3/8 article on US wireless industry
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3/8 Time Magazine - Part I
by: sQuishyPhysh
15555 of 15561
03/08/99
Time Magazine
E-conomy/Business Trends
Dial C For Cheap Cell-phone providers aren't catering just to the elite anymore.
Daniel Eisenberg calls on carriers to see how they're cutting prices--and helping
folks cut the cord
Daniel Eisenberg
It's safe to assume that Rose Ripke's name never came up during the
multibillion-dollar bidding war in January over AirTouch Communications, the
U.S.'s largest wireless phone carrier. After all, Ripke is just an insurance agent
from Brownsville, Texas. But in her own, unsung way, she was a factor at the
bargaining table where British cellular dynamo Vodafone beat out Bell Atlantic
with a $60 billion offer. Last fall, you see, Ripke cut the cord on her wireline to
trade a mishmash of local, long-distance and wireless charges for a single
monthly calling plan from Sprint PCS. Now, whether she's baby-sitting for her
grandkids at home or hawking policies on the road, Ripke's mobile phone is her
only phone. "It became economically feasible to use just the one," she says.
Most of America's 67 million cell-phone users haven't come to that sweeping
conclusion. But Ripke is only one of a growing number of frugal high-volume
callers who are making a cell phone their main means of communication. Lured
by dramatic price cuts by national carriers like AT&T Wireless, Sprint PCS and
Nextel, they're forcing regional titans into an elaborate mating dance. "The
{smaller} wireless carrier is a dying breed," says Mark Lowenstein, senior V.P.
of the Yankee Group, a Boston telecom consulting firm.
Until recently, coverage or price wasn't much of a problem for the likes of
AirTouch and Bell Atlantic. They encountered only token competition in their
respective markets, enjoying cushy profit margins and handing customers high,
difficult-to-decipher bills. But ever since the FCC auctioned off a chunk of
cost-efficient, digital spectrum three years ago, national carriers have been
rewriting the rules of the game, rolling out flat-rate calling plans with charges as
low as 10{cents} to 15{cents} a minute and eliminating prohibitive roaming and
long-distance fees. No wonder 12 million new subscribers went wireless in
1998, as the average price of a minute of service dropped to 39{cents}. By
2002, when a minute should cost half that, there may be 110 million U.S. users,
according to investment bank Sanford C. Bernstein & Co.
Much of that growth can be attributed to AT&T. Nearly a year ago, it came up
with the bold idea of offering consumers a novel kind of all-you-can-talk plan,
under which any minutes over the bundled allotment would cost the same low
rate, no matter where in the country you were calling from. Since its introduction
last May, Digital One Rate, which requires a minimum purchase of $90 a month,
has signed up 850,000 customers. "We underestimated the demand for
simplicity," says CEO Daniel Hesse, who serves 8 million subscribers. "We had
no idea how successful it would be." So successful was it that last month AT&T
launched Personal Network, a bundled service offering both wireless and
long-distance calls at one low rate.
Still, the price of all this success remains open to question. In order to charge
artificially low rates, AT&T has to subsidize roaming calls; anytime a user goes
off its network, AT&T shells out the 30{cents} to 50{cents} extra a minute. To
make up for that, it's counting on higher revenues. Already, plan subscribers have
racked up an average monthly bill of $100, even as the industry's has dropped
from $70 in 1992 to $47 last year.
Not everybody buys AT&T's strategy, which has spurred a host of imitators, like
Bell Atlantic and GTE, to offer their own national plans. "The industry is leaping
ahead and losing money," says Arun Sarin, president of AirTouch, which will
have 23 million customers in 23 countries after its merger. "When you're as big as
AT&T, you can afford to do a lot of silly things."
(continued ...)
3/8 Time Magazine - Part II
by: sQuishyPhysh
15556 of 15561
Here's another one that could work: Hesse recently launched a trial in Plano,
Texas, offering wireless at a flat rate as a replacement for local service. It's an
experiment, but more than a few people think wireless will eventually become a
full-fledged alternative. By 2004, 20% of all U.S. voice traffic will be wireless,
according to the Yankee Group. In many cases, if you can stand the occasional
dropped call or static-filled reception, it's already a better deal. "If you're a
business traveler using a pay or hotel phone, you should be going through a little
self-examination," says Andrew Sukawaty, CEO of Sprint PCS, which has
garnered 2.6 million subscribers in just more than two years.
Cost is only one consideration. Certain customers are programming their digital
cell phones to receive e-mail and updates on stocks, traffic and weather. Many
of Nextel's 2.4 million business customers love its unique "direct connect" feature,
which turns their phones into a walkie-talkie to contact co-workers. And in the
next few years only the person dialing a cell phone may have to pay for the call.
For consumers, it sounds good. Not so for George Schmitt, president of
Omnipoint, which has 400,000 wireless subscribers around New York City and
Miami. "They made us drop prices {faster}," Schmitt says. To help stay
profitable, he hopes to cater to customers like teenagers and lower-income,
prepaid, cellular callers, who don't travel a lot. Even so, he argues, "less than 2%
of my customers ever leave the Northeast." Unfortunately, the competition is out
to prove that it's just a matter of offering the right incentive.
{SIDEBAR}
FASHION STATEMENT Cell phones for every taste
Remember when buying a cell phone meant taking whatever boring old handset
your carrier was giving away? Well, today it requires a bit more selectivity, plus
some cash. Now that affordable flat-rate calling plans are ushering in a new class
of savvy wireless users, manufacturers are rolling out an array of models to suit
every taste- -and fatten their bottom line. "Acquiring a phone is like buying a tie
or watch," says John Ferrari, director of product launch for Nokia. "It makes a
statement about you."
Fashion-conscious teenagers may choose Nokia's 5100 series ($100- $150)
and its rainbow assortment of slip-on color covers; their elders may covet the
Nokia 8800 line ($500-$700), an elegant new metallic-coated phone, or
Motorola's ultra-thin V series ($500-$700), which makes its minuscule StarTac
look clunky by comparison.
For serious globetrotters, there's Ericsson's I888 ($300), one of the first
dual-mode models that work on GSM systems in the U.S. and Europe.
Qualcomm 's soon-to-debut pdQ Smartphone ($500-$1,000), which combines
a sleek cell phone and a Palm Pilot organizer into one svelte package, is for the
information-crazed executive who likes to travel light.
Connected devices like the pdQ, in fact, are only the first generation of digital
phones that will be able to link to the Net. Says Paul Jacobs, president of
Qualcomm Consumer Products: "It's a learning experience. Handset interfaces
are still in the dos era." Of course, upgrading to Windows will not be cheap, so
forget about those freebies.
COLOR PHOTO ILLUSTRATION COLOR PHOTO ILLUSTRATION:
PHOTO COLLAGE FOR TIME DIGITAL BY DAVID MCGLYNN
COLOR PHOTO MOTOROLA V SERIES
COLOR PHOTO NOKIA 8800 *** COLOR PHOTO QUALCOMM pDQ
***
Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.
Posted: Mar 7 1999 2:03PM EST as a reply to: Msg 15555 by sQuishyPhysh |
