy a prepaid cell phone is at best a hollow gesture as long as minors can get fake IDs and can actually buy alcohol with it. The sponsors of these bills have claimed that the arrests of people associated with purchasing dozens of phones in connection with terrorism would justify these bills. The problem is that none of the people that purchased these phones have anything to do with terrorism as law enforcement had to admit after the first sensationalized reports. This type of fall out from misinformation and hysteria is, to word it politely, very unfortunate. I really want to believe that these lawmakers introduce these bills out of concern for their electorate rather than in a dash for publicity. The add-on justification claims that it prevents criminals from buying dozens of phones to use for their illegal activities. Hmm, roving wiretaps are being praised by police for already achieving that goal, and please remember showing ID does not prevent anything, it just helps finding and convicting the perpetrators faster. While cell phones are targeted, nobody has come up with the idea requiring ID from people who buy boxcutters, which were the weapons the 9/11 terrorists were using. Soon we will be required to show ID for buying everything because it could be used as an assessory to a violent crime. Where does it end? The most recent warning (or shall I say hoax?) I read was that criminals are using cameral cell phones to take a picture of your credit card when you hand it over in restaurants and stores… Oooh! Scary camera phones! I guess the good old paper and pen is out of fashion for thieves now. Lets all outlaw camera phones, and while we are at it real cameras too!
What is worse than the pointless hassle of providing ID when purchasing a cell phone is the negative impact on the poorest members of society. At approximately 75% wireless penetration only people who are too young or cannot pass a credit check do not have a cell phone. That is if we ignore technophobes, prison inmates, people who are institutionalized or in a coma and others who after 20 years of relentless marketing barrage by the carriers still do not see the benefits of a wireless phone… While a portion of prepaid wireless users are using wireless this way out of choice, but the vast majority use prepaid out of necessity because they do not qualify for postpaid. Advocates of prepaid phone ID checks simply point at postpaid subscriber activations where ID checking is customary. The huge difference is that these ID checks are doing in conjunction with a credit check to avoid fraud, not to prevent terrorism. Prepaid providers are operating with razor sharp profit margins to provide these services to the poorest Americans. Tracfone, the largest prepaid only carrier and 6th largest carrier overall in the United States with 7 million customers and an ARPU of $13 (national average is about $50) has merely an EBIT profit margin of 2.9% for the first six months of 2006. That’s 37 cents of gross profit per month per customer. The comparison figure for postpaid is around $23 per month. How one can require ID checking without raising rates for the people who can least afford it and remain profitable is difficult understand, especially for such a futile measure.
I am all in favor of introducing real measures that protect Americans from terrorism, but these bills are just not it. Even worse, bills like this are much harder to get off the books than on the books, just like the Federal Exise Tax which was instituted to fund the Spanish-American War in 1898 and ultimately repealed 108 years later.

This article first appeared in RCR Wireless News on October 17, 2006

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