So I’m guessing a better end for TiVO would be to sell out, despite (or perhaps even because of) the recent court successes. They’ll find a buyer that covets the subscriber base, covets the IP portfolio, covets the revenue stream from recent and future settlements, and maybe sees buying TiVO as some masterstroke in a competitive industry.

There are only two logical buyers for TiVO in my view — Cisco and Motorola. As the two largest manufacturers of cable boxes either could use a kosher DVR implementation to its strategic advantage.  I think Motorola is the more likely buyer because it is about to be flush with $12 billion GoogleBucks from the sale of its Motorola Mobility division and because Cisco has been pointedly concentrating lately on its enterprise businesses and might see buying TiVO as sending the wrong signal to Wall Street.

But none of this means a hill of beans to me.  I’m not a TiVO subscriber, just an observer.

I remember this license auction and wrote about it at the time. New spectrum was being released and the MSOs were afraid Verizon and AT&T would snap it up to compete with them for video. So the cable companies bought the spectrum specifically to keep it out of commerce, which has been the case now for six years.  Mission accomplished. Yet the price they are getting from Verizon when you wrestle through the apples and oranges of varying licenses bought and sold at different times isn’t significantly higher than they paid back in 2005, especially since the licenses have produced zero cash flow for going on seven years.

But the point isn’t the price, we’re told, but the co-marketing — that Comcast can sell Verizon Wireless service eventually without even calling it Verizon or that Verizon will presumably resell Time Warner Cable or Bright House to the very folks it would rather buy Verizon’s own FiOS video package.

Yeah, right.

I think the co-marketing story is just spin and that not much will come of it.

We’re heading into a bandwidth war between DOCSIS 3 cable modems and fiber-to-the-curb services like FiOS. And while I can’t predict which side will win or lose this battle I can say that wireless service won’t be a factor in the decision.

Yes, we get e-mail and play Angry Birds on our smart phones and yes, 18 months from now all mobile phones will be smart phones, but the mobile transition hasn’t had any impact on our bandwidth use in homes or offices. It has just given us a way to consume even more electrons at lunch or in the car.  And for all the very real potential of Long Term Evolution (LTE) 4G networks, they can’t in practical terms serve enough bits to enough people at the same time in any city to be viable competition to almost any form of wired Internet, whether from the phone company or the cable company.  The physics just doesn’t support it.

Eighteen months from now many American homes will be where Japanese and Korean homes have been for sometime, sucking 100 megabits or more from the Internet. LTE can’t do that now or then and it can’t do half of that for a tenth or even a hundredth of the customer base of wired Internet.

Verizon needs the bandwidth because voice landlines are going away and it has to compete with AT&T, not Comcast. The new voice is all wireless. But at the same time, even 4G wireless will come to share analog voice’s sense of not being enough.

FiOS was deliberately designed from the very beginning with the good glass — fiber that can go to a gigabit and beyond. DOCSIS 3’s channel bonding and network segmentation will eventually allow full access to 70+ video channels for data service where currently most cable modems use one channel and some use two or three. No matter what way the wire gets to your house that wire will soon carry 100 megabits and then a gigabit that LTE never will.

Those wireless bandwidth caps are there for a reason.

Cable companies today make most of their profit from providing Internet service. FiOS and similar services are Internet services enhanced to keep subscribers subscribing, not especially to give them Wheel of Fortune.

This deal is the cable companies getting out of wireless because they can’t figure how to make money in that business.

AT&T is paying $1300 per T-Mobile subscriber and by the time the deal is finished extra costs will probably raise that to $1400 or more.  Were I Seidenberg, then, I’d spend right up to that level to snag customers from T-Mobile.  Anything under $1300 is a bargain.

At a minimum, I’d match or beat whatever those T-Mobile customers are paying per month now, I’d cover their cancellation fees, and I’d replace all their phones for nothing.  Got a smart phone? Have an iPhone 4!  But why stop there?  Have a feature phone? Have an iPhone 4! Or Android or Blackberry or Windows Phone — whatever you like.

All smartphones all the time at Verizon!

Then watch five million or more T-Mobile customers defect to Verizon, raising AT&T’s per-subscriber cost by $300, pushing break-even on the deal to 2016.

But hey that’s just me.  Maybe Ivan’s a pussycat.

Subscribers are nice, as are back-office and marketing savings, but unused spectrum — while it has value — also costs billions (and more importantly years and years) to build-out. But many of AT&T’s current broadband service problems could be solved almost immediately by more creative use of WiFi, which is definitely coming.

For any 3G or 4G wireless carrier voice and voice backhaul have become tiny parts of its bandwidth budget. Voice and texting are together pretty much ignored in that calculation they are so small. It’s web surfing and apps, apps, apps that cost the big bandwidth bucks, and the people who utilize that digital bandwidth in prodigious amounts are generally concentrated in major metro areas — just like each telco’s WiFi hotspots.

