By John M. Lusa

A successful rollout of cdmaOne in the US is only the start. The next stage is to make it pay in a highly competitive wireless market. A growing number of value added services are helping operators to differentiate their networks and attract customers.

New cdmaOne PCS providers are coming on-line in what continues to be a highly competitive wireless market. A recent study released by the Cellular Telecommunications Industry Association (CTIA) says that, since June, more than 10.5 million customers have signed up for cellular service in the U.S. That's the greatest year-over-year increase since CTIA began collecting such data.

CTIA's study also said that revenues in the industry continue to grow. The more than 51 million cellular subscribers spent $25.5 billion last year. With PCS providers now offering digital-oriented services, competition is heating up even more. However, it’s likely that the last thing all the carriers want is a price war. This would cost everybody their profits and reduce an ability to invest in better services.

Peter Bernstein, consultant and President, Infonautics Consulting, Inc., Ramsey, NJ, points out that service creation could be a "me-too" situation, where "all service offerings are going to be identical." He feels the differential will be in marketing and billing, or, as he puts it, "customer care." The answer, he suggests, lies in "how you do market segmentation." The goal is "to create value to the customers."

COST OF CUSTOMERS
Some studies have shown that the cost of acquiring new customers, which includes promotions, handset subsidies and activations, can go above $500 per customer. At such rates, carriers can’t afford to lose customers to competitors. It has also been estimated that customer alienation of one sort or another has led to a 20% turnover rate. That’s not good for the bottom line.

So, in the increasingly competitive market for new wireless services, success will go to the carriers that best understand their targeted customers and what services they want or will even spend good money on. The winners will be those carriers that provide lower prices, innovative services and better customer service.

As Bernstein points out, market segmentation is important in this situation. For instance, while business users want a wide range of wireless services, a young urban mother just wants the security of knowing she has communications as she drives around the city. This means the business user might be willing to pay for all the extras that a digital service might provide, while analog cellular is "just enough" for the young mother.
For the moment, however, most consumers generally lump all wireless services into one bag. It’s going to be up to each carrier to differentiate its service.

CDMA’s advantages over analog are not just the best known ones of spectral efficiency and better capacity. Quality is improved by eliminating the audible effects of multipath fading, while also reducing handoff failures. Because the signal is digital, CDMA offers a reliable transport mechanism for data communications, facsimile and Internet traffic.

Transmitters require less power to operate and, as a result, offer less interference to other electronic devices. Such advantages may be critical in the continuing competitive struggle to establish a standard in the wireless market.

Bob Egan, Research Director for Wireless Technology at market consulting firm the Garner Group, says CDMA will be successful because it delivers this "much better voice quality." He adds, "So from the get-go what we are talking about really comes down to who is satisfied with quality, first and foremost, and at what price point will they pay for it."

Egan points out that since CDMA is digital it does offer considerably more security than analog devices. But just having a digital signal is not the total answer to security, according to Egan. He explains that a laptop hooked to a CDMA phone to crunch numbers opens the possibility of electronic eavesdropping. An answer to this potential problem is encryption, a capability not available yet for CDMA, according to Egan, but one which should be eventually.

THE NEXT FRONTIER
He does think reliable data communications services is "really the next frontier. The promise of delivering mobility is a big one and one that is being demanded within the user populations." Egan says the "real vision created years ago of anywhere, anytime communication should not be focused on voice; it should be focused on services — and those services need to include data."

Wireless vendors, says Egan, will need "to compete on service quality, customer satisfaction, support, voice quality and features," suggesting that if they don’t measure up to those standards, they will be "out of business in five years."

While analog systems can’t compete on voice quality or with the inherent security of digital systems, they do offer many of the same features. These include such services as voice mail, call forwarding, and conference calling. The differences tend to be in the availability of data services, such as text messaging and facsimile. First minute free and free activation tend to be services of digital carriers.

