THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, November 11, 1996 TAG: 9611090170
SECTION: BUSINESS WEEKLY PAGE: 12 EDITION: FINAL
TYPE: Cover Story
SERIES: THE COMMUNICATIONS FREE-FOR-ALL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: 185 lines
By almost any measure, the nation's cellular-telephone industry has been spectacularly successful.
Little more than a decade since mobile phones became widely available, more than 40 million people carry them. The industry's revenues are approaching $25 billion a year.
Yet in a nation that's seemingly becoming unwired, America's cell phones paradoxically have been spending more and more time in glove boxes: in the off mode and often used only for emergencies. Most users have a hard time remembering their cell-phone numbers.
Bottom line: it simply costs too much be a cell-phone junkie.
Just over the horizon, though, a plethora of new competitors is poised to change all that.
In Hampton Roads and everywhere else in the country, a half-dozen new next-generation cellular services will hit the market over the next few years. That's sure to drive down prices for mobile-phone services and drive up usage rates.
Wireless will increasingly become the way to talk, says Joseph O'Konek, general manager of PrimeCo Personal Communications. His company plans to introduce its new cellular-like service in Hampton Roads on Wednesday.
Ten years from now, he says, a wireless operator ``could very well be your primary communications company.''
Congress gets the credit for the nationwide explosion in choices. It approved a groundbreaking auction of licenses for the new wireless offerings: known as personal communications services. Outfits like PrimeCo have already anted up more than $20 billion for the PCS radio frequencies.
Now, these companies are racing to build the systems and draw the tens of millions of new customers it will take for PCS to deliver on its expectations.
If the Washington area is any guide, it won't take long for PCS to transform the United States from a wireless backwater to a sea of gabbing phone toters.
Washington was the first market in the country for the new service. Since November 1995, more than than 100,000 customers have signed up - one of the fastest launches of a service in telecommunications history.
What's more, two-thirds of the subscribers had never carried mobile phones, says Anne Schelle, a vice president for the PCS company there, Sprint Spectrum L.P.
With rates as low as $15 a month, ``we are bringing wireless to the masses,'' Schelle says.
PCS's Washington debut has won raves from product reviewers. ``To a cell phone what CDs are to tapes and vinyl records,'' a Worth magazine reviewer wrote about the new service in May.
Its advantages?
Because it's all-digital, breaking down signals into bytes of data, PCS is generally crisper and more static-free than its mostly analog cousin, cellular. And dropped calls are less common - although, unlike cellular, which typically fades before a drop, there's no warning with PCS.
Another PCS advantage is that its digital transmissions are more easily encrypted. That makes it harder for thugs with eavesdropping devices to steal PCS numbers and fraudulently clone them - a big problem with cellular.
The increased flexibility and capacity that digital platforms provide has also allowed Sprint Spectrum to pack more into its phones than cellular providers. Each PCS phone, weighing less than half a pound, also features a built-in answering machine and an alphanumeric pager.
Customers like Allen Sutter of Silver Spring, Md., gush about the new service.
``Cellular is just old news at this point, terrible old news,'' Sutter, a computer-systems analyst, said one September afternoon while toting his PCS phone in Washington's Georgetown section. He said he converted to PCS after seven years as a cellular customer.
The service is more reliable and offers far more features than either of the two Washington-area cellular providers can offer in the same price range, he says.
People in the cellular industry, understandably, downplay PCS's impact.
The service's main advantage - its digital underpinning - will be short-lived, they say. That's because they are quickly converting their own networks from analog to digital and developing phones with many of the same features.
The cellular providers - in Hampton Roads and elsewhere - have also been lowering rates and increasing their customers' local calling areas in anticipation of the PCS challenge.
Just last week, GTE Mobilnet announced it would abolish activation fees and a year's worth of monthly service fees for Hampton Roads subscribers to its new ``GTE to Go'' cellular service. After paying $199 for the phone itself, customers are charged only for actual usage, from 39 to 99 cents a minute.
Meanwhile, 360 Communications Co., the other Hampton Roads cellular provider, recently began offering pagers to its cellular customers as part of its effort to become a one-stop wireless shop.
``We welcome the competition. It's only going to make us better,'' says Bob Sage, Hampton Roads general manager for 360.
