Adam Bender

AT&T has agreed in principle to accept $39 million from Vonage to settle its patent lawsuit filed last month in the U.S. District Court for Western Wisconsin, Vonage said Thursday. The company also released mostly strong Q3 earnings results. Vonage generated cash from operations for the first time in company history and saw its 19th consecutive quarter of double-digit revenue growth year-to- year. But the VoIP company’s churn remained high because of “poor execution,” CEO Jeffrey Citron said in an analyst call.

No. 4 U.S. carrier T-Mobile continued to close the subscriber gap with Sprint Nextel, beating the No. 3 carrier in net additions for the fifth consecutive quarter. T-Mobile added 857,000 -- 55,000 more than it added in Q3 2006 and about 1.2 million more than Sprint, which reported a net loss in the quarter. T-Mobile has 28 million customers, slightly more than half Sprint’s 54 million wireless subscribers. The trend seems likely to continue: This month, Sprint said it expected to keep having problems Q4 (CD Nov 2 p6).

Next year will be the “most impactful year” for American Tower “with respect to emerging and regional carriers,” particularly MetroPCS and Leap Wireless, CEO Jim Taiclet said during the company’s Q3 analyst call Wednesday. “We expect meaningful increases in new site deployments” by the prepay carriers since “both companies have made progress in planning and staffing for the deployment of their auction 66 markets,” he said. By 2009, Metro and Leap will have the “equivalent” of a fifth national network regardless of whether they merge because “there is little overlap in their respective licenses,” he added. However, the top four U.S. carriers will continue to represent the majority of American Tower business, Taiclet said. “AT&T, Sprint, T-Mobile and Verizon will add sites for quality of service and coverage, while continuing to augment selected sites with 3G service-related equipment,” he said. AT&T’s recent buy of Aloha spectrum and its “stated intention” to bid in the 700 MHz auction indicates that AT&T and other incumbent carriers are preparing for additional high-speed deployments in the future, he said. American Tower is also optimistic about the Sprint and Clearwire-led WiMAX emergence, and expects the “initial deployment” of the technology in 2008, he said. Government will be another source of business. American Tower is “positioned well” to capture business created by the FAA’s next-generation air traffic control system, he said. In the third quarter, American Tower saw revenue increase 10 percent year-over-year to $376.6 million and earnings increase 14 percent to $248.6 million. It built 42 towers and completed six in-building installations in the quarter, expects to have 165 new sites completed for the full year, and predicts 250 to 350 new towers in 2008, said Chief Financial Officer Brad Singer. The tower company’s success was driven by “continued robust demand for tower space and diligent operational execution by our managers and employees,” Taiclet said. Also Wednesday, American Tower said National Grid Wireless CEO Steve Marshall has joined American as International Business Development executive vice president.

Cellphone tower companies that prioritize fiber access will get more business from wireless operators as carriers roll out WiMAX, HSPA and other bandwidth-demanding wireless services, alternative backhaul provider officials told Communications Daily. Though carriers and backhaul providers are studying copper alternatives to fiber and microwave to increase bandwidth at cell sites, tower real estate teams are still more focused on cutting costs, said Jason Jesseph, Level 3 business relations director. “The real estate team goes out and drives around and they look at… Kwik-E-Marts and corn fields and wherever else they think they can stick a tower,” Jesseph said in an interview. “They find the cheapest land they can and that’s where they put it. Nowhere in that decision process is access to a fiber optic network considered.”

It’s not just a phone Google is working on. The search giant revealed Monday an Open Handset Alliance with T-Mobile, Sprint Nextel, Qualcomm, Motorola and 30 other mobile operators, handset and semiconductor makers, software developers and marketers. Their collaboration is “Android,” an open, integrated mobile “software stack” combining a Linux-based operating system, middleware, user interface and applications. It would allow any software developer to put their applications on cellphones without involvement of the network operator, potentially allowing, for example, Google ad-supported services. The open platform could have long term implications for carrier and handset makers’ revenue streams, analysts said. And though some consider Android a “non-event” for U.S. wireless regulation, the Google announcement is stirring up open access and net neutrality debate.

