Wireless users opt for service without commitment

For wireless subscribers, commitment is out and short-term relationships are in.

This year, customers have been making a big shift away from two-year contracts toward "prepaid" cell phone service, which often costs less and does not require contracts. This is happening even though contracts are needed to get popular phones such as the iPhone and the Droid.

Now prepaid service looks like it will get even more attractive, with further price cuts. That's because wireless carriers have hit a wall when it comes to finding new customers who will sign contracts.

"I would love to have an iPhone. I just can't swallow the $70 or more bill that would come with it," said Jeff Finlay, a 45-year-old stay-at-home dad in San Antonio who uses a prepaid plan.

Unlike contract plans that bill subscribers each month for the services they used the previous month, prepaid services traditionally let subscribers buy minutes in advance for around 10 cents to 20 cents each. When the minutes are used up, people "refill" their accounts as needed.

For years, such plans were marketed primarily to people who did not have the credit to qualify for plans with contracts. About one-fifth of Americans with cell phones are on prepaid, according to the New Millennium Research Council, a Washington-based think tank.

But as the recession forced more people to cut costs, prepaid service appealed to a broader slice of the market, and prepaid services responded by offering better deals.

Now it's possible to make unlimited calls and text messages on a prepaid plan for $45 a month — half of what it costs a customer with a contract on Verizon Wireless. At Tracfone, the largest independent provider of prepaid service, customers pay an average of $11 per month.

The popularity of text messaging is also making some people move away from contract plans that provide a big bucket of monthly minutes that may not get used.

Finlay uses prepaid service from Virgin Mobile, a division of Sprint Nextel Corp., because he talks no more than 15 to 20 minutes on the phone each month. That costs him $5 per month. He sends and receives up to 2,000 text messages, so he tacks on an unlimited-texting option for $20 per month.

His sons, 13 and 18 years old, use their phones the same way, so they're on Virgin too. Finlay has even converted his parents to prepaid. They're in their 70s, pretty far outside Virgin's target market: 18-to-24-year olds.

Together, the seven largest U.S. wireless carriers expanded their contract subscribers by just 230,000 people in the first quarter. That's negligible compared to their entire customer base of 280 million.

Prepaid service, meanwhile, attracted about 3.1 million new subscribers to the seven largest carriers in the quarter. (That does not include an additional 1.1 million accounts that AT&T Inc. counts as prepaid but are serving devices that aren't phones, such as e-book readers.)

This marks a sharp reversal of trends. In the same quarter just two years ago, the comparable carriers added 3 million subscribers under contract, and 2.3 million to prepaid plans.

The carriers that rank third and fourth in the U.S. by subscriber numbers, Sprint Nextel and T-Mobile USA, are losing contract customers. No. 1 Verizon Wireless and No. 2 AT&T are still adding contract customers, but at the lowest numbers in more than five years.

The prepaid market heated up in January 2009, when Sprint began offering a prepaid plan with unlimited minutes for $50 a month under its Boost Mobile brand. MetroPCS Communications Inc. and Leap Wireless International Inc., which both target low-income households, had been offering unlimited prepaid plans for a few years, but only in limited areas. Sprint's offer was good nationwide.

Tracfone, a unit of Mexico's America Movil SA, countered with Straight Talk, which provides unlimited calling for $45 per month on Verizon Wireless' network, sold exclusively by Wal-Mart Stores Inc.

MetroPCS and Leap, which sells service under the Cricket brand, have responded by eliminating add-on fees for taxes and roaming, effectively cutting prices.

Ronald Grandison, 56, switched four months ago to MetroPCS after seven years under contract with Sprint.

He said he was paying charges that he didn't understand and couldn't get explained. The bill for him and his wife sometimes rose above $400 per month.

"That was the last straw," said the Brooklyn law enforcement officer. "I felt bad to switch. I had been a customer for so long. But I get up for work at 4 a.m., and it's hard to make this money."

They now pay $84 for unlimited calls and text messages.

Because prepaying subscribers can cancel service at any time without penalty, carriers do not subsidize the cost of the phones as much as they do for contract-signing customers. (For instance, AT&T pays Apple close to $600 for each iPhone 3GS that costs a customer $199.) That has meant that phones available for prepaid service mostly have been basic models.

That, too, has been changing. It's now possible to buy BlackBerrys for prepaid, and carriers have signaled that they're looking to add more "smart" phones.

