While the personal communications services industry is characterized as up and running, a host of PCS carriers have yet to launch service, raising questions about whether they will survive in the marketplace.
Twenty-six out of RCR’s 40 top PCS operators (ranked by pops) have yet to launch service in any market. Many of those carriers are C-block operators. Two carriers, Pocket Communications Inc. and GWI PCS Inc., have filed for bankruptcy.
The future looks bleak for several C-block operators. Many paid exorbitant amounts for their licenses and haven’t had a lot of luck securing financing, resulting in their inability to make payments to the Federal Communications Commission for those licenses. Now the futures of many hinge on pending decisions from the FCC. C-block licensees have until Feb. 26 to file with the FCC their choice-if any-of four financial restructuring options offered last September by the commission, which includes an option to return their licenses.
Time is a factor for those operators not affiliated with larger operators. The independent operators, the C- and F-block carriers, that have not launched service within the next six to nine months are going to have a difficult time competing with the entrenched operators in the marketplace, said Perry Walter, telecom analyst with Robinson-Humphrey Co. L.L.C. in Atlanta. Many A-and B-block operators will hit their first or second-year operating anniversary in many markets during that time.
“Time is definitely not on their side … but I think they have a chance to compete even though they are at a disadvantage in terms of brand equity,” said Peter Nighswander, senior analyst with the Strategis Group in Washington, D.C., referring to the operators that have yet to launch service. “If the smaller players can come in and price below the competition, they stand a good chance to penetrate some of the more price-sensitive customers.”
But pricing may not be enough for the fifth or sixth operator entering the market. Many consulting firms are advising smaller carriers to establish strong niches in the marketplace by offering services like in-building wireless and wireless local loop-services other carriers may be years away from deploying.
“I tell my (small carrier) clients to do something as different as possible,” said Bick Truet, president of Technologies Research Group Inc., a marketing consulting firm in Clinton, N.J. “You want to do something so different that you’re creating a new category of service in the eye of the consumer … If your market-entry strategy is to copy everyone else, then the gaming strategy is to build up a little market share and make yourself attractive for a buyout.”
Truet advises his clients to look beyond voice services to data applications. “We tell them to look at everything else important that needs to be communicated that isn’t necessarily done with voice, like mobile credit-card verification, meter reading, home management. The data stuff is a real good play. It just requires a great deal of creativity and an understanding of what is really required.”
Truet said carriers also can look at different ways of operating, like offering their service wholesale. From a marketing perspective, they can enter the market as the premium operator, pricing just above the competition or position themselves as the community telephone company “instead of being the big bad guy national consortium.”
Merged lanes ahead
Phillip Redman, senior analyst with the Yankee Group in Boston, expects to see consolidation among the smaller operators that could possibly allow them to compete on a nationwide or larger regional basis with the major operators. He and other analysts also believe many will form alliances with bigger players to take advantage of the strong brand names.
AT&T Wireless Services Inc., the nation’s largest cellular operator, has signed deals with cellular and PCS operators in order to expand its Time Division Multiple Access footprint. C-block operator Indus Inc., which owns a license in Milwaukee, Wis., was the first carrier to sign a franchise-like agreement with AT&T Wireless early last year to jointly build a system that will use the AT&T Wireless brand.
As the clock ticks away for the smaller carriers, the activity in the A- and B-block arena will continue to increase this year. AT&T Wireless Services, which launched a small number of its 21 PCS markets last year, will come on strong this year, said Redman, while Sprint Spectrum L.P., a nationwide PCS licensee, will continue its aggressive rollout strategy in 1998, with the goal of launching service in 100 more cities this year. Sprint PCS ended 1997 with launches in 134 cities.
“1998 will be a big year for launching and growth,” said Redman. Last year, carriers dealt with site acquisition, financial and legislative problems, which slowed the rate at which carriers launched service. This year, the process should go much smoother as solutions have been found or are underway, he said.
Stop signs
Though zoning remains an issue, with local governments implementing some 200 moratoria or zoning delays, carriers and the trade groups are doing a better job of educating the public and finding resourceful ways to build towers, say analysts.
“The good carriers are becoming very creative in how they make sure they get towers up in certain areas,” said Walter. “They’re building new church steeples, asking radio stations to share towers and rebuilding towers in some cases.”
Carriers will be rushing to fill in the coverage gaps, despite the promised onslaught of dual-mode, dual-band handsets-those that work on both analog and digital networks and at both 800 MHz and 1900 MHz, said Redman.
“There are handsets available. However, it’s still very difficult for a PCS carrier to sign a decent roaming agreement with [cellular] carriers,” he said. Cellular carriers do not have an incentive to offer PCS roaming to their subscribers, so most PCS operators end up paying expensive roaming fees and passing them on to their customers, Redman added. Plus, “roaming from digital is not necessarily the best strategy when you’re trying to differentiate by offering a digital system.”
“Coverage is king,” said Walter. “Dual-mode phones are still more expensive and only people who really need to have more coverage are more likely to get those. In the right situation, they can be used to make sure the high-minute user is happy.”
This year will see major carriers focusing on rolling out their second-tier markets and expanding service into residential areas since they have completed their major market rollouts. This focus will result in more franchise-like and affiliate agreements with other carriers and companies, say analysts.
“We’ll certainly see a lot of affiliation from the standpoint of extending the brand name as well as allowing coverage much sooner than they could have on their own. For the carrier, it makes sense from a capital standpoint to let others do some things,” said Walter.
AT&T Wireless is the most aggressive so far in this strategy. Not only has it signed on Indus as an affiliate, but has forged various types of agreements with wireless carriers in its quest to fill in the missing links of its nationwide digital footprint.
“You’re going to see more types of unusual deals in the coming months that will build alliances and coverage areas,” an AT&T Wireless spokesman said last month.
Western Wireless Corp. formed a joint venture with Iowa Network Services Inc. last year to expand service throughout Iowa, and it signed a contract with Omnipoint Communications Inc. last month to jointly operate networks in three Kansas trading areas. The networks will operate under Western Wireless’ brand name.
Sprint PCS has indicated an interest in signing up affiliates. The company shut down some of its activity in yet-to-be-launched basic trading areas in the Southeast to assess whether it wants affiliates to build and operate those markets un
der the Sprint PCS name, said a company spokesman.