Perhaps the biggest factor that is bound to blur the distinction between the two services is that most of the big participants in PCS are also major players in cellular.
PrimeCo - a consortium of Baby Bells that includes Bell Atlantic Corp. - is one such company. AT&T Corp., which plans to introduce PCS service in Hampton Roads in mid-1997, is another.
Each plans to eventually knit together its PCS and cellular holdings into regional or national networks so that customers won't know the difference. They even intend to issue dual-mode phones that will automatically shift from the 850-megahertz cellular frequencies to the 1900-megahertz PCS bands when customers cross from one territory to another.
All customers care about is services, says AT&T Chairman Robert E. Allen. ``And that's what we'll be delivering,'' he says. ``Wireless communications will move quickly down the path from an expensive novelty to a mainstay of the way people communicate.''
As he prepares for PrimeCo's Hampton Roads launch, Joe O'Konek brims with confidence about his company's PCS prospects.
The company has already begun an ad blitz. It plans to announce rates and service features on Tuesday. Meanwhile, it's been internally testing the core section of its regional network, which stretches from Virginia Beach to Richmond, since July.
``We've been clearly impressed by the call quality,'' O'Konek says.
PrimeCo has run into one significant obstacle: delays in some communities - particularly in the Richmond area - in approving transmission towers. But even that has been largely overcome, O'Konek says.
To satisfy zoning administrators, PrimeCo has ``co-located'' many of its transmitters with those of competitors - often inconspicuously. Some of its shared sites are in the steeples of churches.
For PrimeCo, building out its network as completely as possible is crucial because it will be challenging two entrenched cellular providers in Hampton Roads that already offer complete coverage.
But, O'Konek concedes, PrimeCo won't be able to match those carriers on Day 1. It won't have transmitters along Route 460 - the main east-west alternative to Interstate 64 - until late 1997 or early 1998. Nor will it be in North Carolina's Outer Banks until that time.
Unlike the cellular providers, which had a 12-year head start building roaming agreements, PrimeCo also has large holes in coverage outside the region. So its customers' phones won't work initially in a lot of other places.
Still another shortcoming: there are still two different PCS transmitting technologies, one pushed by a group led by PrimeCo, another favored by a group headed by AT&T. So while both types of PCS phones will be capable at some point, perhaps as early as next year, of shifting to cellular, they won't work on the other PCS system.
This incompatibility is sure to cause confusion and, if unresolved, could limit PCS's growth.
Yet for the short term, the new service's future looks bright.
PrimeCo's O'Konek predicts his company's phones will be one of the hottest-selling local gifts this holiday season.
America has barely tapped the potential of wireless, he says.
Within the next decade, he predicts, many consumers will even start chucking their traditional ``landline'' phones and using their mobile handsets exclusively.
The development of ``follow-you-anywhere'' one-number services will help make this possible. So will new federal rules that dramatically cut the fees that wireless companies pay landline service providers when exchanging calls.
Even a federal appeals court decision in mid-October that threatens to delay the start of competition within traditional local phone service may accelerate wireless' surge. Some analysts think the court's action will encourage thwarted would-be competitors like AT&T to sideline plans for traditional local services and emphasize their wireless networks even more.
O'Konek has this dream:
A few years from now, he's walking through an airport terminal and sees a businessman with a laptop computer. The man is in the midst of a videoconference with his home office. And it'll all take place via a mobile phone.
``What we're doing now,'' he says, ``is just the tip of the iceberg.'' MEMO: [For a related story, see page 13 of the Business Weekly.]
Coming Tuesday in Business News: Plain old local service may never be
boring again. ILLUSTRATION: [Color Photo]
BILL TIERNAN
The Virginian-Pilot
Joseph O'Konek, general manager of PrimeCo Personal Communications,
says wireless communications will be the model for the future.
PrimeCo is launching its service in Hampton Roads on Wednesday. Ten
years from now, O'Konek says, a wireless operator ``could very well
be your primary communications company.''
GRAPHIC
ROBERT D. VOROS
The Virginian-Pilot
SOURCES: Cellular Telecommunications Industry Association, MTA-EMCI
PCS VS. CELLULAR
[For a copy of the graphic, see microfilm for this date.]
COMPETITION IN HAMPTON ROADS
GRAPHIC
[For a copy of the graphic, see microfilm for this date.] by CNB