But don't expect a prepaid iPhone: AT&T, which carries it, isn't an aggressive player in prepaid. It and Verizon sell prepaid service at relatively high prices that haven't been gaining them many customers. Apparently wary of eroding their brand names, they've instead jumped on the prepaid bandwagon by selling network access to Tracfone.

On Thursday, Sprint and Wal-Mart Stores Inc. announced a trial of another prepaid plan: Common Cents, which is designed for people who don't use their phones much. Calls will cost 7 cents per minute.

"Through the recent difficulties in our economy, we've seen consumers say loud and clear that their phone was a must-have," said Greg Hall, head of U.S. entertainment and wireless sales at Wal-Mart. "But what we have seen is them really getting smart about getting that connection with the best value."

Adobe is firing back at Apple with love.

Adobe Systems Inc. is countering Apple Inc. CEO Steve Jobs' recent jab at Adobe's Flash technology for Web video and games. The company is running ads in newspapers and popular technology blogs saying "We Love Apple" — with a bright red heart in place of love.

Jobs had described Flash as outdated, unreliable and unfit for Apple's iPhone and iPad gadgets. In a detailed, 1,685-word offensive posted online two weeks ago. Jobs spelled out the reasons why Apple continues to ban Flash from its mobile devices, including "reliability, security and performance," and the fact that Flash was designed "for PCs using mice, not for touch screens using fingers."

But he said the most important reason is that Flash puts a third party between Apple and software developers. In other words, developers can take advantage of improvements from Apple only if Adobe upgrades its own software.

Adobe's ad — at 82 words — begins, "We love creativity," "We love innovation," "We love apps."

"What we don't love," it continues, "is anybody taking away your freedom to choose what you create, how you create it, and what you experience on the Web."

The full-page ads appeared Thursday in The Wall Street Journal, The New York Times and more than a dozen other newspapers. Online, they peppered tech blogs such as ArsTechnica, Engadget and TechCrunch, as well as CNN.com and Wired.

Cisco extends recovery, net income up 63 pct in 3Q

Cisco said Wednesday that its net income for the latest quarter rose 63 percent from last year, as the economic recovery gave customers the confidence to spend on big-ticket networking gear.

"We witnessed a return to strong balanced growth across geographies, products and customer segments that we haven't seen since before the global economic challenges began," CEO John Chamber said in a statement.

Cisco Systems Inc. said it earned $2.2 billion, or 37 cents per share, in the fiscal third quarter that ended May 1. That's up from $1.3 billion, or 23 cents per share, a year ago.

Excluding one-time charges and the cost of stock-based compensation, the world's biggest maker of computer networking equipment earned 42 cents per share.

Analysts polled by Thomson Reuters expected 39 cents per share. Cisco routinely exceeds those estimates.

Revenue rose 27 percent to $10.4 billion, from $8.2 billion. That topped Cisco's own forecast of $10 billion to $10.3 billion.

The San Jose, Calif., company's revenue has now recovered to the level of late 2008, when the economic downturn started in earnest. Cisco saw a steep drop in sales after that. The sharp revenue increase is a reflection of a bounce-back in spending, rather than sustainable growth from Cisco — its long-term target remains year-over-year growth of 12 percent to 17 percent. Also, this year's quarter was a week longer than last year's which added 4 percent to 5 percent to revenue.

Chambers said Cisco expects the recovery to continue at the same pace in the current quarter, with revenue up 25 percent to 28 percent from last year. That works out to a range between $10.7 billion and $10.9 billion, stretching above the average analyst estimate of $10.7 billion.

Cisco shares fell 55 cents, or 2.1 percent, to $26.19 in extended trading, after the release of the results.

Cisco's products are used around the world, and its quarters end a month after most companies, making it a bellwether for trends in capital spending by corporations and governments. Chambers told analysts on a conference call that he hadn't seen any drop-off in demand from Europe in the last few weeks, even as the continent has been hit by the Greek debt crisis.

Chambers said Cisco hired a net 1,000 people in the quarter, and he expects the pace of hiring to speed up. It laid off about 2,000 people last year. It has about 67,000 employees.

During the quarter, Cisco closed the $3.4 billion acquisition of Tandberg ASA, a Norwegian supplier of teleconferencing equipment, but the closing happened to late to affect results substantially.

Chambers said the company's servers for data centers are selling well. The company entered that market last year, competing with Hewlett-Packard Co. and IBM Corp., who are partners in other fields. The customer based doubled last quarter, and the pace of sales is now at $200 million a year, the CEO said.

