All Things Digital

If misery loves company, then Apple (AAPL) may have a friend in RIM (RIMM). A Citigroup analyst who has tested the company’s forthcoming BlackBerry Bold claims that the device is troubled by 3G reception woes similar to those plaguing Apple’s new handset. A noteworthy data point, since Bold will initially run on AT&T’s (T) wireless network, just as the iPhone does. “We had a few occasional 3G signal-dropping troubles at some locations especially on high-rise building streets and on our 34th floor (EDGE picked up immediately but at slower Internet speeds),” Citigroup analyst Jim Suva wrote in a recent research note to clients. “[This] may be why AT&T has yet to launch the product.”

Interesting to hear that the Bold shares the iPhone’s erratic 3G connection because the device doesn’t share the same Infineon Technologies (IFX) chip believed to be the source of the iPhone’s troubles. Which means the only real point of commonality between the two phones is AT&T’s 3G network, which may still be a bit too immature for either of them.

Moments ago, Apple issued a firmware update for the iPhone 3G that presumably addresses the voice and data reception issues that have troubled the device since its debut. Whether it successfully resolves them remains to be seen. The update description says only that it includes “bug fixes.” Let’s hope the “bugs” to which Apple (AAPL) is referring here include the iPhone-consistently-drops- calls bug, the iPhone-fails-to-recognize-cell-coverage-where-I-am- certain-it-exists bug and the iPhone-has-serious-trouble-transition- ing-between-Edge-3G-and-WiFi bug.

(Image credit: magerleagues/Flickr)

I live in downtown Los Angeles, where 3G coverage is a given, and not only is the 3G wonky and unreliable, but oftentimes I’m struggling to even get decent Edge support! Edge is absolutely worse on my new 3G than it ever was on my first-generation iPhone. Adding insult to injury, I drop multiple calls every day, something that rarely happened before my ‘upgrade.’ ”

– A post to Apple’s iPhone 3G discussion forum

Good thing the iPhone was chosen as Time Magazine’s 2007 Invention of the Year, because a growing chorus of discontent suggests its successor is unworthy of the honor in 2008. Voice and data reception issues have been troubling the device for weeks now and it seems the blame for them lies not with the network carriers, but with Apple (AAPL) itself. On Wednesday, T-Mobile Netherlands stepped forward to blame Apple for the reception issues with the iPhone 3G. “We suspect that it is a hardware/ software-specific issue of the iPhone itself,” the company said in a (poorly translated) blog post. In Australia, Vodafone also blamed the iPhone 3G’s reception issues on Apple. In Sweden, engineering weekly Ny Teknik claims that iPhone 3G’s sensitivity to third-generation wireless network signals is well below the 3G standard.

In the states, “well-placed sources” have told BusinessWeek that the Infineon Technologies (IFX) chip Apple chose for the handset is undermining its performance. And they are not the first to make such claims. Earlier this week, Nomura analyst Richard Windsor fingered the device’s chipset as the problem as well. “The 3G iPhone has been out for a month, but signs of problems are appearing that should give competitors some breathing space,” Windsor said in a report to clients. “Problems include high incidence of dropped calls, switching onto EDGE while the device is stationary and loss of reception while in good coverage. We believe that these issues are typical of an immature chipset and radio protocol stack where we are almost certain Infineon is the 3G supplier.”

So if that’s truly the case, what’s the solution? A firmware upgrade, most likely. Those “well-placed sources” mentioned earlier say Apple and Infineon are prepping one for September release. In the meantime, the companies are sticking with time-tested workaround: “no comment.”

AT&T (T) is on track to complete the upgrade of its 3G mobile broadband network by the end of June.

Good thing, too. Because we’re just weeks away from the eagerly anticipated launch of Apple’s 3G iPhone and AT&T–Apple’s exclusive wireless carrier in the states–certainly doesn’t want to foul up the debut of the second-generation iPhone, the way it did the first. Because if it does, AT&T Mobility CEO Ralph de la Vega won’t be activating his own 3G iPhone until it’s been surgically removed by a doctor. Apple (AAPL) CEO Steve Jobs does have a bit of a temper.

Anyway … AT&T’s network upgrade is just six markets away from first-phase completion in 275 cities (second-phase roll-out will extend it to another 75). And when it launches, it will be the first and only network to run on a technology called HSUPA, or High Speed Uplink Packet Access. HSUPA should provide speeds of 1.4 Mbps down and 800Kbps up, which AT&T asserts “will be as speedy as logging onto the high-speed Internet service that many consumers enjoy at home.”

