WASHINGTON-For years, wireless resellers have been fighting carriers, regulators and Congress for a little respect.
In the future, they may command it.
The infusion of spectrum, deregulation and competition is changing marketplace dynamics, making resale an increasingly attractive distribution channel in the new world of one-stop shopping for the 21st century.
“I think the industry is poised to enter an era of serious growth,” said David Gusky, executive director of the National Wireless Resellers Association.
Gusky, heading into the trade group’s fall conference this week in Scottsdale, Ariz., has good reason to be optimistic-to make the kind of bullish forecast usually reserved for trade association chiefs who speak for carriers of the fast-growing paging, pocket telephone and specialized mobile radio sectors.
Resale is getting sexy.
MCI Communications Corp. and Cellexis International Inc. have mega resale deals with NextWave Personal Communications Inc., the top C-block PCS auction winner.
Worldcom, the fourth largest long-distance carrier that acquired MFS Communications Co. Inc. (a business competitive access provider) for $12 billion in August, bought Choice Cellular’s 35,000 resale base in July. Choice, the sixth largest reseller, is headed by Jim Wolfinger, president of NWRA.
Gusky notes cellular carriers, who have considered resellers a pesky nuisance in the past, are politely renegotiating resale agreements to keep resellers from joining forces with new personal communications services licensees, which face enormous financial and competitive pressures to get subscribers on new spectrum costing nearly $20 billion.
While telecommunications reform focuses primarily on landline services, Gusky said the new law-enacted in February-“gives resale greater credibility” and invites one-stop shopping.
If a company is serious about competing, it better have a wireless component.
MCI’s nationwide wireless play is predicated entirely on resale. AT&T Corp. and Sprint Corp. went the traditional route and paid for transmission facilities.
The NextWave transaction builds on MCI’s purchase of the largest U.S. cellular reseller last year and on existing resale partnerships with paging leaders Paging Network Inc. and SkyTel Corp.
As such, the deal furthers the No. 2 long-distance carrier’s strategy in the new millennium of offering customers wireless in its package of local, long-distance, Internet and other services.
It is a peek into the future, an example others are following, no thanks to regulators and lawmakers.
“We cannot count on the FCC to promote resale in the wireless marketplace,” said Gusky.
Resale helped make the long-distance industry competitive and policymakers hope the policy will achieve a similar result in the local landline telephone monopoly market.
But the Federal Communications Commission and Congress have declined to extend an aggressive resale policy to wireless, fearing it could hurt the industry. The rationale is that, unlike monopoly and oligopoly landline markets, the young and restless commercial wireless business is characterized by multiple facilities-based wireless carriers.
Thus, policymakers believe market forces-not government regulation-will drive competition in the wireless industry.
The FCC forbids wireless carriers from engaging in restrictive or discriminatory activities. But the rule sunsets five years after the last group of PCS licenses are issued. The sunset provision is being challenged at the FCC and in court.
“If the market does not develop,” observed Gusky, “that could cause some problems for resellers.” He said the FCC is “inviting abuse.”
At that point, Congress could step in. One lawmaker in particular, Joe Barton (R-Texas), a ranking member of the House Commerce Committee, could take on the job.
Barton has been dogged, though unsuccessful, in his attempt to mandate switched resale and unbundled interconnection in the wireless industry.
Resellers and carriers were close to a compromise a year ago, but a dispute over who resellers could sell out to sunk talks. Barton’s effort lacked support of Republicans and Democrats alike.
Depending on the outcome of his election race, Barton could continue to be a force to be reckoned with.
NWRA has nearly 100 members, mostly small wireless resellers who make money buying airtime from carriers at a 30 percent discount and selling service to the public.
Gusky said resellers face the same pressures as other small businesses. He sees ample financing as the key to success.
“The resellers who understand this and who have over time amassed sufficient capital to compete with carriers and other resellers to help grow their businesses, they’re doing quite well,” said Gusky.
“Resellers that are constantly struggling to pay the rent, make payroll-let alone try to market their services-they’re struggling. And they’ll always. It’s just like any other business, you need capital.”
And a little respect.
