For those who are banking on the growth of specialized mobile radio during the next few years, there is good news and there is good news. The good news is: The transition to digital technology will continue to grow, adding new voice and data services, and taking advantage of spectral efficiency. And the good news is that those carriers and subscribers whose business needs can be met by analog technology will be able to function in that environment for years to come.
In any given month, Teltronic Inc. of Kensington, Md., installs 200 to 300 SMR and enhanced SMR units, an even mix between analog and digital. It acts as an agent or reseller for Motorola Inc., Nextel Communications Inc., Geotek Communications Inc., Sprint Spectrum L.P. and, soon, SkyTel Corp. Its predominant customers are state, local and federal government agencies in the tri-state area that includes the District of Columbia.
“Digital constitutes a great majority of what we are selling today, but those customers are only a small part of our database, which numbers 6,000 to 7,000,” said Denny Cieslak, president. “Many first-time users who work on small areas buy analog, and most of our business continues to be analog.”
Even so, Cieslak said some customers who want analog can’t get it in certain areas of Teltronics’ installation territory. Traditional dispatch channels are full, and many SMR businesses are not accepting new customers. Some have turned to cellular phones, thinking their short communications needs will be served by that medium, but they discover the bills become too unwieldy, and that cellular is not dispatch.
So they come back, some shoehorn in with crowded SMR providers and some choose to enter the digital world with Nextel. Geotek’s products aren’t moving yet. While Cieslak is “bullish on paper” about Geotek’s Frequency Division Multiple Access technology and believes its products “will play a major role in our lineup” in the coming years, no one unit has been installed to date. “The system still is being constructed for the next month or two. After that, it looks good,” he said.
Most business ends up with Motorola one way or another, either with dedicated Motorola analog equipment or with Nextel, whose system is built around the manufacturer’s integrated Dispatch Enhanced Network, or iDEN, backbone. State and local governments still use Motorola because governments move slower in the contract stage, Cieslak said. However, nongovernment customers with 10 or more vehicles to outfit are turning to Nextel, but some are surprised by the change in monthly fees over traditional SMR service.
“People got used to paying $20 or $25 per month, and now they have to pay more,” Cieslak said. “We can’t control that. There is some pain involved in change.”
Even with more and more customers being signed onto Nextel’s growing network in the Washington, D.C., area and beyond, Cieslak wonders if Nextel will stay with its commitment to business radio or if it will focus on the more lucrative consumer side. “Customers who have moved to Nextel really like it now.”
Cieslak’s fears probably won’t be realized, at least not in the near future. The SMR industry has experienced steady growth of 12 percent to 17 percent per year, although there was a slight downturn in 1995, said Steve Virostek, senior consultant at research firm Economic and Management Consultants International Inc. “The demand for dispatch is still there, with plenty of room for growth,” he said. Dispatch continues to be the main service offering by most SMR companies operating today, but interconnect service is growing at a percentage equal to the total yearly growth of the industry as a whole.
Dispatch could be experiencing some changes of its own, but only on the carrier level. There are some 2 million SMR public subscribers nationwide, and not many of them have gone to digital service. The Yankee Group estimates another 18 million users work for companies that have their own private networks. Because of the scarcity of expansion channels coupled with the high costs associated with network buildout, many SMRs finally are considering moving to shared networks as a way to continue offering dispatch along with newer voice or data services as they are requested. Even the attitudes of public-safety communications managers are changing, Virostek said, although that evolution will be gradual.
Moving to a shared, digital environment also could help carriers stay in business and perhaps even help a few come back to the SMR/ESMR arena. “There definitely has been a decline in the number of carriers,” Virostek said. “When the money was good, people sold out. But many ex-carriers still have radio in their blood, and they have a hankering to come back in some capacity. Other SMRs have customers who keep asking for more and more amenities, and the mom-and-pop organization will have to evolve to survive. The same goes for a lot of 220 MHz providers out there.”
