Paging lit up the wireless industry like a white-hot star.
It showed that fistfuls of money could be made using wireless technology. It showed that wireless companies could grow by leaps and bounds virtually overnight. Paging showed the industry that millions and millions of people across the country-and across the world-are ready and willing to pay for the types of benefits wireless technology can provide.
And now it’s providing another valuable lesson for the rest of today’s wireless industry. It’s proving that with spectacular growth there’s also the chance of spectacular descent-the white-hot star has the potential to go nova.
The ongoing chronicle of the paging industry may provide a sort of guide map for today’s burgeoning wireless companies, giving them a hint of what to do and what not to do. The future of today’s wireless companies may depend on the history of those past.
The beginnings
The chronicle of the paging industry started almost 50 years ago with a type of messaging service that simply cycled through a series of voice messages. Users would tap into the publicly broadcast messages and listen for ones that applied to them. It was a messy, time-consuming way of communicating, but it worked. It also fueled the need for better and more personal methods of paging.
As the industry began to grow and the technologies mature, select entrepreneurs began to see the need and the potential for wireless communications. Those entrepreneurs decided to build transmitting towers-often just one or two-to cash in on paging enthusiasts in their corner of the nation. These fledgling paging systems began popping up across the country.
Until the late 1970s, the paging market was dominated by these small, “mom-and-pop” paging carriers, which almost exclusively served businesses. Hospitals-still a paging mainstay-emergency services and others quickly picked up wireless paging to improve their response times and keep in touch with their employees. Individual consumers were left out of the equation because the price of paging was simply too high. Beepers could run anywhere between $150 to almost $300-an exorbitant price for most people.
This pricing situation in turn kept paging players small because they couldn’t tap into the mass market. Also, additional spectrum was too costly and the paging regulatory climate was too complicated for carriers to try for anything more. For years, paging licenses were given out on a tower-by-tower basis-a situation that didn’t exactly foster expansion.
“You did see a lot of local systems, a lot of local players,” said Brad Scott, president of Network Services L.L.C., the nation’s newest nationwide paging player. Scott, a paging veteran, has worked with a variety of paging carriers and resellers.
The paging carrier situation began to change in the early 1980s when the Federal Communications Commission started to award more spectrum and larger licenses. This brought in new paging players, including television broadcast subcarriers, private carrier paging and specialized mobile radio services. Suddenly, with the help of more spectrum, technological advances and falling prices, the small radio common carrier industry was blown wide open.
Massive growth
It proved to be a rough process, but by the late 1980s several companies managed to raise the funds needed to begin their quest toward nationwide paging services. Paging Network Inc., Metromedia Inc. and others began breaking new ground and offering paging services to the mass market.
These brave companies sought to make paging a household word in their attempt to bring wireless paging to the country. A variety of factors-including extra spectrum, looser regulations, technological jumps and dropping prices-worked to bring paging to the consumer. Now wives could keep in touch with husbands, teens with parents and friends with friends. Paging became a fashionable, everyman’s way of staying in touch.
And the companies made millions. Carriers were reporting thousands of new subscribers every month. The stock prices of publicly traded paging carriers shot through the roof, and Wall Street wallowed in the high valuations. The paging industry became a place of multimillion-dollar deals and everyone rejoiced in an industry whose time had come.
“This industry continues to grow at 25 percent per year and that growth covers a lot of sins,” PageNet Chairman George Perrin told RCR Wireless News in 1995. “We’ve all been blessed by this industry. PageNet may have done a bit better than others. We had a critical (subscriber) mass, hit the industry at the right time and made some right decisions early on in terms of frequencies and their utilization.”
Perrin’s comments came at a time when the industry was near its zenith and PageNet led the business with a subscriber base nearly three times that of its largest competitor. The company’s revenues were $411 million and its operating cash flow was $140 million. The future was bright for PageNet and the rest of the paging industry.
But that future may have burned a little too bright. In order to garner even more customers and continue to impress Wall Street investors, paging companies doled out millions and millions in huge acquisitions and network upgrades. The pace became furious.
“You saw tremendous consolidation,” Scott said.
“There’s nothing wrong with consolidation done properly because it brings synergies to the business,” said Michael Gill, executive vice president and director of research with Tejas Securities Group Inc., which keeps close tabs on today’s paging companies. “But the consolidation occurred in many cases at prices that were unsupportable based on their (carriers’) asset base. And the assets of these companies primarily is their subscriber base.”
The industry reached a fevered pitch as carriers-in order to increase their subscriber numbers-dropped paging prices below their business worth, paid for network upgrades and funded the acquisition of other companies. The situation rapidly deteriorated as investors began to back away.
“They (the carriers) were all trying to roll up the industry, which made some intellectual sense, but obviously in hindsight it was a disaster,” Gill said.
The end?
And then came mobile phones. For a time the effect of this new service was negligible, but soon paging customers began to throw out their trusty pagers in favor of a phone they could take anywhere.
“The No. 1 reason (for the decline in paging) has got to be the proliferation of cellular phones,” Gill said.
Paging companies worked to offset the drops in their subscriber numbers-offering advanced services such as two-way paging-but nothing could stop the tide. PageNet, the crown jewel of the paging industry, filed for Chapter 11 bankruptcy and eventually merged with Arch Wireless Inc., one of today’s few remaining paging players. Other major paging companies, including WebLink Wireless Inc., MobileMedia Corp. and TSR Wireless L.LC., have fallen into bankruptcy. Even paging vendor Glenayre Technologies Inc. is now out of the paging industry.
“It’s very interesting how the industry has changed,” Scott said.
While the introduction of mobile phones definitely helped push the paging industry into its current situation, a variety of other factors were involved. High valuations, cut-throat pricing, the importance placed on subscriber additions and unchecked spending are all parts of the whole, and the varied segments of today’s wireless industry would likely do well to note the reasons behind the rise and decline in the wireless paging industry.
