NEW YORK-Landline replacement, the Holy Grail of wireless telephony, received a boost from an array of forces unleashed simultaneously into the communications environment.
This is not a high-stakes game of winner takes all, however. Telecommunications providers are learning more about how best to exploit the cross-pollination advantages of bundled service offerings.
The conventional wisdom is that those who know a subject well are best able to teach it. As a result, consumers are becoming more educated about how to tap the comparative advantages inherent in wired and wireless technologies to meet their varied communications needs.
The proverbial pie is thus expanding, in the view of presenters on a panel entitled, “Mobility: Complementary or Competitive,” which was part of Bear, Stearns & Co. Inc.’s Nov. 2 “Global Competitive Telecommunications Conference.”
Only a few years ago, 100 minutes of use typified the average wireless customer, said David L. Freedman, senior managing director of Bear, Stearns and moderator of the discussion. Today, mobile wireless customers average 300 to 500 minutes of use and those using fixed or local area wireless, 900 minutes of use, he said.
“We have been an advocate for a long time of the idea that the next big growth initiative is wireline replacement. Leap (Wireless International Inc.) and Centennial (Cellular Corp.) are leaders in this,” said Kevin Beebe, group president of communications for Alltel Corp., Little Rock, Ark.
“Wireless is a great place to launch multiple services from because it has the most strength in terms of distribution and presence in the community … The advantage of a wired network is clarity and data speed.”
Over the past year, Alltel has found that bundling its cellular, paging, competitive local exchange and interexchange carrier services has substantially reduced churn and boosted revenues, Beebe said. Monthly wireless customer churn rates, which the company disclosed for the first time during its third-quarter earnings release, are in the 1-percent range. Customers who purchase bundled services spend about 30 percent to 35 percent more than those who buy individual services.
“The world is going to free long distance. That’s the reason for the mergers and acquisitions among long-distance carriers,” Beebe said. “We will test that proposition before anyone else.”
Of the $90 billion in wireline long-distance revenues, about $65 billion is for voice communications, Freedman said.
“If you think that long distance is going wireless, consider that total revenues for wireless in 1998 were $36 billion,” he said.
Leap Wireless, the San Diego-based carrier that Qualcomm Inc. spun off, launched its first domestic market, Chattanooga, Tenn., in March. After six months, it had 12,400 subscribers and 4-percent market penetration for its Cricket service, which allows only local calling on an unlimited basis for a flat rate.
“Cricket is local area wireless, not wireless local loop. More than half our subscribers use this as their primary phone … We are not really churning people off other carriers. We’re bringing in a new set of customers,” said Harvey P. White, chairman and chief executive officer of Leap.
“The industry has looked at wireless as an individual technology … Wireless is not a service but a platform for access to various networks.”
White said he believes telecommunications will follow the lead of the automobile industry, which offers everything from subcompacts to trucks.
“You will need copper for high-speed data. But many people would think they’d died and gone to heaven if they could get data at 144 [kilobytes per second] because today they have 56 kbps that runs at 28 kbps.”
Leap intends to offer wireless data and believes this offering will replace paging, White added.
“The reason wireless is so important as the foundation to launch other services is that, for voice communications, if you can be untethered, why not?” Alltel’s Beebe said.
“Many businesses in our area already are using their primary wired line for data as voice goes wireless.”
In Centennial’s Puerto Rico market, wireline penetration is 35 phones per 100 people, well below the mainland United States’ average of more than 65 per 100. The carrier offers wireline and Code Division Multiple Access personal communications services off of a common switch. Its fixed wireless offering involves restricting the use of a mobile phone to one location, and many of its WLL customers use their handsets for their primary telecommunications line, said Michael J. Small, president and chief executive officer.
With a fiber backbone that covers about 75 percent of the island’s population and half its land area, Centennial “runs fiber to customers to get in the front door as an alternative to the local phone company … We also look to cable (television) to gain access,” he said.
“The challenge for us in marketing more aggressively and deploying more broadly is capacity,” he said.
In the mainland United States, Centennial, which is based in Neptune, N.J., owns and operates rural cellular systems, primarily in the Midwest, South and Southwest.
“We have some wireless [private branch exchanges] with intelligent network capabilities in our domestic operations,” Small said.
“The primary constraint (to more aggressive marketing of this service) is that our support organization is more suited to cellular sales. There are no technological constraints. It’s more of a business decision.”
Centennial, which is a Time Division Multiple Access carrier on the mainland, likes the inbound roaming revenues it gains from AT&T Wireless Services Inc. as a result, Small said.
“We chose TDMA because it was an easy transition from analog, and we don’t see capacity problems in our rural properties. But through our Northern Telecom platform, we can transition to CDMA,” he said.
“I think there will be some integration of (Global System for Mobile communications) and TDMA networks that is driven by AT&T and British Telecom.”
AT&T, which uses TDMA for its wireless networks, and BT, which uses GSM technology, are engaged in a strategic alliance to serve corporate customers with cross-border communications needs.
