In Chicago, where the mobile phone penetration rate is one of the highest among the nation’s most populous markets, cellular carriers Ameritech Cellular Services Inc. and SBC Wireless have made aggressive moves to match offers coming primarily from their PCS counterpart, AT&T Wireless Services Inc.
Historically, Chicago has been one of the most competitive markets, with some of the lowest prices and most sophisticated wireless users in the nation.
“The demand for digital service is very high here,” said Gina Macchitelli, director of marketing communications with Cellular One (SBC). “The increased awareness of digital service has made the medium user attracted to it.”
PrimeCo Personal Communications L.P. and Nextel Communications Inc. also compete in the Chicago market. PrimeCo was the first PCS operator to launch there in 1996, introducing bundled minutes, no contracts and flat-rate pricing. The company’s local calling area encompasses all of Illinois, northwestern Indiana and Wisconsin.
“The PrimeCo focus on local calling and bundled minutes has been successful,” said David Kerr, director of wireless programs with Strategy Analytics. “Many people are making the majority of their calls on their mobile phone.”
“PrimeCo had a nice start in Chicago,” said Mark Lowenstein, director of wireless mobile communications with the Yankee Group in Boston. “They went into a situation where Ameritech and Cellular One were competitive and prices were pretty low to begin with. There was not much room for cost-cutting from the PCS guys … But digital was still a novelty when PrimeCo launched.”
Digital service now is widely available, but PrimeCo is the only carrier offering a digital service access fee as low as $10, including standard features such as voice mail and caller ID. For $20 per month, customers can use 100 minutes per month.
PrimeCo is targeting the mass-market segment, said Jacqui Amacher, PrimeCo’s director of marketing in Chicago. Her statistics indicate the company’s free features and affordable pricing plans have driven usage to three times more than that of cellular usage.
Cellular One and Ameritech have $10 pricing plans available for low-end user, but only on their analog networks. Cellular One is offering 50 percent off the monthly service charge of its lowest pricing plan and a free analog phone. On the digital side, $20 gets Cellular One customers 30 minutes of airtime, while Ameritech offers 50 minutes for $25.
Digital pricing from the two cellular carriers and AT&T Wireless Services primarily targets mid-to-high-end users.
In May, AT&T Wireless launched its Digital One Rate plan, an aggressive national rate system that eliminates long-distance and roaming charges.
Cellular One now has implemented a Home and Away Rate, which allows customers to pay their local rate as their roaming rate throughout the United States. And if customers sign up for digital service now, they receive 50 percent off any monthly service charge until 1999. With this option, customers can for $80 per month receive 2,000 minutes and a 25-cent rate for the Home and Away Rate.
Ameritech’s promotions in Chicago include a Nokia phone, free night and weekend calling for 18 months, free activation and rates as low as 8 cents per minute. Customers have to sign a three-year contract to receive the limited offer, which includes plans such as 2,400 minutes for $180 per month.
Analysts say the Chicago market is not the most competitive market in the United States because Sprint PCS has yet to make its entrance, and the market lacks a Global System for Mobile communications carrier since Pocket Communications Inc. declared bankruptcy. SBC’s purchase of Ameritech several months ago also poses an interesting dilemma. SBC will be forced to sell one of the cellular carriers in Chicago.
Chicago is unique in that it has strong brands competing against each other, say analysts. Advertising has increased dramatically, and the maturity of the market will require stronger segmentation strategies, said Kerr.
“The proportion of people with two or more cell phones is higher than any other market in the country,” said Kerr. “It comes down to segmenting the market at a greater level, tapping into lifestyles to sell cellular service. The level of awareness of the available options is significantly higher. You don’t have to sell customers on what the phone can do. You have to sell them on why they need it.”
