All Things Digital

Those on-again, off-again talks between Sprint (S) and Clearwire (CLWR)? They’re on again. In fact, they’re so on that they’re already over. This morning the two companies announced a $14.5 billion multi-player joint venture backed by cable operators Comcast and Time Warner as well as Intel and Google.

The alliance will see the four cable and tech companies investing $3.2 billion in the nationwide wireless network that Sprint and Clearwire have been struggling–with profound unsuccess–to roll out. Comcast (CMCSA) will contribute $1.05 billion, Time Warner Cable (TWX) $500 million. Intel (INTC) will invest $1 billion, Google (GOOG) about $500 million. The new venture will be majority owned by Sprint, but it will take the Clearwire name and be run largely by Clearwire execs, among them cellular industry pioneer Craig McCaw.

For the cablecos, which have yet to settle on a clear wireless strategy, the deal is a quick and dirty way to establish the high-speed wireless network they need to compete with telcos like AT&T (T) and Verizon (VZ). For Sprint and Clearwire, it’s a chance to make their non-starter of a WiMax network viable and something happy to talk about when conversation turns to Sprint’s stock price, which has fallen nearly 60% over the past 12 months.

That said, the deal is not without its problems–top among them WiMax itself. As Craig Moffett, an analyst with Bernstein Research, explained in a note to clients earlier this year, the 2.5 GHz spectrum upon which Sprint and Clearwire are building their network isn’t nearly as good as the spectrum Verizon and AT&T just purchased in the FCC’s 700 MHz auction. “Serious questions remain about penetration through walls and windows,” Moffett explained. “Elsewhere in the world, operators have also raised questions about WiMax’s real-world bandwidth, latency and non-line-of-site coverage. How competitive the offering would be versus Verizon’s or AT&T’s planned LTE broadband service therefore remains to be seen.”

That it does–though there have been some indications that it may not be quite up to par. Speaking at an international WiMax conference in Bangkok in March, Garth Freeman, CEO of Buzz Broadband, Australia’s first WiMax operator, described the technology variously as a “disaster,” “miserable failure,” and a standard “mired in opportunistic hype.”

So will that prove true for Clearwire as well? We won’t know for some time. Building out a massive network like this will take some doing. “We’ll likely to see early trials in 2010, but a full-fledged build-out will take longer,” Clearwire CEO Benjamin Wolff said during a conference call this morning. “Building faster is a matter of logistics. The build plan we’ve laid out will be one of the largest and fastest build-outs ever done. We have the capability to do it, but it’s a massive undertaking.”

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.”

Comcast is apparently too busy drafting its “P2P Bill of Rights and Responsibilities” to bother attending the daylong hearing into its dubious “network management” practices. An odd decision for a company so intent on “clarifying” the practices ISPs should use to manage P2P applications running on their networks. But according to a company spokesperson, Comcast (CMCSA) “felt the issues specific to us were well covered at the first hearing, and the focus of this event should be broader than any individual company’s issues.”

Broader issues? Like reasonable network-management practices? The responsibility to deliver traffic fairly? Service disclosures? The sort of issues that might figure prominently in a “P2P Bill of Rights?”

Guess not.

Anyway, Comcast has already scrapped its policy of deliberately slowing some traffic flowing over BitTorrent and other P2P networks, so there’s really no need for Federal Communications Commission Chairman Kevin Martin to bust its chops anymore. As Mitch Bowling, Comcast’s senior vice president and general manger of its Internet service, told the New York Times, Comcast’s new policy is to slow traffic based on usage pattern, not application. “[Our new technique] will be based purely on individual consumption by consumers,” Bowling said. “Anything in addition to that is outside the scope of what our network management goal is.”

So the company plans to throttle traffic to the customers that use the most bandwidth. Hmmm. I wonder who those might be? The folks who use the Internet for email and Web browsing or those who use it for downloading digital media?

It’s quite a road-to-Damascus conversion Comcast (CMCSA) is having these days, isn’t it?

Back in February the cable company claimed it was perfectly reasonable for it to throttle or degrade the performance of peer-to-peer file-sharing services on its broadband network. But when Federal Communications Commission Chairman Kevin Martin suggested the agency was mulling action against it, Comcast had a moment of clarity. In March, it said it would work with BitTorrent to develop P2P-friendly network capacity-management techniques. And today it announced plans for an industry-wide effort to create a “P2P Bill of Rights and Responsibilities.”

The document–which is to be created with the help of other Internet service providers, P2P companies and content providers–would specify how ISPs should manage P2P applications running on their networks and how consumers should use them. Said Tony Werner, Comcast Cable’s Chief Technology Officer, “By having this framework in place, we will help P2P companies, ISPs and content owners find common ground to support consumers who want to use P2P applications to deliver legal content.”

And by announcing its plans to create this framework right before the FCC hearing on its P2P-throttling techniques to be held at Stanford (in Palo Alto, Calif.) Thursday, Comcast is hoping the agency won’t take action against it for violating its Net neutrality rules.

Turns out those Europeans are using their Internet connections for a lot more than just drying laundry.

According to the World Economic Forum, Denmark, Sweden and Switzerland are the three most networked nations in the world. In its annual Global Information Technology Report, the Forum ranked 127 countries according to network readiness and found that Denmark, followed by Sweden and Switzerland, had not just the highest average broadband-Internet speeds, but the highest broadband penetration rates as well.

