The personal communications services industry emerged almost unscathed in its quest for automatic roaming agreements with analog cellular carriers.
Last year’s lawsuit, which subsequently was dropped, brought by AT&T Wireless Services Inc. against Southwestco Wireless L.P. over in-market roaming, was thought to be a clash that could be repeated across the nation as PCS carriers rely on their cellular counterparts to fill in their footprints. That hasn’t happened, though some squabbles remain across the United States.
Most have roaming pacts
“Most of the larger carriers are extending roaming agreements. You will have hot spots where intense competition will not allow this. Some carriers view their networks as a competitive advantage,” said Richard Siber, director of Andersen Consulting’s worldwide wireless practice in Boston.
Powertel Inc., a PCS provider in the Southeast planning to offer dual-mode/dual-band handsets this summer, said there are a few markets across the country where its customers will not have access to automatic roaming.
“There are a couple of isolated spots where carriers have refused to give us automatic roaming agreements,” said Powertel’s Vice President of Business Development Jim Murrell. “We view that as a compliment in a way. Most of the problems are in markets where we already have service, and customers are not in dire need of analog services there.”
PrimeCo Personal Communications L.P.’s customers can roam in about 45 markets across the country using dual-mode/dual-band handsets. The carrier has an advantage of leveraging the networks of its owners, Bell Atlantic Mobile and AirTouch Communications Inc., but also has signed agreements with GTE Wireless. It still is negotiating with a handful of carriers, primarily in rural markets within its own major trading areas.
Nationwide licensee Sprint PCS said it has completed a large number of deals with cellular carriers across the nation, including AT&T Wireless and GTE Wireless.
“We’ve tried to sign carriers that have the highest impact and work down the list to fill in the rest,” said Andrew Sukawaty, chief executive officer of Sprint PCS. “We have 85 percent of our pops signed on with at least one analog roaming agreement (in needed markets). Two or three carriers have been less cooperative.”
Some squabbles
In particular, Sukawaty said AirTouch and Bell Atlantic Mobile have not signed agreements with Sprint PCS. AirTouch said it won’t for competitive reasons.
“We think customers want coverage. It’s a competitive advantage,” said Kathy Reinhart, AirTouch spokeswoman. “AirTouch has not signed any in-market roaming agreements. Though we look at every opportunity, we definitely see coverage as a competitive advantage.”
Bell Atlantic said it is in negotiations with Sprint PCS and has many roaming agreements with other PCS carriers.
PCS operators indicate the Atlanta market, one of the more competitive markets in the United States, is one hot spot where BellSouth Mobility will not extend roaming agreements to its PCS competitors. One source said it was a tit-for-tat game between AT&T Wireless, the 1.9 GHz operator in Atlanta, and BellSouth Mobility. AT&T Wireless won’t extend in-market roaming to BellSouth Mobility in Tampa, Fla., one of BellSouth Mobility’s basic trading areas, while BellSouth will not sign a roaming agreement in Atlanta with AT&T Wireless.
Pat Bowes, director of wholesale revenues with BellSouth Mobility, said the process of negotiating roaming agreements has been labored, and the company is negotiating with AT&T Wireless.
“AT&T has not been a roaming partner with us in the past. We’ve never done business together. That’s a whole new increment of traffic potentially coming on the network. It’s great to have new revenue, but on the other side, you have to make sure the network is properly engineered so it doesn’t poorly affect customers,” said Bowes.
In all, roaming revenue from PCS customers is becoming big for many cellular carriers, especially second-tier and rural operators like United States Cellular Corp. and Rural Cellular Corp., which recently lowered its roaming fees to increase usage, because many carriers are many months away from rolling out in some secondary markets.
Buildout threat
Sprint PCS’ Sukawaty said cellular carriers see the long-term benefits of signing roaming agreements because of the increased revenue. They also face the threat that Sprint PCS would build out quicker and compete with them in their markets if they refuse to extend roaming.
“It forces us to build in their area,” said Sukawaty. “The capital is going to come their way.”
