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To: Sawtooth who wrote (20562)	12/30/1998 11:11:00 AM
From: Gregg Powers	Read Replies (3) \| Respond to of 152472

George: With all due respect, I disagree with your premise regarding AT&T Wireless. It may appear that in a perfect CDMA-centric world, the company would have abandoned IS-136, I think that this may prove to be a superficial conclusion. T started a digital-oriented price war that BANM, PrimeCo, Sprint and others have responded to in kind. Competition has reduced the cost of wireless minutes which should have a converse result on consumer demand. Moreover, T is waging this price war with a high cost, low productivity minute factory that it must eventually upgrade, particularly if 3G services figure into the long-term plan. While ruminating on T's strategy, it occurred to me that it probably is not wireless-centric. Consider that the One-Rate plan offers pretty specific benefits to business customers and that T management must combat two types of churn: wireless and long-distance. Since L-D pays most of the bills, management is likely focused first and foremost on reducing the latter. What better way to mitigate corporate churn, stem rate erosion and protect the minutes flowing through that big L-D pipe than to bundle wireless and long distance. The complexity of transitioning hundreds or thousands of employees from one handset/telephone number to another is a powerful barrier to exit with a high productivity cost. T's approach, in lieu of its high cost minute factory, appears reasonable tactically but more questionable strategically. Waxing a tad cynical, I would observe that, over the next year or so, the productivity issue amortizes slowly onto the balance sheet (due to wireless CapX) while the customer retention and revenue growth benefits are visible immediately on the P&L. Within this context, Armstrong's recent comments about a "world phone" struck me as profound. He must understand GSM's migration path to direct sequence spread spectrum as he must also understand that IS-136 cannot deliver anything approaching acceptable 3G services. In summary. T kicked off a price war that accelerated the migration from analog to digital in the U.S. T is fighting this price war with an inefficient minute factory, but is likely pursuing an agenda that is, in the near-term, not specifically motivated to maximize wireless profitability. Although I would observe that since much of the infrastructure is already in, it does make sense from a NPV standpoint to maximize utilization. As T looks for a 3G solution and examines convergence from a worldwide perspective, the company may well find it necessary to migrate to a more favorable technology platform. Best regards, Gregg