Game sales strong for EA but outlook hurts shares

Video game publisher Electronic Arts Inc. said Tuesday that strong sales of games such as "Battlefield: Bad Company 2" and "Mass Effect 2" gave the company a quarterly profit above expectations. But its outlook fell short of Wall Street's forecast, and its shares slumped in after-hours trading.

Electronic Arts, which also has "The Sims" and "Madden" games, said it earned $30 million, or 9 cents per share, in the quarter that ended March 31, its fiscal fourth. In the comparable period last year it lost $42 million, or 13 cents per share.

Revenue rose 14 percent to $979 million from $860 million.

EA's adjusted earnings of 9 cents per share and revenue of $850 million handily surpassed Wall Street's expectations of a profit of 5 cents per share on revenue of $835.4 million. Adjusted results exclude special items and account for deferred revenue from games with online components.

EA indicated that many kinds of games sold well, from $60 titles for consoles to inexpensive games for Facebook and mobile devices. The quarter's star performer was warfare shooter "Battlefield," which is available for PCs, PlayStation 3 and Xbox 360, said Eric Brown, EA's chief financial officer. It has sold 5 million copies to date and exceeded the company's expectations.

It was EA's earnings forecast that gave investors pause.

For the current quarter, EA said it expects results in the range of a loss of 5 cents per share to a profit of 5 cents per share. On an adjusted basis, it is forecasting a loss of 35 cents to 40 cents per share on revenue of $460 million to $500 million.

Wall Street had been forecasting a loss of 33 cents per share and revenue of $516.8 million.

Shares of EA, which is based in Redwood City, Calif., fell 79 cents, or 4.2 percent, to $18.01 in after-hours trading. Before the earnings release the shares gained 3.1 percent to close at $18.80.

"Expectations perhaps got a little bit ahead of themselves," said Arvind Bhatia, an analyst with Sterne Agee. "The quarter itself was quite satisfactory. But some people would have liked to see a raise in guidance."

Along with other video game makers, EA has been increasing its focus on the online component of games, which include downloadable content to enhance games bought in packages. This "digital" category also includes games for social networks such as Facebook and mobile platforms like the iPhone.

On Monday, the company announced it will begin charging people $10 to play its sports games with others online if they rented or bought the games used. It includes the service at no extra charge for players who buy the games new.

Charging for online services is not new — it's how EA rival Activision Blizzard Inc. brings in a steady source of revenue from "World of Warcraft." But EA's new policy is a further sign the company is preparing for a future where games are offered online as a service, not just in a shrink-wrapped disc.

Twitter bug lets users fake followers

A Twitter glitch has allowed users to game the popularity contest by making it appear that celebrities had subscribed to read their mini-blog postings known as tweets.

The flaw, which Twitter said Monday it has fixed, allowed users to add anyone else as a follower of their tweets. Normally, the other person has to initiate such "following."

It's unclear how long the flaw existed and how many people took advantage of it. Twitter Inc. says it's looking at the issue.

A side effect of the fix was that for about an hour on Monday, Twitter users showed zero followers while the company fixed the problem.

People who exploited the bug got more than an ego boost from having famous people appear to be their fans. For a time, those celebrities really did become their audience and received the tweets from people who had fraudulently added them as followers.

Twitter recommends that users who were fraudulently added as a follower to someone else's account should click "unfollow" to take themselves off those lists.

The company emphasized that updates on accounts set with privacy restrictions weren't made public because of the bug. Information on such "protected" accounts is hidden from public view, unless the account owner approves specific people to view updates.

Chavez rockets to No. 1 on Twitter in Venezuela

President Hugo Chavez is tops on Twitter in Venezuela less than 2 weeks after launching his account, surpassing Internet-savvy foes who dominate the social networking site and use it to oppose him.

Chavez's account, "chavezcandanga," had racked up more than 237,000 followers as of Saturday morning — besting the 234,000 who receive tweets from Globovision, the only TV channel that remains critical of the socialist leader.

In recent televised appearances, Chavez has trumpeted the meteoric rise of his Twitter popularity while downplaying the critical, often disparaging messages he receives.

"Some criticize me, others insult me. I don't care," he said. "It's a form of contact with the world."

The president joined Twitter on April 27 in an attempt to counter adversaries who have actively used the site to make accusations of human rights violations, organize protests and — above all — ridicule Chavez.

He urged supporters to join as well, calling Twitter "a weapon that also needs to be used by the revolution."