Bell Atlantic Nynex Mobile, second largest wireless carrier in the U.S., has deployed CDMA in nine metropolitan areas earlier this year. By the end of 1997 it hopes to cover some 75% of its customer base, according to Andrea Linskey, a spokesperson for the company. Bell Atlantic Nynex Mobile now serves some five million subscribers.

She wouldn’t say how many customers the company expected to migrate to the new digital service by year end. She explained that for some the cellular phone goes into the "glove box and (the customers) just use it for safety and security. Analog might be a way (for them) to go for many years to come."

On the other hand, Linskey says the company is getting a lot of "early adopters. These are your technology savvy people — business users who want the increased battery life that you get from the digital handset, as well as your first-time buyers who just want the latest and greatest." Data services aren’t available on its digital network as yet, according to Linskey. The company is working with Lucent on circuit switched data applications over a CDMA network.

Among the new services on the CDMA system is voice activated dialing. Up to 20 numbers can be programmed into memory. Thus, says Linskey, "instead of dialing a number you can say ‘pizza’ and it will dial your favorite pizza delivery man."

The company’s digital customers are offered a dual-mode phone, that operates in both digital and analog modes, thereby allowing customers automatically to maintain service outside of digital coverage and anywhere in the U.S.

INFORMATION SERVICES
In the meantime, Bell Atlantic Nynex Mobile has introduced Cellscape, a next-generation service that offers information services, enhanced encryption, and new "predictable pricing". This service is expected to offer business customers access to information on the Internet and on their corporate databases, e-mail, fax, and voice service via a Cellscape smart phone that runs on the company’s CDPD network, rather than through its CDMA service.

CDMA carrier PrimeCo Personal Communications, a partnership operation of AirTouch Communications, Bell Atlantic-Nynex and US West Media Group, at present operates in 19 cities, but has a potential market of 46 states.

It offers a number of services to distinguish it from cellular providers. Its "me-too" services include first in-bound minute free, no activation fee, low-cost text messaging and short-term contracts. The distinguishing services include free caller ID, a for-fee roadside service and a for-fee information service. With the latter, for 95 cents a call, users can obtain yellow pages, restaurant, movies, weather and time-of-day information by dialing #INFO.

EXPANDING
AirTouch Cellular is one of the country's early cellular providers, starting with the introduction of service in Los Angeles in 1984 under the name of PacTel Mobile Access. By expanding existing markets, acquiring new ones, and forming partnerships, the company is now one of the largest providers of cellular service in the U.S. and extends the AirTouch Cellular brand presence to 17 states. Los Angeles was its first market for the new AirTouch CDMA-digital cellular service called Powerband. Service was launched north of Los Angeles in May 1996, and now includes San Diego, the Detroit metro area and Atlanta. According to a company spokesman, customers benefit from Powerband's national roaming capability, enhanced features, improved call quality, better privacy, fraud protection, and batteries that permit over four hours of talk-time.

COMPELLING
Charles Oliva, a media spokesperson for AirTouch, says: "Currently we have Call Waiting, Conference Calling, Call Forwarding, Messaging Service (Voice Mail, Paging, Text) and Caller ID." He points out that "our Wireless Information Service Development team will develop and trial compelling new wireless information and messaging services. There will be a number of Internet enabled wireless access applications that we will focus on such as office connectivity and integrated messaging.

"The widespread adoption of the Internet, the spread of corporate intranets, advances in digital wireless infrastructure, and the emergence of "smart" consumer products capable of delivering voice and non-voice services signal new opportunities in wireless information services," explains Oliva. He adds: "AirTouch is taking steps to ensure that we are ready with customer-focused solutions that capitalize on advancements in the non-voice area."

KEY PART
Another major CDMA provider is using pricing as a key part of its competitive marketing program. In a relatively short period of time, Sprint PCS, has jumped from zero to 65 cities served by its wireless network. It has now has announced two new nationwide pricing plans. Ashley Pindell, Media Relations Manager, says the plans are called Home Rate USA and Toll Free USA. The first plan enables customers to make or receive calls from anywhere on the Sprint PCS network at their home airtime rate. On the other hand, with Toll Free USA its customers can make long distance calls from their home service area to anywhere in the U.S. and are only charged their home airtime rate; all domestic long distance charges are waived.

