Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, December 25, 1994 TAG: 9412290026
SECTION: BUSINESS PAGE: F1 EDITION: HOLIDAY
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Long
On the other side of the Atlantic, one of your kids, traveling on a student exchange program, dials home. She was walking along a Parisian quay when the pocketbook containing her passport and all her money slipped into the Seine.
The familiar cricket-like sound of a telephone stirs you from your vacation slumber, and you dig around in the beach bag for the tiny wireless handset. Your panicked daughter is on the line.
The crisis is handled with a few calls from your beach chair. You settle back again and watch the porpoises play. Back in Roanoke, a copier-supply salesman who's been pestering you for months punches in the same number your daughter dialed an hour earlier. But your phone remains silent, and the salesman finds himself in voice-mail oblivion. You doze.
Such is the promise of the brave new world of digital wireless communications.
\ Dramatic change is nearing in the way we communicate.
It represents more than another step in the age of electronic voice communication that began in 1876, when Alexander Graham Bell called for his assistant, Mr. Watson, to "come here" and a primitive telephone picked up his voice.
The latest development - accelerated by deregulation of the telephone industry and technological advances in our ability to move telephone conversations and computer data over radio waves - eventually may be viewed as revolutionary.
Earlier this month, the Federal Communications Commission began auctioning licenses for portions of the radio spectrum on which new "personal communications services" will operate.
When PCS first enters the market in 1996, it will resemble existing cellular telephone service, but the digital PCS phones will be smaller, lower-powered and their batteries will last longer. Later, however, PCS providers may offer services such as the transfer of electronic data and video-conferencing from virtually anywhere on the globe.
Increased competition from new wireless phone companies will force consumer costs down, some say to a level where wireless service will compete with traditional wired telephone service.
Among those seeking a piece of the PCS business in Western Virginia are familiar names such as Bell Atlantic Corp. and Cox Cable Communications Inc., as well as an alliance of 10 independent and basically rural telephone companies, including Roanoke & Botetourt Telephone Co. of Daleville.
Those who would underestimate the market potential for the new technology should look to the cellular telephone industry, where consumer acceptance greatly exceeded expectations, said Craig Ellis, a securities analyst with Wheat First Butcher Singer in Richmond.
Today there are 20 million cellular subscribers in the United States. An AT&T study a decade ago predicted only 900,000 by 2000. The cellular business is now growing by 17,000 customers a day or 50 percent annually, according to the Cellular Telecommunications Industry Association, a Washington, D.C.-based trade group.
\ The FCC decided in September 1993 that it would divide the personal communications systems market by auctioning licenses for large and small blocks of the radio frequencies that have been set aside for PCS.
The frequency auction is a first for the government and "highly appropriate," said Rep. Rick Boucher, D-Abingdon, who has been a leader in congressional efforts to open up the telecommunications industry to more competition. The government has estimated it will receive $10 billion to $14 billion from the auction, Boucher said. Based on the current rate of bidding, however, those expectations may not be realized.
Bidding in the auction's first phase began Dec. 5. At stake are licenses for two of the wider radio bands in each of 51 Metropolitan Trading Areas in the United States and its island territories. Roanoke is part of the Richmond-Norfolk MTA, which extends from Wytheville to Virginia Beach.
Ten bidders paid up front for the right to bid on the Richmond-Norfolk licenses. Among them were AT&T, Cox and Bell Atlantic with three partners. Cox also is bidding elsewhere in the country as part of a group led by Sprint.
When bidding was suspended for the holidays Wednesday, the leading bidders were Continental Cablevision Inc., which had bid $20.6 million for one of the Richmond-Norfolk licenses, and PrimeCo, the Bell Atlantic partnership, which had bid $22 million for the other. Total bidding for all major licenses in the first phase stood at about $1.6 billion through Wednesday.
The first phase will resume Jan. 3 and will end when no other bids are received on any of the 99 licenses at stake. Three of the first-phase licenses already have been awarded through a federal program designed to reward technological innovation.
The second and third phases of the auction will offer 1,972 licenses - four in each of the nation's 493 basic trading areas, which are subdivisions of metropolitan trading areas. The second phase, which includes one each of the bigger and smaller band licenses in each area, will be open only to small businesses or those owned by women and minorities. The third phase, when the final two smaller-band licenses in each area will be offered, will be open to any bidder.
The potential result is as many as six separate PCS telephone service providers in any one region of the country in addition to existing cellular services, although that is unlikely to happen.
Ellis, for instance, expects that some of the licenses will be bought by companies that have a specific need for wireless communications for their own purposes, such as electric utilities that will read meters with wireless devices or vending-machine companies that will use them to tell when machines need servicing.
In any case, competition is expected to increase among wireless phone service providers. That should help reduce costs from the current average of 33 cents a minute to around 10 cents a minute, the point at which it starts to be competitive with traditional wired service, said Brian Woerner, director of the mobile and portable radio research group at Virginia Tech.
\ Ten independent Virginia telephone companies, including Roanoke & Botetourt, announced Dec. 8 that they were forming an alliance to enter the PCS wireless business. CFW Communications Co. of Waynesboro, parent of the Clifton Forge and Waynesboro Telephone Co., is the lead actor in the group. CFW and Roanoke & Botetourt already are in the wireless market, each owning 30 percent of the Contel Cellular business in Roanoke.
Warren Catlett, CFW's director of business development, said the group is primarily interested in offering the new service in central and Western Virginia, where the companies have a presence now. The group may or may not take part in the auction but, in any case, will seek an alliance with a regional or nationwide PCS provider in order to offer customers a seamless phone network as they move from one region to the next.
"Ideally, we'd like to work with someone who serves the [metropolitan trading area]; then we'd have the advantage of a big national name," said Allen Layman, president of Roanoke & Botetourt.
By midyear the group will be ready to announce its service areas and when service will be available, Catlett said. He expects the big companies to focus on building PCS networks in the major metropolitan areas. "We're going to be a strong player in our neck of the woods," he said.
Bell Atlantic, which provides local telephone service to much of the Roanoke region, has joined with two fellow Baby Bells, Nynex Corp. and U.S. West Inc., and AirTouch Communications, a West Coast company, to bid on 26 of the PCS metropolitan licenses covering a population of 91 million people. The companies already own cellular licenses in 15 of the 20 largest U.S. cities and have more than four million cellular customers.
The goal of the partners is to use a combination of PCS and cellular properties to provide wireless phone service nationwide. They expect the consumer use of wireless phone service to grow from the current 8 percent of the total telephone market to 20 percent by 2000 and 35 percent by 2005, Bell Atlantic spokeswoman Nancy Stark said.
Those interested in investing in the new PCS businesses should look for the best managed companies, Ellis said, and they should remember PCS is not a new cellular technology but a competitor to cellular.
To compete with PCS, existing cellular companies will have to become more customer-oriented and better network operators than in the past, Ellis said.
On the other hand, in markets where existing cellular companies do a good job, the PCS providers will have to offer new services such as wireless data transfer to be successful, he said.
Michael Houghton, a spokesman for the Cellular Telecommunications Industry Association in Washington, D.C., said existing cellular companies will be bidding for PCS licenses where they don't provide service now and limited licenses in areas where they already provide service. The new frequency bands will allow those companies to enter new markets and provide new services in markets where they already exist, he said.
Cellular companies will remain competitive because consumers will be buying particular services and not a particular technology, Houghton said.
When the services made possible by PCS fully arrive, some say it will be like a trip to Ben and Jerry's compared to the plain-vanilla cellular services of today, Houghton said.
by CNB