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To: Wyätt Gwyön who wrote (120632)	6/18/2002 9:17:13 AM
From: Art Bechhoefer	Respond to of 152472

>>wireless SPs have no monopoly rents<< This is an important point, which makes wireless service providers more like newspapers in a given area or region. Areas with competing newspapers tend to be characterized by good service but low profits for the competitors. Eventually, one of the papers is usually purchased by the other, or the two competitors reach some sort of agreement with regulators, allowing them to share production (printing and distribution) costs. We may see some sort of consolidation taking place among wireless service providers, but before that happens, I think we will see a movement toward the service provider that provides the best service for a given price. In areas where CDMA competes with TDMA or GSM, it's my hunch that CDMA will prevail for customers who want both voice and data services, but existing TDMA/GSM services will be priced to be more attractive to those who want only voice. Yet the main problem with TDMA/GSM ability to price at or below CDMA is that CDMA base stations can handle more calls on a single channel, giving CDMA an advantage of about 10 to 20 percent in overall costs (more, if you look just at base station costs). This is why I think the inefficient service providers, no matter how financially well off they may be, will eventually be forced into extinction. There is, after all, a need to price a service to give an adequate return to shareholders. All of this assumes there are no bookkeeping irregularities that would make an inefficient service provider look like it was making a profit, or at least producing positive cash flow. In this respect, wireless service providers resemble long distance wired companies in that customers can easily shift from one company to another. Since, long distance costs are becoming similar, the only thing that can differentiate between long distance providers is price and service quality. Here again, if the service provider is burdened with too much debt, it 's going to be very hard to price the service to compete with another firm with little or no debt service costs. In this regard, I worry about the ability of Sprint PCS and Leap Wireless to handle their current debt levels, but as long as demand for wireless keeps growing, both companies should eventually be okay. Art