The nascent 220 MHz industry reached another milestone last month when non-nationwide licensees almost were forced to fish or cut bait. As of March 11, anywhere between 3,600 and 3,800 prospective operators who have been waiting for the regulatory morass surrounding the startup of their businesses, had to tell the Federal Communications Commission whether they had constructed their systems, whether they planned to modify their license in any way or if they were getting out of the business altogether.
If licensees plan to relocate their base stations, an application notifying the commission is due May 1. They then will have until Aug. 15 to construct their channels. Nationwide 220 licensees have a 10-year buildout schedule.
“The FCC still is in the process of assessing who has constructed, who will modify and who will default,” said Terry Fishel, chief of the FCC’s Land Mobile Branch in Gettysburg, Pa. “The level of frustration that existed until the Jan. 26 report and order has been reduced, however.”
Yes and no. Licensees of this emerging wireless industry niche who threw their hats and pocketbooks into an unknown and untested industry sector in the early 1990s discovered early on that a 220 MHz license was not the same as, perhaps, a cellular franchise-a comparison many of them were offered when the applications mills solicited their business. Many also had no idea at the time that their systems would have to rely on proprietary equipment that had not been developed to its full potential, that networks could be linked into wide-area operations only if licensees used the same equipment, and that the system-even if it were interconnected-still would only provide a half-duplex conversation environment.
“The 220 MHz industry is in better shape now than it was,” said Jill Lyon, director of regulatory relations for the American Mobile Telecommunications Association. “It is eager to move forward and to get businesses running.” Lyon also mentioned that licensees even are eager to participate in the auction of additional 220 MHz channels, scheduled for this fall.
AMTA still is waiting for some clarifications from the FCC’s Policy Division regarding what types of modifications will be accepted by the commission besides just base-station relocation. The division still is working on 220 MHz licensing and auction rules, and AMTA has put forth a few opinions on those issues as well, including the possibility of geographic licensing and of larger frequency blocks than have been suggested by the FCC. A decision could be announced this month.
Charlottesville, Va.-based consultant Spike Schultheis, a principal of the Mission Telecommunications Group, took a look at the 220 MHz industry’s possibilities right after licenses were awarded, but the litigation that began over the procedure drove him and many financial backers away.
“Litigation efforts hurt the program badly because it changed the windows and disrupted the natural movement into the marketplace,” he said. “The margin of benefit would have been better without it.”
The novice status of most 220 MHz licensees gave rise to the formation of such management groups as Roamer One, which has helped licensees organize, build and run their systems and has acted as a negotiator for equipment purchasers. Roamer One’s goal is to get local systems up and running, to help operators network their groups and then to form super-regional systems.
According to Dave Neibert of Roamer One, who also heads AMTA’s 220 MHz Council, “220 MHz, in general, has the potential to become a nice niche-market radio service.” It can provide many of the same customer services as do specialized mobile radio operators but it will never compete technologically with its higher-priced cousin-cellular-at least where Roamer One is concerned. Where it can compete is on price for plain old voice and data dispatch.
Even though Neibert admits that 220 MHz technology “still is in its infancy in product development, with few bells and whistles to offer,” there still are advantages for the subscriber.
“Because our cost of infrastructure is significantly lower than of an enhanced SMR and because we don’t have the same kinds of siting problems, we can offer service at a much lower price, and we can hit our profit margins earlier,” he explained. Part of this is due to the type of technology Roamer One has adopted via its main equipment source Securicor-linear modulation, which Neibert said competes favorably with the digital time division multiple access mode. According to the manufacturer, Securicor holds a 50 percent market share in 220 MHz equipment globally, with the United States its the largest customer.
Base-station equipment has been “reasonably available,” meaning delivery in about three weeks, but radios “are in a tougher position.” A completely rigged base station will cost approximately $70,000. Radios are going for about $895, with Roamer One subsidizing between $350 and $450 of the cost. Roamer One private-labels Securicor radios and tries to keep an inventory on hand.
The average Roamer One price for dispatch is $14 per month, although it can be as low as $8 and as high as $27.
Besides Securicor, other 220 MHz equipment manufacturers include E.F. Johnson Corp. (through a relationship with Securicor), Uniden and SEA Inc., which was one of the first developers of the amplitude compandored sideband technology.
SEA has supplied equipment for as many as 500 systems in the last 12 to 18 months, and it expects to equip another 100 to 150 licensees between now and Aug. 15. Company spokesman Bill Saul said that the market is growing for SEA’s portable product, which works best when close to a repeater; mobiles continue to be more powerful, however. As a result of continued research and development, SEA radios now can interface with data terminals, and a new high-power transmitter has been developed.
Other management/building companies have not fared as well as has Roamer One or SEA. Berkeley, Calif.-based SunCom Mobile & Data Inc. had put together a stable of licensees but it has not been able to obtain the kind of financing needed to move forward to meet buildout deadlines in light of protracted litigation. Last October, SunCom proposed allowing its contracted operators to be released from their network agreements and, in certain cases, established grounds to release itself from some contracts. To those who choose to stay, SunCom is developing a new set of terms and contracts based on if it wins its pending court cases.
SunCom also believes that its business has been hurt by telemarketing scams aimed at possible 220 MHz investors and because an equipment deal with Securicor/E.F. Johnson had fallen through.
“If the FCC had acted more quickly on its [220 MHz] rulemaking to weed out speculators, we would have been done with this two years ago,” Neibert said. “The delay gave people time to raise money but the changing environment has been difficult, now that there are commercial mobile radio service carriers. What you applied for in 1991 bears little or no resemblance to the kind of business you have to provide today.”
Even so, Neibert says Roamer One constituents are signing up their share of current 800 MHz subscribers because “we have better range and signal propagation.” And in a growing wireless market, “we will get a portion of first-time users, too,” he said. The industry has consolidated into groups, with about 100 “real players” who are trying to make a commercial success of the 220 MHz niche.
Most 220 MHz operators cannot afford an expensive marketing budget to gain new customers, added Schultheis. Instead, they should concentrate on cold calling, office visits and some targeted direct-mail pieces. To make a case to an entire metropolitan marketplace through a blanket ad campaign may yield a few new customers, but they probably would churn to cellular or personal communications services providers once they realized the total cost of service, including equipment.
Target Roamer One customers include “public-safety types who are looking at ways to rent space, because 220 MHz is as close as you can come to a private network with IDs;” courier services; and companies needing to monitor workload, and to track driver and vehicle performance.
Neibert credits AMTA with helping to make things easier for his operators at the FCC. Another industry group, the Industrial Telecommunications Association, also makes 220 MHz licensing and buildout intelligence available to its members via an association database that updates FCC information.
Who will survive in this new competitive marketplace that could include double-digit wireless operators in any given city? “Only one 220 MHz operator,” Schultheis predicted. “There is only room for one, unless you are in a top-10 market and unless you want only to live hand to mouth.”