T-Mobile has 7,000 cell towers in the USA but 30,000 WiFi hotspots. AT&T has another 30,000 hotspots of its own. T-Mobile’s hotspots are conspicuously connected by fiber with major bandwidth — more so than AT&T’s hotspots, which aren’t so bad themselves.

If hotspots and cells have comparable backhaul capability and I’m told many of them do, then T-Mobile has more than four times the broadband capability through WiFi than it has through the cell network. And remember that an urban cell can easily cover a square mile (640 acres) or more while hotspot rarely covers more than an acre, making the effective data density many times higher.

Now add to this the WiFi capability in our homes, which T-Mobile already has software to leverage — software that you can bet will be shortly used by AT&T as well.  Clever use of other people’s bandwidth can add an order of magnitude to AT&T’s connectivity and backhaul for no marginal price at all.  Suddenly the network expands, coverage gaps go away, yet backhaul bandwidth actually drops.  Look for it.

What we’re likely to see, then, is more transparent use of WiFi on a combined AT&T/T-Mobile network. And I’ll bet a nickel that particular part of the network consolidation begins almost immediately because WiFi is WiFi and all the phones are ready to go. Why else would AT&T offered T-Mobile a $3 billion breakup fee if they didn’t want the Germans to start complying with certain consolidation terms even before the deal is approved?

So look for software updates that choose WiFi first and connect without asking, whether at home or McDonalds. Look, too, for new pricing plans that make WiFi connections not count against bandwidth limits, encouraging the cheaper among us to make a little more effort seeking-out that odd Starbucks or friendly neighbor.

With AT&T’s LTE 4G service rolling-out over the next couple years to settle the issues of dropped calls and lousy surfing speeds, AT&T still needs a quick fix to level the playing field with Verizon. Yes, all those other reasons for AT&T buying T-Mobile still apply, but the most pressing is WiFi integration because it can be turned-on almost immediately.



T-Mobile and AT&T are the USA’s only GSM wireless network operators, so if you had an iPhone and wanted to dump AT&T to allow things like free tethering, the obvious (and frankly only) way for Americans to do so was by jumping from cranky old AT&T to the much friendlier T-Mobile. And so tens of thousands — maybe hundreds of thousands — of AT&T customer did just that, and were gratefully accepted by T-Mobile.

But now with the T-Mobile brand, back office, and customer service likely to go away, will AT&T turn all those iPhones into bricks?  It depends in part on Apple, on the Apple-AT&T contract, but mainly I think it depends on terms set by regulators in return for approving the deal.

AT&T has said it will grandfather T-Mobile customers, honoring their often lower monthly fees and continued use of T-Mobile phones, but AT&T has had nothing specific to say yet about T-Mobile iPhones.

Apple hates jailbroken and unlocked iPhones, of course, and would like to see them all die, but since Verizon began selling iPhones in the USA, Apple has lost some clout with AT&T.

So my guess is that AT&T will allow jailbroken and unlocked iPhones to run on their network if the Federal Communications Commission or Federal Trade Commission or Department of Justice demand it as a condition for approving the merger, which they will if we demand it. And if that happens, the even more important question becomes whether Apple will lose some control of its ecosystem?  Will jailbreaking and unlocking — enabling iPhones to add software features and do things beyond the ken of Cupertino — become the norm?

I hope so.

Update — According to a report this morning in Forbes: “AT&T said Monday that it in the year after the closing, it plans to rearrange how T-Mobile’s cell towers work. The spectrum they use for third-generation services, or 3G, will be repurposed for 4G, which is faster.  That would leave current T-Mobile phones without 3G. They would need to be replaced with phones that use AT&T’s 3G frequencies. AT&T said it had factored the cost of replacement phones into the total cost of the acquisition.”

This would seem to suggest that AT&T will give you a free replacement for your jailbroken, unlocked iPhone on the T-Mobile network.

But wait, there’s more! If AT&T is repurposing T-Mobile 3G service to 4G, doesn’t that strongly suggest that 3G is going away completely on AT&T?  It looks that way to me. So will AT&T be giving EVERYONE a free 4G phone upgrade or just the jailbroken unlocked iPhones?

Ironic, eh?

Where’s the Long Term Evolution (LTE) network? Where’s surfing while talking? Where’s the damned white case?

June.

We’ve been here before, remember? The first iPhone worked only on AT&T’s slower Edge network so the early adopters all upgraded to 3G a few months later, paying again. Worse still there was that big price drop only weeks after the original iPhone introduction when Apple clearly intended to punish the faithful for being, well, faithful.

What will happen if, come February, AT&T drops its iPhone 4 price to $99? Verizon will follow suit, that’s what, and a million early adopters will have been burned.

