The proposed combination of SBC Communications Inc. and Ameritech Corp. could create a big obstacle to the implementation of calling-party-pays service in the United States.
Speaking last month at a luncheon sponsored by Donaldson, Lufkin & Jenrette Securities Corp., Sam Ginn, chairman and chief executive officer of AirTouch Communications Inc., said AirTouch has negotiated a CPP billing agreement with Ameritech and is talking with Bell Atlantic Corp. and BellSouth Corp., but has run into a wall with SBC.
AirTouch provides CPP in nine states, said a spokeswoman for the company.
“SBC is of the opinion that wireless is a serious threat to its wireline business,” said Ginn, who noted AirTouch might challenge SBC’s merger agreement with Ameritech if necessary.
Southwestern Bell Telephone Co. said it is working with wireless providers to explore the possibilities of calling party pays.
“While we have made our network available for this new option, we have not agreed to date to serve as the billing agent for any `caller pays’ plan,” said the company. “We have taken this stand because we are concerned that Southwestern Bell customers could be confused or upset by being charged for what amounts to local telephone calls.”
Some analysts have asserted that CPP is one of the only ways to increase wireless usage-especially incoming calls-and therefore an effective way to begin winning minutes of use from landline telephony. David Kerr, director of wireless programs at Strategy Analytics, predicts the wireless industry could capture 10 percent of the total telecom minutes of use by 2003, but only if CPP is widely deployed. The wireless industry controls about 2 percent of overall telecom minutes of use today.
“Penetration rates in many European countries are very high, in some cases twice as high as the United States,” said Richard Siber, director of the worldwide wireless consulting practice at Andersen Consulting. “Some believe penetration and minutes of use can be attributed to calling party pays.”
Siber noted in some other countries, inbound calls account for about 50 percent of use, while in the United States, outbound calls account for about 80 percent of minutes of use.
Carriers that have both wireline and wireless interests, however, face a dilemma: Implementing CPP in order to increase wireless minutes of use could put them in a situation where they are taking minutes from their landline business.
Whether they prefer to implement CPP and reason the minutes are just being shifted to another division of their company, or whether they will resist CPP to protect their landline business, is unclear.
Tom Wheeler, president of the Cellular Telecommunications Industry Association, said he views CPP as additive to wireline business. Rather than taking minutes away from landline, he said CPP will grow the total amount of usage.
“Calling party pays is important, but not essential, to the future success of wireless (in the United States),” said AirTouch’s Ginn. “The first thing to do is admit a failure. Fifteen years ago, we saw wireless as a luxury service and, as a result, allowed a system that doesn’t serve us well today.”
Many industry experts, however, say they believe it will be too challenging to try to change the habits of millions of people who are accustomed to and satisfied with the way calls are billed today.
“It’s sort of industry politics that one big company decides calling party pays looks attractive and everybody else is sort of forced to react,” said Chris Mangum, senior manager of strategic development and CPP project manager at BellSouth Cellular Corp. “We’ve looked at CPP a number of times from both sides of the business perspective. Nothing has changed to convince us it is an attractive business.”
“There’s no evidence people are willing to pay for it or want it,” said Mangum.
BellSouth implemented a CPP system in Honolulu that had “100 subscribers on it at its peak and probably less than 10 subscribers when we turned it off,” said Mangum.
In fact, Mangum says CPP actually could work against wireless carriers. Rather than paying the charges to call someone on a wireless phone, he said, customers may decide to call that person on their landline phone instead to avoid the charges.
Nevertheless, CTIA has taken actions to support CPP service. Wheeler said CPP faces technology and policy challenges that need to be addressed.
On the technical level, billing challenges plague the widespread implementation of CPP. CTIA has initiated a standards-setting process it hopes could be completed by early next year. There also are concerns about how CPP would be regulated and what legal underpinnings exist to compel landline subscribers to pay for wireless calls.
Analysts also say a standardized method of notifying landline customers that they are about to be billed for a call to a wireless phone must be put in place. A mechanism that allows a caller to accept or decline those charges also is needed.
Another issue to be resolved is how calls will be charged, said Siber of Andersen Consulting. Charges could be tied to time of day and length of the call, or according to the wireless subscriber’s rate plan, or something in between, he said.
In the end, said BellSouth’s Mangum, carriers should not be forced to provide CPP.
“The industry should wait to see if a market for CPP emerges,” he said. “Our suspicion is that a CPP market probably will fail to appear.”
Elizabeth V. Mooney, RCR’s New York Bureau Chief, contributed to this story.
