WASHINGTON-The future is here.
Vice President Al Gore, father of the information superhighway, christened the broadband personal communications services industry with a call to Baltimore Mayor Kurt Schmoke Nov. 15 on the Sprint Spectrum system operated by American Personal Communications.
“I’m proud to speak to you today by means of this brand new technology that’s going to create hundreds of jobs in the metropolitan Baltimore-Washington area and tens of thousands of jobs nationwide,” said Gore.
The two cities in 1843 were connected by the nation’s first telegraph system. Now, a lightweight digital pocket telephone with a built-in pager and answering machine provides that link.
PCS is expected to be competitive with cellular telephone service today offered by the two carriers in every market, and perhaps one day with local landline telephone companies. Still, major cellular firms like AT&T Corp. and the regional Bell telephone companies will be among the biggest personal communications service providers.
Sprint Spectrum, which is 49.5 percent owned by APC and 49 percent held by the Sprint Telecommunications Venture (Sprint Corp. and cable TV giants Tele-Communications Inc., Comcast Corp. and Cox Communications), plans to compete with existing pocket telephone firms by differentiating itself from cellular in image, price, service and marketing. The Washington Post Co. owns the remaining 1.5 percent of Sprint Spectrum.
“It’s not just a phone; it’s a personal phone,” said Scott Schelle, chief executive office of Bethesda, Md.-based APC, which received one of the three broadband PCS pioneer’s preference licenses from the Federal Communications Commission. The agency originally granted the permit for free, then reversed its policy and made APC pay $100 million for the license.
At least one Wall Street investor agrees with Sprint Spectrum’s strategy.
“Marketing is going to be the key reason why someone buys one phone over another phone,” said David Freedman, a telecommunications analyst at Bear, Stearns & Co. Inc. Freedman added that in a competitive environment establishing effective distribution channels and a presence in the marketplace is important.
“PCS must be able to give a new value equation to users,” said Freedman.
Sprint Spectrum is pricing PCS in Baltimore-Washington, D.C., from 10 percent to 40 percent below cellular. Unlike cellular, no service contract is required and no cancellation fees are imposed. All service plans include free airtime.
The firm said digital technology will provide subscribers with better voice quality and more features than analog cellular telephone service, and will protect callers from eavesdropping and illegal cloning of telephone numbers-both huge problems in the cellular industry.
However, cellular firms are converting from analog to digital technology to increase channel capacity and service capabilities.
Phones supplied by Motorola Inc. and Nokia Corp. retail for $199. Ericsson Inc. phones cost $149, but are being sold for $99 thru Dec. 31.
Sprint Spectrum began running TV, radio and print advertisements last week, and has opened three stores in the Baltimore-Washington market. More than 200 retail outlets in the area will stock PCS phones in colorful shrink-wrapped boxes resembling computer software packages.
Competition will be fierce. Sprint Spectrum has to compete not only with the two cellular operators in the Baltimore-Washington market, but also must go up against two other PCS providers. One is AT&T, which last year bought cellular kingpin McCaw Cellular Communications Inc. for $11.5 billion. The other major competitor will emerge from next month’s PCS auction.
“There is nothing magic in our competitor’s list of offerings that Bell Atlantic Nynex Mobile does not or cannot provide today,” said Steve Fleisher, spokesman for regional Bell cellular partnership.
APC officials said license and capital expenditures total $200 million and that they don’t expect to be profitable for five years. More costs will be incurred during the next couple of years as the firm overlays another digital technology (Code Division Multiple Access) on top of its current network architecture, which is based on European-based Global System for Mobile communications technology and consists of 400 base station transmitters. The system infrastructure is built by Ericsson and Nortel.
STV, which paid $2.1 billion for 29 broadband PCS licenses in the auction the Federal Communications Commission concluded in early March, is using CDMA technology. That means customers who buy GSM phones from Sprint Spectrum today in Baltimore-Washington will not be able to use them in other Sprint markets. But roaming agreements between APC and other carriers adopting GSM should partially offset the problem.
Sprint Spectrum PCS service will be available to 5 million people, including in two years those in parts of West Virginia and Pennsylvania. APC has 250 employees.