Steve Jobs can’t help himself. It’s in his blood.

Neither Dave nor I know anything about this AT&T algorithm but he supposes it might change the game a bit by representing absolute signal strength instead of Apple’s present algorithm, which appears to represent the strength of a signal within a Reality Distortion Field.

By going back to basics Dave thinks Apple can regain the upper hand in this public relations tussle.

It’s a well-reasoned argument, but the problem I see with it is that Dave is in New Zealand and AT&T isn’t. Dave thinks AT&T is a phone company, while I think it is a marketer of voice and data services with the emphasis on marketer.

As a marketer, AT&T’s longtime slogan was “more bars in more places,” which seems to me would work equally well (perhaps even better) for Hooters, but that’s for another column.

How do they get those “more bars in more places?” Did AT&T spend more than Verizon did building their wireless network? No. Do their cell towers transmit at higher power than those of other companies? No. Or do they simply make their phones — with the exception of the iPhone, the same phones used by the other networks — show more bars for the same signal?

Bingo.

I’ve been told by a couple of mobile phone manufacturers that AT&T is guilty of a little bar inflation, so to speak. It’s the most reliable way to get “more bars in more places.”

Now this is just something I’ve been told. I haven’t bought or borrowed a mess of comparable mobile phones and measured it myself. But these people had no reason to lie to me, either. So I’ll just throw this out as an idea why Apple adopting AT&T’s signal bar algorithm to somehow effectively reduce the number of bars might not be such a plausible idea.

As for Apple’s antenna problem, maybe that’s why my wife’s iPhone 4 sounds so tinny and why it drops so many calls. It’s a stunning handheld computer, but not a good phone.

But the real issue here, it seems to me, is the obvious gag order successfully imposed on giant AT&T by Apple. Now that part I believe.

Apple and Steve Jobs (they are one and the same) feel a tremendous need to control stories about them. No other computer company I know of has sued its own customers to silence them, yet Apple did just that a couple years ago. Steve Jobs now reportedly controls most of the copyrighted photos ever taken of him, which is why editors and TV producers keep using the same few shots over and over again. The company, too, imposes on its commercial partners a virtual gag order. That’s the case here with AT&T, which apparently isn’t allowed to refute Verizon’s network performance claims even if AT&T has contrary data.

I’ve seen this before. PortalPlayer (now part of nVIDIA) was under a similar gag order when I went there in 2006 to shoot a NerdTV interview. PortalPlayer designed the innards of all early iPods, yet the people I spoke with at the company weren’t even allowed to acknowledge that Apple was a customer, much less that it represented 85 percent of their business. “We aren’t allowed to say their name in any context,” my interview subject told me. “They want the world to believe that all iPod technology was invented in Cupertino.”

And so it is with AT&T where the wireless carrier reportedly could respond to Verizon’s claims but generally doesn’t because doing so might piss-off Steve Jobs.

That must be very frustrating for AT&T (unless of course, as I suspect, Verizon is correct in its claim to have the better network). But the kind of inferiority complex it implies — one that would have the company accepting such a galling deal from Apple — shows up near the end of a long history of bonehead moves by AT&T or by its earlier incarnation SBC — Southwestern Bell Communications — one of the original Regional Bell Operating Companies.

Consider, for example, SBC’s onetime ignorance of Moore’s Law, as described to me recently by a friend who used to work there:

“Do you remember Americast? It was a cable TV joint venture between SBC and Ameritech. I was involved in evaluating set top boxes for that mess. They finally settled on a box and in the telco tradition signed a contract requiring the manufacturer to make ‘the same box at the same price’ for 10 years. The execs who cut the deal thought they had really won big because (they were convinced) the cost of the box had to increase over the next ten years. But, they really signed a contract requiring the company to build a box that looked the same, had the same connectors and the same functionality for the next 10 years. Then I asked if they had figured-in Moore’s Law?

“They, being Telco Executives, had never heard of Moore’s Law. When I pointed out that the cost of the electronics in the box should drop by a factor of between 8 and 16 over that ten years, they denied that there could be such a thing as Moore’s Law or it would have shown up in all their other purchasing. About a week later my boss asked me to write a memo on Moore’s Law and hand deliver it — paper only — to the President of TRI, later known as SBC Labs, now a tiny part of what is left of AT&T Bell labs. I was later told that paper copies of that memo circulated widely among executives at SBC.

“SBC had a corporate purchasing culture based on the idea that everything gets more expensive over time. I guess that is an example of people who should know better investing in things they didn’t understand. In this case they had an entire building full of people who did understand the technology but were either not consulted or were ignored.

“The SBC executives didn’t believe they needed help because they were experts. I mean they had to be experts to become executives, right? ”

Right.