Problems getting financing for capital growth also could contribute to more companies sharing services. While public companies can offer more stock, “the smaller guys have a problem,” Virostek said. “Wall Street still doesn’t understand SMR. Some who invested heavily in Nextel got burned when the stock dropped, and the banks are worse. Carriers will be forced to used their own money, or they will have to partner in some way.”
Again, all indications are that analog service will survive, despite financial and spectral squeezes. “This is analogous to what happened in the broadcast industry,” said Charles Walters, president of Walters & Associates Inc. in Bethesda, Md. “People predicted the demise of AM radio when FM came in and of all radio when television came in. It didn’t happen.”
What separates the SMR and the ESMR industries is the way each chooses to be regulated, Walters added. “Analog providers are close to their markets and can respond to their needs quickly,” he said. “Basic analog trunked radio services are inexpensive and relatively trouble-free. It’s the owner who has to decide if the company wants to be regulated as a commercial mobile radio service by adding interconnection or if it wants to stay a private carrier with dispatch only. Most SMRs don’t want to have to provide automatic vehicle location or enhanced 911 services, either. That will be a game played by big carriers.”
Past and upcoming spectrum auctions are one way analog and digital SMR providers can stay ahead of the competition, but Walters doesn’t see the mom-and-pop organization benefiting much from them. “Smaller players could cut deals with big players, but such deals could fall through, like BDPCS Inc. and U S West (Inc.),” he said. “And big players just don’t need them to compete.”
As smaller, less-funded entities, SMRs also must consider collocating their growing number of antennas, especially in major markets where space is scarce and in heavily zoned suburban areas, where residents and city councils hold sway. Mark Fowler, president of Unisite Inc. of Richardson, Texas, and a former chairman of the Federal Communications Commission, said more than 50 types of FCC licenses depend on tower sites to do business. The company recently was awarded a contract to manage 35,000 U.S. Postal Service sites, on which it can collocate other types of services. Another deal is brewing with MCI Communications Corp. to collocate services.
“We’ve signed master releases with all wireless operators, and we’re currently doing business with most of them,” Fowler said. Such releases run 20 or 30 years. Unisite offers a carrier a savings of between $15,000 and $25,000 per site plus cuts out much of the zoning hassles and capital headaches associated with growth, he added. All engineering and research can be done by computer, instead of by scheduling lengthy, expensive, in-person site visits.
While all this sounds good, Fowler did mention one personal challenge: getting people to change their minds about collocation. “We stress that collocation speeds time to market an
d that it is analogous to `clean air’ in the eyes of the general public because it cuts the number of sites,” he said.
As far as the future is concerned, there will continue to be ESMR hares and SMR tortoises, although both will win the race in this parable-the good news and the good news. “It’s not that traditional SMRs are slow to move; they just need dispatch and not interconnect,” said Ralph Haller, president of consulting firm Fox Ridge Communications Inc. in Arlington, Va. “I believe you have two separate markets-those who want interconnect and those who want cheap, barebones dispatch. They have no incentive to change right now.”
As for the future growth of the ESMR market, a soon-to-be-released Yankee Group white paper lists the following target markets as those ripe for digital picking:
mobile workers whose intra-and interorganizational communications needs have been underserved by current wireless operators, including cellular and paging; (Most commercial vehicles operating in the United States have not been equipped with wireless communications gear.)
SMR customers who are looking for an upgrade;
mobile professionals who want to cut down on the number of wireless devices they need to perform their jobs.
Even with growing demand, there probably won’t be a plethora of new providers springing up to serve the market, predicted Walters. “There is a lot about SMR that most people don’t know when they come in,” he said. “The carriers of today will be the carriers of tomorrow. Motorola and Nextel, for example, are pretty formidable, especially once Craig McCaw got involved. Motorola doesn’t make many mistakes in its core business. And Geotek will be thinking globally.”
As wireless technology improves, the Yankee Group warns that ESMRs must continue to convince digital users that specialized mobile radio is a different, cheaper and more efficient road to take when plotting business needs.
Otherwise, “other options, from mobile data to cellular, personal communications services and paging, will become more, rather than less, competitive with ESMR over time,” the group said.