Sending emergency text alerts to cellphone users poses significant challenges, panelists said last week during a panel discussion at the VON conference in Boston. Many consumers don’t know how to sign up for alerts, and those who do may experience “alert fatigue” and ignore them, they said, but new technologies and policies could change things for the better. “The roadmap going forward, while cloudy, looks very promising,” said Joe Walsh, SquareLoop chief operating officer.

Sprint Nextel must keep more of its customers, acting CEO Paul Saleh told analysts in the company’s Q3 results call Thursday. Sprint operating income plummeted 25 percent from a year earlier to $658 million. Revenue was down 4 percent to $10 billion. Subscriber deactivations from the iDEN wireless network were the main problem, Saleh said. The former Nextel executive said he won’t be “standing still” as Sprint searches for a CEO to succeed Gary Forsee. He gave two “key objectives” to stop the bleeding: improve the experience of Sprint’s customers and simplify the business. Wall Street analysts were skeptical.

Good results on new subscribers and churn weren’t enough to keep second-place Verizon Wireless from falling further behind U.S. cellular leader in AT&T in total customers third quarter. Parent Verizon posted $23.8 billion in third quarter revenue, up 5.8 percent from last year. FiOS growth is spurring a wireline turnaround, executives said Monday in a call with analysts. They raised their projections on share buybacks and the benefits of the MCI acquisition. But they brushed aside questions on 700 MHz auction strategy.

Sprint PCS affiliate iPCS added more subscribers Q3 than last year, but higher churn led to reduced net adds, it said Friday. Churn rose to 2.8 percent, up 0.3 percentage points from last year, reducing net adds almost 40 percent to 10,100 from 16,800 in 2006. It ended the quarter with 622,000 total subscribers. Sprint has bought all of its old PCS affiliates except iPCS, most recently acquiring Northern PCS in August (CD Aug 3 p9). Eventually Sprint probably will buy iPCS, but is waiting to resolve litigation and arbitration proceedings against the affiliate, Jeffries analyst Jonathan Schildkraut said in an interview. Sprint could buy iPCS by year end if a resolution comes, he said. But the departure of Sprint CEO Gary Forsee and promotion of ex-Nextel official Paul Saleh to acting CEO may slow talks, he said. “It’s been my impression that Paul Saleh was the guy holding [a deal] up,” Schildkraut said. Nextel was a “blue-collar, fighting man’s” carrier, and Saleh was a “big part” of that “combative” culture, he said. Unless Saleh has mellowed, he probably won’t play “peace maker” in the Sprint-iPCS conflict, he said.

Vonage users could be vulnerable to identity theft, eavesdropping and other malicious attacks, said security firm Sipera Systems. Attackers could steal a Vonage user’s identity and receive their calls, Sipera said Wednesday. To keep VoIP service uninterrupted, the phone adapter registers itself on the Vonage server every 20 seconds, it said. But the server challenges only the initial registration and it accepts subsequent messages without authentication, the company said. An attacker could replay a Vonage subscriber’s register message with a spoofed IP address and send it to the server, hijacking phone service, it said. Eavesdropping is possible, because Vonage doesn’t encrypt voice conversation packets sent over the VoIP network, Sipera said. Vonage users also may be open to spam and denial of service attacks, Sipera said. The Vonage-Motorola phone adapter doesn’t authenticate session initiation protocol (SIP) requests from the server used to ring the phone and start a conversation, it said. Since the phone adapter checks only that the IP address matches the Vonage server’s, an attacker could impersonate Vonage and directly call users, it said. Attackers also could exploit the vulnerability to flood users with SIP requests, preventing Vonage users from sending or getting calls, Sipera said. Sipera said it told Vonage about the problems more than a month ago, but got only an automated response. Sipera has an ulterior motive, a Vonage spokesman said. “Sipera appears to be in the business of providing a VoIP ’security solution’ and has previously attempted to sell their products to our company,” he said. “Vonage is not a customer of Sipera’s products.” Selling Sipera services isn’t the goal, a Sipera spokesman said. Sipera is “not that much different” from independent researchers Symantec and McAfee, and has worked with other businesses at no charge to help publish security patches, he said. Sipera is studying other VoIP providers and will publish notices “the next few months,” it said.