With an average of about 20,000 people per day signing up to follow Chavez's tweets, the president says he has been overwhelmed by nearly 54,000 messages from supporters, critics and people writing to ask for help with a problem or lodge a complaint. On Thursday, he announced that a new team of 200 aides would help him manage the stream.

"I'm creating a team due to the avalanche of requests, and some grievances," he said.

Opposition lawmaker Juan Jose Molina said he was not surprised by Chavez's ability to attract a crowd in cyberspace, but he thinks the president should spend less time tweeting and more time working to reduce soaring inflation and violent crime.

"Nobody can deny that Chavez has leadership. But it's also true that nobody can deny his inability to govern," Molina said. "He should be more dedicated to solving the country's problems."

"I'm not thinking about following him (on Twitter) because I don't care about what he has to say," Molina added.

Chavez's foray into Twitter has also inspired U.S. State Department spokesman P.J. Crowley to sign up.

"With chavezcandanga entering the field, how could I resist?" Crowley tweeted May 3.

Eight great iPhone apps for Mother's Day

Is your mom addicted to social media? If so, check out the Mother’s Day Cards and Frames app ($1.99). This iPhone app let’s you create a custom Mother’s Day card by accessing your mom’s photos on her Facebook page or from your library. Then, you can post the card on her wall or print out the actual card. It’s really easy, so you can do it to honor all your family and friends who are mothers.

If you have more time on your hands, check out the ScrAPPbook app (99 cents) and build a virtual scrapbook for your mom, including photos, videos and sound. You can even share the scrapbook on her Facebook page. What better way to pay tribute to Mother Earth than by going green, and your mom by gifting her with memories?

Modern MomThe free Modern Mom app is a companion to the magazine and website of the same name. Started by an actress and mother of four, Brooke Burke, and a partner, the goal of Modern Mom is to help moms find balance, relevance and consciousness, and offer resources in one convenient location. The app is filled with videos and articles, as well as a Twitter feed filled with savvy info from modern moms everywhere

Apps for busy moms

Playground Pump The Workout - Chris RauchnotThe Playground Pump the Workout by Chris Rauchnot iPhone app ($2.99) lets busy moms get their workout done while the kids play. The app is filled with comprehensive workouts utilizing your own body weight and playground equipment. A handy tool to generate random exercise cards keeps your workouts fresh.

The Bank of Mom app ($1.99) gives moms with multiple children a way to keep track of allowances. Start an account for each child and enter in activities for which they earn more money or instances where they’ve spent their money. It’s a virtual allowance bank you can take with you wherever you go.

Intuition: Mom's Personal AssistantThe free Intuition: Mom’s Personal Assistant iPhone app is a really cool and interactive to-do list for busy moms on the go. Keep track of tasks by category including calls, errands, grocery shopping, wish lists, family activities and more. My favorite part is the "Tasks by Location," which shows you if you are near, say the dry cleaner, if you need to pick something up while you are out and about town. Never forget to pick up a kid from soccer practice again!

Apps for moms to be

Pimp My Ultrasound/Baby Picture--Entertainment 4 expecting mom (s) and dad (s)This app is a little silly, but it is worth downloading just to see the smile on her face. For moms-to-be, check out the free Pimp My Ultrasound app. Add a Dr. Seuss style hat, sunglasses and more to your unborn baby’s first picture. Then share it with the world on your Facebook page.

The free Hello Baby – Pregnancy Calendar iPad app by Pampers not only shows you the typical development of a baby by weeks, but also shows pictures of what her thriving fetus might look like at all stages. The cool part is you can hold it up to her tummy to get a look at what the baby looks like at different stages throughout her pregnancy.

FCC says it has compromise on key broadband rules

The head of the Federal Communications Commission thinks he has come up with a way to salvage his ambitious national broadband plans without running into legal obstacles that have threatened to derail him.

FCC Chairman Julius Genachowski said Thursday that his agency has crafted a compromise in how it regulates high-speed Internet access: It will apply only narrow rules to broadband companies. The FCC chairman, a Democrat, said this delicate dance will ensure the agency has adequate authority to govern broadband providers without being too "heavy-handed."

But his plan likely will hit legal challenges from the big phone and cable companies and already faces significant opposition from Republicans at the FCC and in Congress.

The FCC has been scrambling to develop a new regulatory framework since a federal appeals court last month cast doubt on its jurisdiction over broadband under existing rules.

