Originally published in Perspectives, January 1999

Wireless Technology: Friend or foe?

By John Gammmino and George Giardelli

Wireless technology presents both challenges and opportunities for payphone providers.

Since the early 1980s, wireless telecommunications networks have been deployed in growing numbers throughout North America and elsewhere in the world. These wireless networks evolved from early microwave and satellite forms to cellular, personal communications systems (PCS) and enhanced specialized mobile radio systems.

In the payphone industry, there has been much discussion about the impact wireless telephones have had on payphone usage. It's hard to know with absolute certainty, but it seems wise to assume that the increase in wireless calling has decreased the number of calls made from payphones to some extent in some markets. While this wireless threat is definitely real, payphone providers should know that wireless technology also affords opportunities for payphones.

To understand these opportunities, it's important to understand the history of wireless technology and what is currently happening in terms of the types of technologies that are now being deployed.

Where wireless technology got its start

In the early 1980s, cellular networks were deployed across the United States, beginning with the op 30 market service areas. Eventually, cellular coverage extended to the entire country. With two authorized service providers in each of 734 market and rural service areas, the cellular market became a fragmented quilt sewn together with roaming agreements among the service providers.

It took many years for the cellular systems to be deployed and for the billing and roaming agreements to be arranged. Today, some companies are making an effort to gain coverage across the entire U.S. wireless market through a variety of digital wireless networks. One example is AT&T, which is trying its digital wireless systems together to achieve a larger footprint.

The deployment of PCS networks in the 1990s has followed in the footsteps of cellular in that it is taking the form of a fragmented quilting in the American landscape. In this case, the service areas have been auctioned in a different configuration than cellular.

The PCS market is comprised of 47 Major Trading Areas (MTAs) and 492 Basic Trading Areas (BTAs). One company that is making impressive advancements in this technology is Sprint Spectrum.

Another technology that is being deployed is Enhanced Specialized Mobile Radio (ESMR) networks, which until recently were devoted to dispatch services. When regulations changed, ESMR providers were able to deploy digital two-way systems that emulate cellular service.

ESMR service territories are not contiguous with either cellular or PCS. An example of an ESMR company is Nextel, which is competing with other wireless companies and technologies.

While the rollout process for these terrestrial wireless systems has been fragmented and has taken considerable time, the overlap of cellular, PCS and EMSR is beginning to create ferocious competition in the markets that are served.

In addition to these terrestrial wireless systems, new Low Earth Orbiting (LEO) satellite networks are emerging today to provide wireless connectivity to wireless devices anywhere at any time. These networks may be the bridges to the quilt of fragmented networks evolving today.

According to The Yankee Group, the explosion of wireless communications competition in major cities has increased to five or more wireless service providers in each of the top 40 U.S. cities. More than 10 of the top U.S. cities now have six wireless service providers. Wireless prices have dropped 20 percent in the past year and 40 percent in some cities.

With the precipitous drop in prices for wireless services and the continued deployment of terrestrial and satellite wireless networks, a significant increase in capacity is being introduced each day. Service packages now bundle hundreds of wireless minutes at a flat rate. For example, 700 minutes can be purchased for $99 per month from one cellular provider.

PCS providers are offering even better deals. For example, in Michigan, one PCS company is offering 1,000 minutes of calling each month for $39.95. This includes caller ID, voice mail, call waiting, call forwarding and three-way calling. In Jacksonville, Fla., one PCS company is offering unlimited calling for $50 per month.

Whereas the networks described above are principally designed for people on the move, there is a new breed of fixed wireless technologies known by various names that can accommodate fixed terminals, which would include payphones.

These networks are currently being deployed in buildings to offer businesses an alternative to wireline service at significantly lower prices. Two of the most well-known companies that are deploying fixed wireless networks are WinStar Communications Inc. and Teligent Inc.

WinStar is offering free local calling to small business customers in select locations until the year 2000 if the customer signs a three-year contract for the company's service. Teligent is offering small to mid-size businesses discounts of as much as 30 percent from their existing local, long distance and Internet bills.

The wireless local loop services offered by WinStar and Teligent are broadband services that enable both telecommunications and information services, which means they can accommodate local, long distance and Internet traffic.

Currently, WinStar operates in 27 markets, and Teligent operates in 10 markets. WinStar recently entered into a $2 billion strategic relationship with Lucent Technologies and is expected to roll out its network to 100 cities worldwide.

With the explosion of wireless networks, it would appear that the wireless market is following the pattern of the long distance market. As multiple networks are deployed, overcapacity will drive prices lower. Services that are too expensive today may become very affordable in the next few years.

What's the picture for the future?

That isn't to say that these systems don't have problems that must be addressed. However, while existing wireless networks have inherent weaknesses such as weak signal strength, and existing portable terminals have weaknesses like limited battery life, things are about to change.

Technology is solving both problems in the former case, the satellite networks may offer the solution to dead spots in the terrestrial networks. In the latter case, new technology is extending battery life.

For example, in a recent offering by AT&T, a Nokia digital multinetwork phone has been made available that has up to 335 hours, or 13 days, of stand-by time and more than five hours of talk time. In the case of fixed wireless sytems, AC power, solar power and other energy sources can extend battery life for terminal devices.

Opportunities for payphones

Wireless payphones are actually nothing new. GTE Airfone and GTE Railfone have been in existence for years. Both offer callers the ability to place a non-coin call and bill the call to a credit card or a calling card. Wireless payphones also are being deployed in Third World applications in increasing numbers.

Wireless payphones on street corners in North American may someday become commonplace. Elcotel's GENCELL system, Intellicall's N-Genius system and Protel's Express 1000 Cellular Series - all of which are wireless payphones - include unites that accept coins, calling cards, prepaid cards and chip cards. Until now, the principal market for these products have been the international market rather than the North American market, but that may soon change if PSPs are able to take advantage of fixed wireless networks.

PSPs would benefit from the WinStar business offering of free local calls until the year 2000 and the Teligent offering of a 30 percent reduction from wireline local loop prices. Perhaps the payphone industry and the wireless local loop providers should being a dialogue of how both industries can profit from a wireless local loop product for payphone service providers.

In a wireless world, payphones do not have to remain tethered to a specific location. Streets, driveways and significant structural modifications do not have to be made to initiate service. If the selected payphone location is not productive, the payphone can be moved to another location with less cost and with limited logistical concerns.

By untethering payphones from the wireline network, payphones can be placed on trailers or in other custom mobile vehicles. Payphones communications can be brought tot the places where phones are more intensely needed for short periods of time. Examples include conventions, political events, sporting events, fairs, carnivals, seasonal resorts, major outings and other activities where large groups of people gather for periods of time.

While there are obstacles to overcome, this appears to be another entrepreneurial opportunity waiting to happen. It could stimulate growth in both industries.

John Gammino and George Giardelli are consultants with John Richard Associates Inc. (JRA), a management consulting firm in public communications. Collectively, they have 57 years of experience in the telecommunications industry. JRA can be reached at (732) 933-2654.