Hope so, because logging onto AT&T’s Edge network is about as speedy as logging onto the Internet with a 56.6 Kbps fax/modem.

To some, Sprint’s longstanding reputation for lousy customer service, poor network coverage, high churn and Keystone Kops-style management disorganization might be a bit–how can I put this delicately–off-putting. The beleaguered company’s subscriber numbers are dropping like failed calls, as are its shares. Sprint’s stock price has fallen nearly 60% over the past 12 months. It posted a $29.6 billion loss for 2007 and has had its debt rating cut to junk by Standard & Poor’s.

Not the most attractive of acquisition targets. But beauty is in the eye of the beholder, in this case T-Mobile parent Deutsche Telekom (DT) which is reportedly considering a bid for the wireless outfit, whose worsening losses have left it ripe for a buyout. By swallowing Sprint (S), DT could gain some spectrum in the States and stave off a price war between the mobile carriers, or so the “thinking” goes.

Thing is, an acquisition of Sprint entails an acquisition of Sprint’s problems–and there are many. It would also require DT, which operates a GSM/EDGE network, to manage Sprint’s 3G CDMA network and Nextel’s legacy iDEN system. That’s three different network standards. And then there’s Sprint’s WiMax operation, XHOM, to deal with. That’s the makings of a real Greek tragedy of a business story right there. Said Avian Securities analyst Matthew Thornton, “While the differing network technology standard does not necessarily eliminate the possibility of a deal, it does significantly raise the costs and complexity of the combination.”

Michael Nelson, an analyst at Stanford Group, agreed. “You really cannot underestimate the level of complexity that that entails,” he told Bloomberg. “There is a significant amount of integration risk.”

The clever folks at Deutsche Telekom’s T-Mobile unit have figured out a way to comply with a court order prohibiting the sales of iPhones tethered to its network, and still remain the exclusive German carrier of the device: sell the iPhone without a T-Mobile contract at a wallet-shriveling price.

And so this morning, the company began offering prospective iPhone buyers a choice: purchase the device with a two-year T-Mobile service contract for 399 euros ($591) or without a contract for 999 euros ($1,478). And if for some reason you choose the latter, don’t expect your iPhone to be fully functional, because some iPhone services are only available with a T-Mobile subscription. Now which version of the device was it that you were interested in?

Analysts say that the arrival of an unlocked iPhone in the German market will likely signal the end of Apple’s exclusive deals with carriers, though that seems questionable given the unlocked phone’s dizzying price point and hamstrung feature set. Certainly, T-Mobile doesn’t seem too worried. “We have no doubt that the success story of the iPhone from Apple in Germany and T-Mobile will be updated,” T-Mobile Managing Director Philipp Humm said in a poorly translated press release. “The distribution model is correct, only because our customers will benefit from exclusive features and custom tariffs. The proper function of the iPhone in our network was tested for months, only T-Mobile offers data transmission standard EDGE nationwide, which the iPhone for fast Internet communications. No other mobile operator offers more WLAN-HotSpots as T-Mobile. I would like to assure our customers that T-Mobile as exclusive distribution partner of the iPhone continue to be the best package of network quality, service and competitive prices.”

What is Net neutrality? This from AT&T CEO Randall Stephenson, one of its staunches opponents, and the guy who paid Lent Scrivner & Roth LLC $100,000 to lobby against it in the first half of 2007.

Onstage at Web 2.0 Summit, Stephenson again argues for a two-tiered Internet, rehashing the incumbent telecoms’ talking points. Net neutrality=BAD. Telecoms deserve the option, he says, to charge some users more money for loading certain content or Web sites faster than others. “We all want the same thing,” says Stephenson. “We all want this Internet thing to grow. But I don’t want anyone to interfere in how we monetize our investment. You shouldn’t regulate something until there is a problem.”

Moving on to the iPhone and AT&T’s partnership with Apple. “How’s the iPhone deal going,” conference co-sponsor John Battelle asks. Going great, replies Stephenson. “Not sure I could have asked for more from it than I’ve got.”

“Some people are a little … unhappy with AT&T’s EDGE service,” says Battelle. “Why isn’t it better and when will it be better?”