The countries also received high marks for their tech-friendly regulatory environments, something the United States apparently lacks. The US ranked fourth in the survey–up three places from last year–because of its (surprise!) poor scores for “Burden of Government Regulation,” “Effectiveness of Law-Making Bodies,” and “Total Tax Rate.”

It’s a Comcastic day for BitTorrent. This morning the cable provider, under fire for degrading the performance of the peer-to-peer file-sharing service on its broadband network, announced plans to develop better ways to manage peer-to-peer traffic. To that end, Comcast (CMCSA) will work with BitTorrent to develop a network capacity-management technique that is protocol agnostic.

Said Tony Werner, Comcast’s chief technology officer, “This new architecture would enable many new and emerging applications and will be based upon an open, nondiscriminatory framework that could interface with or support multiple technologies. We believe that P2P technology has matured as an enabler for legal content distribution, so we need to have an architecture that can support it with techniques that work over all networks.”

Of course you do. You just didn’t realize it until FCC Chairman Kevin Martin pointed it out, right?

Anyway, like most such corporately altruistic pledges, this one has the potential to do more good than bad–or more bad than good. “… We must recognize that these are two commercial entities whose goals are, in the end, to make sure that their networks and technologies are as profitable as possible,” writes Public Knowledge’s Jef Pearlman. “One can conceive of a world where an ISP and an application developer band together to make a proprietary system in which sanctioned application data gets preferred treatment, the ISP gets greater control of the application running on your computer, and both companies are happy in the exact situation we want to prevent. Time will tell what this partnership actually means.”

In order to build the necessary respect and win the mindshare of the Internet community, I recommend a recipe not unlike the one we’ve used with our TCP/IP efforts: embrace, extend, then innovate. Phase 1 (Embrace): All participants need to establish a solid understanding of the infostructure and the community–determine the needs and the trends of the user base. Only then can we effectively enable Microsoft system products to be great Internet systems. Phase 2 (Extend): Establish relationships with the appropriate organizations and corporations with goals similar to ours. Offer well-integrated tools and services compatible with established and popular standards that have been developed in the Internet community.”

–J Allard, corporate vice president of design and development for the Microsoft Entertainment and Devices Division, “Windows: The Next Killer Application on the Internet,” 1994

In February, Microsoft (MSFT) surprised industry watchers and embraced the idea of data portability, throwing its support behind OpenID, a decentralized digital-identity protocol.

This morning came the inevitable extension of that idea, the announcement of a partnership with five social networks on a new data-portability strategy. LinkedIn, Tagged, Hi5, Bebo (TWX) and Facebook have all agreed to use Mirosoft’s Windows Live Contacts API to, in the words of John Richards, director of Microsoft’s Windows Live Platform, “create a safe, secure two-way street for users to move their relationships between our respective services.”

In other words “Windows Live Messenger.” Certainly, it’s hard not to look at Microsoft’s announcement that way, given the simultaneous debut of invite2messenger.net, a new Microsoft Web site through which people can invite friends from participating social networks to join their Windows Live Messenger contact list.

“In completing this two-way street, both Windows Live and our partners have paid special attention to relationship context and privacy management in order to create the best possible user experience,” explains Richards. “We understand that just because people have a friend relationship with a contact on one social network, that doesn’t necessarily mean that they want that same relationship on another network. To preserve the context of the relationship, we are requiring that relationships be re-established in each experience with permission from the friend or contact, rather than automatically storing the data. We encourage you to visit www.invite2messenger.net to see these ideas in action, and to invite your Facebook, Bebo, Hi5, LinkedIn and Tagged friends to join you on the world’s largest instant messaging network, Windows Live Messenger.”

If Digg founder Kevin Rose is right, Apple’s next generation iPhone will include not one, but two cameras–the second a front-mounted video camera designed for iChat AV.

During a recent episode of his weekly Diggnation vidcast (see above), Rose claimed that the new iPhone reportedly being prepped by Apple (AAPL) for a summer release will enable video conferencing over AT&T’s (T) high-speed 3G wireless network.

Like most such predictions, Rose’s should be taken with a grain or two of salt. His last iPhone premonition, which had the device featuring slide-out keyboards, dual batteries and CDMA and GSM support, was laughably inaccurate. That said, he did accurately predict the debut of iPod nano ahead of its 2005 debut. So there may be something to his latest claim. Certainly, it sounds plausible.

The Federal Communications Commission isn’t buying Comcast’s (CMCSA) argument that throttling or degrading the performance of the peer-to-peer file-sharing service BitTorrent on its broadband network is a necessary traffic-management technique.

Speaking at the Stanford Law School Center for Internet and Society, FCC Chairman Kevin Martin said he’s considering taking action against the cable operator for violating the agency’s network-neutrality principles. Seems Martin was troubled by Comcast’s dissembling around the BitTorrent issue, not to mention its efforts to pack an FCC hearing on Net neutrality with its own employees.

“A hallmark of what should be seen as a reasonable business practice is certainly whether or not the people engaging in that practice are willing to describe it publicly,” said Martin, adding that the incident offered the commission a good opportunity to establish a precedent for future cases of this kind. “I have said in the past the commission is ready, willing and able to take action on individual complaints,” he said. “I think that is what we are going to end up doing, and I think that will end up setting an important precedent going forward: that we are willing to address individual complaints when they come in.”