PCS and cellular carriers still are negotiating roaming deals as the large number of carriers in the industry today makes it difficult to quickly hammer out agreements. Bowes said BellSouth has been working on roaming agreements for a year and still has not completed all the deals it wants.
“It’s a long process with the advent of new carriers coming into the market. A lot of carriers haven’t really known what to expect in terms of traffic. My take is that everyone is working toward doing business with one another.”
Russ Wiseman, vice president of marketing and strategy with PrimeCo, said roaming fees are falling as cellular carriers have gotten over the fear of competition and fraud problems associated with analog networks.
“We were frustrated in the past with the posture carriers had taken in terms of high roaming rates,” he said.
The face of roaming changes
As national carriers like Sprint PCS, AT&T Wireless and Nextel Communications Inc. offer high-end customers digital deals that do away with roaming charges, the pressure is on for some regional players to offer significantly lower roaming rates.
PrimeCo, whose 11 major trading areas are spread across the country, hasn’t pushed a nationwide offer as of yet, using its partners and charging 69 cents per minute for roaming. That will change in the first quarter, said Wiseman, when the company begins offering digital roaming.
“We’re going to be piecing our dual-band digital and trimode sets together to leverage a nationwide offer,” said Wiseman. “The goal is to be more competitive with nationwide competitors and lower the roaming rates … PrimeCo is an interesting entity in that we are both focused on our very successful local product, and it only will get better for our customers who want to travel on a national business.”
The GSM Alliance, formed last summer as a way for the country’s Global System for Mobile communications PCS operators to leverage themselves as one nationwide branded entity, is looking at ways to charge one rate across the nation for selected national companies.
“The alliance is looking at national accounts and the possibility of coordinating together national rates for selected companies. We have the ability to do that technically, but we’re trying to make a business case for it. Some customers get that service now from GSM carriers,” said Powertel’s Murrell.
One of the primary reasons the GSM Alliance was formed was to provide a nationwide footprint and reasonable roaming rates to customers. Most GSM carriers, like Powertel, are charging a flat rate of 50 cents per minute, but have economic flexibility in how low of a price they want to charge. This could become an advantage if other carriers begin charging extremely low roaming rates.
“Each of us bill our own customers and buy roaming minutes wholesale from each other,” said Murrell. “It’s up to us if we break even … Our customers recognize the roaming structure is one low rate. We’re trying to give customers the best value for the minutes they use the most.
So far, AT&T Wireless’ One Rate plan, which charges customers the same rate for roaming, long-distance an
d local calls, hasn’t triggered any changes in competitors’ pricing plans over roaming fees. As it stands, AT&T Wireless is taking a hit on roaming charges from other
carriers’ networks. Industry analysts say 35 cents is considered a favorable roaming rate in the industry, leaving AT&T Wireless to pay half of the two-thirds of each roaming minute.
But AT&T Wireless has an advantage because its markets already cover most of the important roaming markets and its size, said spokesman Ken Woo, allows it to negotiate favorable rates.
Intelligent Roaming
Smaller carriers don’t have AT&T Wireless’ advantages, but as handset technology changes, in time they may be able to cater to high roamers by offering them favorable rates.
Though many logistical and technical issues need to be hammered out by the industry, carriers say the idea of intelligent roaming is coming down the pipe.
“There may be an opportunity for the PCS industry to buy wholesale minutes from a carrier, whether PCS or cellular, and offer dual-number phones that can be programmed with two numbers,” said PrimeCo’s Wiseman. “When my customer goes to carrier A’s market, they won’t pay roaming rates there, they will pay carrier A’s rate. Paying carriers 50 cents for roaming won’t work. But we could buy resale minutes at 10 or 15 cents per minute. We’d be using reselling to simulate roaming.”
BellSouth Mobility’s Bowes said operators in the future will have the ability to program customers’ phones over the air to work on specific carriers’ networks, regardless of whether they are the A- or B-side carrier.
“I could in effect see where I have the best rates and over the air program customers’ phones to work on those networks. I could give the best rates to customers by routing traffic. In that scenario, it would be growing the market in wholesale roaming because we would be able to go to various carriers and say, `here’s our traffic,’ and negotiate rates on your ability to make a change in that traffic,” she said.