[Laughter]

“Well, [Apple CEO] Steve Jobs wanted it on the EDGE network. He wanted a broad ubiquitous data network. I don’t particularly like the speed; 3G is a lot better, but Wi-Fi is a pretty darn good surrogate.”

Apparently, Stephenson doesn’t use an iPhone.

Battelle asks about Stephenson’s feelings about Google. “You [AT&T] have a $250 billion market cap, $117 billion in revenue. They have $200 billion in market cap, on revenues that are about 10% of that. How do you feel about that?”

“I’m envious,” says Stephenson.

Battelle pushes a bit harder. “Are they riding your capital investment [on telecom infrastructure]?”

Stephenson concedes, “Of course,” he says.

“Does it tick you off?”

“No.”

Unflappable, this Stephenson.

One last exchange worth noting here. Battelle asks Stephenson about claims of government access to AT&T user data. Stephenson ducks for cover and offers this terse reply: “The law is clear on this: I can’t comment on matters of national security. The law is also clear on how we respond to requests from law-enforcement agencies.”

Only Apple would launch a 2.5G device in a country where 20% of mobile-phone users own 3G-enabled handsets and expect them to downgrade their wireless experience and pay a premium for doing so.

Apple CEO Steve Jobs confirmed yesterday that the company’s iPhone will go on sale in Britain Nov. 9 and be carried exclusively by Telefonica SA’s O2 division (which was apparently willing to give up a kidney as well as its first born to win the deal).

As in the states, U.K. iPhones will run on a 2.5G EDGE network. An odd choice, given the prevalence of 3G-enabled phones in the country and O2’s British EDGE penetration, which apparently hovers around a paltry 30%.

Speaking at London’s Regent Street Apple Store, Jobs defended Apple’s decision to support EDGE and not 3G, saying to do otherwise would compromise the iPhone’s battery life. “The 3G chipsets are real power hogs,” said Jobs. “Most phones now have battery lives of two to three hours, and that’s due to these very power-hungry 3G chipsets. Our phone has 8 hours of talk-time life. That’s really important when you start to use the Internet and want to use the phone to listen to music. We’ve got to see the battery lives for 3G get back up into the five-plus hour range. Hopefully we’ll see that late next year. Rather than cut the battery life, we’ve included Wi-Fi and sandwiched 3G between EDGE and a more efficient Wi-Fi.”

And that appears to be Apple’s party line as it continues its iPhone march across Europe. This morning, Apple announced T-Mobile–the only network operator in Germany to offer EDGE throughout its entire GSM network–as the exclusive German carrier of the iPhone. Presumably it will announce a similar deal with France Télécom SA’s Orange in the days ahead.

Correction: Because of an editing error, an earlier version of the first paragraph of this post incorrectly referred to a “2.5-gigabyte” device instead of 2.5G device (as in “generation”) as the author intended.

Apparently, my daughter’s third question in today’s video didn’t come through as clearly as I’d thought, which is too bad. Anyway, for those of you who’ve inquired, she said:

“Daddy, can we camp out in front of the Apple store, like Scoble?”

Anyway, I’ve updated the headline to clarify things a bit.

It turns out EDGE is great for mail, and it works well for maps and a whole bunch of other stuff. Where you wish you had faster speed is … on a Web browser. It’s good enough, but you wish it was a little faster.”

–Apple CEO Steve Jobs, yesterday

Sticking feathers up your butt does not make you a chicken. And adding millions of dollars of network infrastructure improvements to your widely maligned “2.5G” EDGE wireless data network does not make it 3G. But it might make it 2.6G, and that could be just enough to temper perceptions that your jalopy of a data network has hamstrung Apple’s new iPhone.

Certainly, this seems to be AT&T’s view, because beginning last night, subscribers to the company’s wireless services began reporting increases in EDGE performance. Dramatic increases. EDGE throughput, which typically tops out at 100 kbps, began hitting 180 kbps or so, with some users reporting runs in excess of 200 kbps. This sudden bump in speed is likely the result of AT&T’s “Fine EDGE” project, an effort to beef up EDGE in advance of the iPhone’s official debut and ensure that AT&T doesn’t end up a scapegoat if the device doesn’t do well at market.

One last thing worth noting here: AT&T’s 3G network currently tops out at about 380kbps and is expected to hit 1.5mbps (megabits per second) by year’s end. So while the performance increase we’re seeing in EDGE today is welcome, it really pales in comparison to what could have been …