“To see what competitive telecommunications will look like tomorrow, look at wireless today,” read a banner at CTIA’s Wireless ’99. That’s not the way Ernest Kelly, president of the Telecommunications Resellers Association, sees it.
“I wish I had more encouraging things to say, but I am very disappointed … This is not a competitive market,” Kelly said.
Kelly, who is more accustomed to working with long-distance companies, believes wireless is not very competitive because the small business reseller market has not developed. “Competition is not just driving prices down. How do you help small business? The incumbents are not going to help. The government [may not] help. You have to have resale.”
While long-distance carriers are working to build opportunities for resellers, wireless telephony carriers-whether cellular or personal communications services carriers-are avoiding them, Kelly said.
Some carriers, however, cater to wireless resellers.
Bell Atlantic Mobile has 48 operators reselling its service, up from a mere handful earlier this decade, said Mario Brassini, BAM executive director of distribution channels.
On the reseller side, Select Wireless Inc. of Minneapolis has grown a resale business from the ground up, from June 1995 to the present, as the sixth-largest reseller, according to the RCR Top 20 list.
It all seems to be about attitude. “If you want the [resale] business, you can get it. If you don’t want the [resale] business-and for some carriers it isn’t part of their business strategy-it won’t be there,” Brassini said.
Select Wireless has run into problems that seem indicative of many resellers and would-be resellers. It currently resells service from AirTouch Communications Inc. and AT&T Wireless Services Inc. While its business has grown, according to owner and President Bob Alexander, it is getting more difficult to compete as carriers offer discounted calling plans such as AT&T Wireless’ One Rate Plan.
Bundling handsets with service also is a challenge. Select previously had to purchase handsets from a distributor, said Alexander. Federal Communications Commission rules state if a carrier bundles a handset with service it also must make that same bundled package-including handsets-available to resellers. Currently Select buys its handsets from AirTouch.
What is resale?
What is resale or what makes one a reseller?
A reseller buys blocks of airtime from a licensed carrier, then resells that airtime to end users. The reseller has the only relationship with the customer. In fact, in many or most cases, end users don’t know the radio waves their calls are carried on are licensed to someone else.
Resellers are often confused with agents. Radio Shack, an agent, sells Sprint Spectrum and Sprint PCS service in the Washington, D.C., metropolitan area, but customers who purchase phones from Radio Shack purchase service plans from Sprint.
Agents-or authorized representatives-also offer paging and enhanced specialized mobile radio services.
What’s wrong?
Resale is seen by the FCC as an additional distribution channel for wireless telephony-a distribution channel expected to spur the kind of competition seen in the long-distance and paging industries.
So why hasn’t it happened?
Part of the reason may be that not all PCS carriers welcome resellers. Indeed, the Personal Communications Industry Association, which represents PCS carriers, asked the FCC in 1997 not to enforce the mandatory resale rules. The FCC turned down the PCIA forbearance request because it was too broad, but left open the door for market-by-market forbearance in the future.
PCIA argued that the commercial mobile radio services marketplace was full of robust competition and the resale obligation was no longer necessary. The current rules call for CMRS resale obligations to sunset on Nov. 24, 2002.
TRA does not believe in the proposed market-by-market approach-a view shared by PCIA. PCIA believes it is too burdensome. TRA believes it eventually will lead to the end of resale. TRA also is fighting the sunset date.
“Wireless resale is going to be crucial in the future. There is not enough spectrum to provide the capacity. The sunset has to be changed. The [FCC] can’t be this short-sighted,” said TRA Vice President David Gusky.
Gusky said if mandatory resale rules expire on Nov. 24, 2002, “then we have lost the war.”
Another reason resale has not spurred competition may be the lack of carrier-carriers, that is carriers that have licenses but instead of setting up a network to sell service to end users, carriers set up networks to sell airtime to resellers, which then will market service to end users.
Carrier-carriers have become successful using this business model in the long-distance industry.
It nearly developed in the wireless industry. Bankrupt operator NextWave Telecom Inc. said it planned to market its PCS service to carriers. Arguments are scheduled to start today in a trial that could determine whether the FCC can take back the company’s licenses.
A third reason resale hasn’t promoted competition may be enforcement.
The FCC only acts if there is a complaint and there are few complaints, said an FCC official who declined to be named.
Paging
In its request to stop mandatory PCS resale, PCIA argued that resale sprung up on its own in the paging world because there was not mandatory paging resale. “We believe the same thing would happen in PCS if the free market was allowed to reign,” said Mary Madigan Jones, PCIA vice president for external affairs.
Resale has developed in paging for a number of reasons but the most important appears to be that it is a good distribution channel. “Resale was the gas for the engine of growth in paging,” said Rob Hoggarth, PCIA senior vice president for paging and messaging. Gusky expressed similar sentiments.
A look at PageMart Wireless Inc. shows how that relationship is changing.
PageMart is developing what it calls strategic alliances with other big carriers, while its resale business to mom-and-pop paging operations is down 4 percent in recent years.
Also as two-way paging develops, some believe resellers may have a more difficult time because a more educated work force is needed to sell two-way than to sell one-way paging.
Notwithstanding this, AirTouch Paging signed a resale agreement with PageMart last month similar to an agreement PageMart signed with Metrocall Inc. in 1998. The agreement calls for AirTouch to resell PageMart’s ReFLEX-based two-way network and allows all three companies to share buildout costs once capacity is strained.