The FCC needs that legal authority for the sweeping national broadband plan that it released in March. Among other things, the plan aims to give more Americans access to affordable high-speed Internet connections by revamping the federal program that subsidizes telephone service in poor and rural areas and using it to pay for broadband.

Genachowski also needs this authority for his proposal to adopt "network neutrality" rules prohibiting phone and cable companies from prioritizing or discriminating against Internet traffic traveling over their lines. Internet companies such as Google Inc. and Skype Ltd. say these rules are needed to prevent broadband providers from becoming online gatekeepers and blocking Internet phone calls, streaming video and other services that compete with their core businesses.

Genachowski said his new regulatory framework will let the FCC move ahead with its plans and "support policies that advance our global competitiveness and preserve the Internet as a powerful platform for innovation."

The FCC currently treats broadband as a lightly regulated "information service." It had maintained that this framework gave it ample authority to proceed with its broadband plan and to impose net neutrality rules. But the U.S. Court of Appeals for the District of Columbia rejected this argument.

So now Genachowski is seeking to redefine broadband as a telecommunications service subject to "common carrier" obligations to treat all traffic equally. Similar rules apply to other networks that serve the public, including roads, electrical grids and telephone lines. But Genachowski said he will refrain from imposing more burdensome mandates that also apply to traditional telecom companies. For instance he would avoid requiring the broadband companies to share their networks with competitors.

The proposal is intended to strike a balance that can satisfy both Internet service providers that oppose new regulations and public interest groups that are demanding greater consumer protections. FCC officials stressed that they intend to regulate only Internet connections, not the online services flowing through them.

The FCC will soon seek public comment on Genachowski's proposal. It would have to be approved by at least three of the FCC's five commissioners, and Genachowski is expected to have the support of his two fellow Democrats.

Several public interest groups and big Internet companies, including Google, Skype, eBay Inc. and Amazon.com Inc., praised the proposal. So did Rep. Edward Markey, D-Mass., who sits on the House Energy and Commerce Committee, which oversees the FCC. "With this decision, the FCC will ensure that the agency remains the `cop on the beat,' protecting consumers and competition on the World Wide Web," Markey said.

But Republicans lined up against the plan.

The two Republican FCC commissioners, Robert McDowell and Meredith Baker, said the proposal would "shatter the boundaries" of the agency's authority and discourage broadband providers from investing in their networks. McDowell and Baker said Genachowski's plan would impose "burdensome rules excavated from the early-Ma Bell-monopoly era onto 21st century networks."

House Republican Leader John Boehner of Ohio called the plan "a government takeover of the Internet."

The battle is likely to land in court if the big phone and cable companies decide to challenge the new framework. The companies already oppose Genachowski's network neutrality proposal, warning that restrictions on what they can do with their networks will discourage them from investing in their lines.

Shares of phone companies Verizon Communications Inc. and AT&T Inc. slipped 2 percent Thursday. Cable stocks tumbled even more — reflecting the fact that cable companies have a larger share of the broadband market and no wireless operations to fall back on. Shares of Comcast Corp., the nation's largest cable company, lost 6 percent, while Cablevision Systems Corp. fell 7 percent and Time Warner Cable dropped 8 percent.

Tom Tauke, Verizon's top Washington official, said Genachowski's new approach to regulation is "legally unsupported" and "could ultimately harm consumers and inhibit the innovation and investment he wants to encourage." AT&T echoed that point.

Comcast said that while it is disappointed with the FCC proposal, it is prepared to work with the agency. But Comcast may be more open to compromise because it needs FCC approval for its plan to take a controlling stake in NBC Universal.

It was Comcast that helped set in motion the events leading to last month's court ruling.

The case centered on the company's behavior in 2007 when it interfered with subscribers using the online file-sharing service BitTorrent, which lets people swap movies and other big files. Comcast said the service was clogging its network, but public interest groups maintained that the company saw the swapping of video files as a threat to its cable business.

The FCC, then led by Republican Kevin Martin, ordered Comcast to stop blocking subscribers from using BitTorrent and based its decision on net neutrality principles it had adopted in 2005.

Comcast challenged the order in court. It argued that the order was illegal because the agency was seeking to enforce principles and not regulations or laws. That is one reason that Genachowski is now pushing the FCC to adopt formal net neutrality rules that would apply across the industry.

Comcast also had argued that the FCC lacked authority to mandate net neutrality because it had deregulated broadband by classifying it as an information service under the Bush administration. Now Genachowski's next move could reverse course on that approach.