Now that small and rural cellular operators have become an integral piece of large operators’ nationwide calling plans and consumers demand more advanced services, many small carriers could feel pressure to move to third-generation-type technologies faster than anticipated.
Smaller carriers in recent years haven’t found solid reasons to migrate to digital second-generation service since they haven’t suffered the capacity constraints that pushed their larger urban counterparts to deploy digital services. Many today, however, find some of their largest customers are operators, such as AT&T Wireless Services Inc., which push minutes their way by offering digital nationwide calling plans. Rural customers also are coming to know the benefits of digital service.
“Small carriers are now deploying 2G not because of the increased voice capacity, but for the economic and consumer benefits, lower cost of capital, longer battery life, short messaging services, message waiting indication and the intelligent roaming databases,” said G. Edward Evans, president of Dobson Communications Corp., a rural cellular carrier in Oklahoma City.
Dobson has been aggressive in building out rural digital networks using Time Division Multiple Access and Code Division Multiple Access technologies. Today, 95 percent of the carrier’s markets offer digital voice and digital services like SMS, said Evans.
A number of rural carriers are migrating to digital technology these days, said Charles Drayton, vice president of network marketing with Nortel Networks, a vendor that has been successful in convincing rural carriers of the economic benefits of digital service.
“There is a combination of factors,” said Drayton. “The roaming agreements are a key factor, and while analog is providing good service, the fact of the matter is, a lot of subscribers these days are starting to find the difference. They notice when their phones are roaming to analog.”
Hence, the pressure to roll out the latest and greatest technologies is beginning to intensify for smaller operators. These smaller operators must decide who their largest customers will be-their local consumers, the big carriers that push blocks of roaming minutes their way or both.
Dobson’s Evans is convinced small and rural operators that want to remain competitive will be forced to deploy 3G technology.
“Straight out of the gate, consumers will get the benefits of technology ubiquity, wireless Internet and e-mail,” said Evans. “I believe consumers will demand these services, and carriers will respond.”
Thirty-four percent of Dobson’s traffic is digital today, and in some markets, digital sales account for more than 70 percent of gross activations. The market is demanding digital services, said Evans.
Rural Cellular Corp. President Richard Ekstrand says his customers only equate digital services with the large buckets of minutes operators like AT&T Wireless are offering. But he must take into consideration what his large roaming partners are offering.
“Our experience over the last year with nationwide footprints is that consolidation is continuing and the lineups continue to unfold with affiliation programs,” said Richard Ekstrand, president of Rural Cellular Corp., which offers digital service in Maine and Minnesota. “This requires small players to evaluate. If you want to sit and operate in a region with a huge footprint, you must make that space attractive to nationwide players’ customers to extract a piece of the roaming business. You need technology your partners are offering.”
Many smaller operators today have some sort of alignment with urban providers. Dobson and AT&T Corp. last week agreed to jointly acquire rural operator American Cellular Corp. for $2.32 billion, extending both operators’ footprints. Large carriers like AT&T Wireless and Sprint PCS are signing operating agreements with smaller carriers to extend their footprints seamlessly.
Most affiliation agreements don’t require operators to deploy 3G technology. said Perry Walter, wireless analyst with Robinson Humphrey Co.
“Some may decide to go to interim steps at some point, but in a lot of cases, they will wait for the larger carriers to get the early-generation equipment to make sure all the bugs are worked out and wait for the cost to come down,” said Walter. “They will get there, but substantially later.”
But smaller operators are aware that their large partners could look elsewhere if they are slow on the technology side.
“You better be able to provide those kind of services or the bigger carriers will find someone else who can,” said Ekstrand. “You have to be responsive to that and proactive in trying to figure out what they want and what they are doing. The last thing we want is to get caught with our head in the sand.”
