“The debate on CDMA is over, folks,” declared Jerry Butters, an executive with Lucent Technologies Inc., last week when PrimeCo Personal Communications L.P. launched 1900 MHz service in 11 major trading areas.
It was the most comprehensive launch of both personal communications services and Code Division Multiple Access technology in the United States to date.
Dallas-based PrimeCo now offers coverage in the MTAs of Dallas/Fort Worth, Houston, San Antonio, Miami/Fort Lauderdale, Jacksonville, Orlando/Tampa, Fla., Chicago, Milwaukee, New Orleans, Norfolk/Richmond, Va., and Honolulu.
The company will deploy its final PCS market, Austin, Texas, during the next two weeks and then will focus on optimizing the networks.
About 90 percent of the cities had coverage at launch, as did about half of the entire MTAs, the company said. The service will be commercially available to all consumers and business users, according to PrimeCo.
The launch comes shortly before the biggest U.S. shopping day of the year, the day after Thanksgiving, and in plenty of time for winter holiday gift shopping.
“This timing to market advantage should enable PrimeCo to capture a larger segment of the Christmas season buyers than competitors who launch later,” said Jane Zweig, senior vice president of marketing for Herschel Shosteck Associates Ltd.
With this launch, PrimeCo beat competitor Sprint PCS to market in five MTAs. Sprint intends to launch service in 15 to 20 unnamed markets by year-end. PrimeCo also beat AT&T Wireless Services Inc. to market in Chicago and Richmond/Norfolk, Va. AT&T Wireless won’t begin launching 1900 MHz service until the first quarter of next year.
However, PrimeCo is the second PCS operator in two markets. InterCel Inc. launched Oct. 15 in Jacksonville, Fla.; Western Wireless Inc. deployed its PCS system Feb. 28 in Honolulu.
“It was important for PrimeCo to launch before its PCS competitors,” Zweig said. “We saw similar parallels in the United Kingdom when One-2-One, their first PCS operator, launched its service to compete against cellular operators Cellnet and Vodafone. The third operator in a market fares better than the fourth,” she said.
A recent Shosteck report predicts PCS will capture about 3 percent of total wireless subscribers by year-end, and 11 percent of net new subscribers in 1997.
PrimeCo spent an estimated $1 billion on software and network equipment, which was supplied by Lucent and Motorola Inc. Qualcomm Personal Electronics is sole handset provider for the launch.
Terminal proposition
Handsets are branded PrimeCo and Qualcomm and operate only at 1900 MHz at this time. The suggested retail price is $200. PrimeCo won’t say how much it pays for the phone, but admits the terminals are subsidized for the customer. PrimeCo won’t require a service contract.
“This is not an increased risk for us, and our cost of acquisition is not a disadvantage,” said Karen J. Little, PrimeCo’s vice president of marketing. “We subsidize the phones and the cellular industry subsidizes the phones. But the cellular industry also has a commission structure, and we have a margin structure. It’s a different way of getting the same thing done,” Little commented.
PrimeCo is not using agents, but expects to add resellers in the future. The company has about 1,000 retail stores and contracts with six major retail companies: Best Buy, Circuit City, Computer City, Incredible Universe, Office Depot and RadioShack.
Customers who want to churn to a competing PCS operator initially will have to buy new handsets because the competitors in six PrimeCo markets use different technologies.
Dual-band phones, which operate at both 1900 MHz CDMA and 800 MHz analog frequencies, will be available in about mid-1997, the company said. There are even plans for a “tri-mode” phone in the future, which could operate on 800 MHz analog networks, 800 MHz CDMA networks and 1900 MHz CDMA systems.
PrimeCo will charge a single per-minute rate to avoid the peak and off-peak differentiations of its cellular competitors. Its per-minute rate, which varies by region, will be 5 to 10 percent lower than its cellular competitors, PrimeCo said.
Working out bugs
CDMA service has been launched in cellular markets in Korea and Hong Kong, and in a handful of U.S. cellular markets. But this is the first multimarket deployment of the new technology, as well as the first commercial launch of CDMA at 1900 MHz. Previous 1900 MHz launches have used GSM technology.
PrimeCo engineers believe they have worked out as many bugs as possible at this time.
“The soft handoffs are working very well,” said Keith Kaczmarek, PrimeCo’s vice president of engineering and operations and chief technology officer. He was vice president of technology development at Nextel Communications Inc. before joining PrimeCo.
“There have been a lot of long hours spent with optimization. And clearing 300 links of microwave was no small job. And in terms of the power control issue, that is a matter of capacity,” he said.
Problems with a system become most evident once it is loaded with customers, engineers say.
Zweig said the PrimeCo partners went through the painful maturation process with Time Division Multiple Access systems in the United States and GSM through their overseas ventures.
“None are naive with regard to problems that new networks and new technologies pose,” Zweig said. “We believe that PrimeCo has learned from the earlier experiences and tested the system rigorously. Arguably there will be fewer bugs in their systems than were experienced with the initial rollout of TDMA systems in 1992.”
Still, Shosteck Associates expects serious network bugs to appear-bugs that won’t be worked out until the third or fourth quarter of 1997.
“However, in contrast to TDMA/Interim Standard 54 in 1993, the voice quality of CDMA in 1996 is much higher. Because of this, subscribers will be more forgiving of other network faults. This means that notwithstanding bugs, the take-up of CDMA in the PCS frequencies will be faster than the take-up of cellular TDMA three years before,” Zweig said.
The PrimeCo partnership is owned by four companies: AirTouch Communications Inc., U S West Media Group, Bell Atlantic Corp. and Nynex Corp. When the PCS networks are combined with the owners’ individual cellular systems, wireless service is available virtually nationwide.