She points out that the toll-free plan "would be ideal for someone who makes a lot of long distance calls from their home service area." The plan will "allow you to have up to 1,000 long distance minutes per month at your local airtime rate. For instance, Pindell explained that on a 400-minute plan the rate could be as low as 10 cents a minute for the first 400 minutes and 25 cents a minute for time over 400 minutes.

Sprint PCS offers its customer a variety of phones, including the dual-mode Q phone from Qualcomm. According to Pindell, the company expects to offer in 1998 a short messaging service, paging, email, facsimile and file transfers. During the next two years, she adds, the company will expand to 100 cities, connect them along interstate highways and "will add robust data applications, such as video and high-speed data applications."

Recent press reports indicate that Sprint PCS is expected to award about $700 million to expand its CDMA network. Systems suppliers Nortel and Motorola, appear to be the beneficiaries of the huge contract. Some 3,500 cell sites are expected to be built.

DISTRIBUTION
As features and service become commonplace in the PCS and wireless industry, the providers are looking at other means to stay competitive and to increase market share. It has been reported that both Sprint PCS and AT&T are looking at new distribution methods to reach potential customers. They may be looking to franchise their brand names to quickly expand their market coverage.

The pressure to expand national network footprints is probably coming from major business customers demanding the ability to operate their phones anytime and anywhere. They particularly want their employees to be able to communicate while traveling in cars. Businesses, for the most part, are willing to pay for secure digital service for use with paging, messaging and data transfers. Many business users have seen the future — and they want it now.

In addition to franchising, wireless providers have already moved to open up retail stores under their own names as alternative ways of building market share and brand recognition. Such companies as Bell Atlantic Nynex, AT&T, Sprint PCS, Western Wireless and PrimeCo have opened hundreds of stores. Strategis Group, a Washington, DC, research firm, says that company-owned operations generated about 22% of total wireless distribution during the first part of 1997.

Perry LaForge, Executive Director of the CDMA Development Group (CDG), says: "It is clear that we are now moving into an era of new competition where wireless operators will be looking to compete in any way possible — whether it be price, customer service or features and services."
He goes on to say: "The roll-outs by the PCS operators are behind us, and the focus will be on differentiation through value added services."

He points out, in particular, that the commercialization of dual band cdmaOne PCS and cellular AMPS handsets will have a significant impact on the North American PCS industry.

LaForge explains that CDMA operators, whether large or small, will be able to differentiate themselves from GSM competitors by providing low cost wireless service in their own markets and with North America-wide AMPS roaming.

He feels that "an area we have a significant advantage in is that we’re the only wideband technology out there." He feels the spectrum capability of CDMA "gives us capabilities that can’t be matched by narrowband systems." This is, he says, a "robust platform" to use in the development of CDMA data applications. "We’ve just announced the capability and specifications to do pretty high data rate capabilities in a mobile environment." The uplink and downlink rate for this new service is 64Kbps. However, he expects the downlink rate to settle in at about 100Kbps.

The first deployment of the new specifications is expected to be in Japan. He adds that after that "you can be assured that it will roll out fairly quickly in the U.S."

The data interface capability will actually reside in the handset. In addition, the handset will provide a direct connection port for a data device, such as a PC, without the necessity of a modem-like device. He feels many applications are out there waiting for such a high-rate data capability.

The pressure to use the Internet in a mobile environment is growing, according to LaForge. He mentions that Qualcomm is now developing a way to transmit voice over the Internet. He feels that integrating voice and email is another value-added service that will soon be available.

As users migrate from analog to digital systems, they are in many situations forced to select from one of three incompatible second generation wireless systems — CDMA, GSM or TDMA —with all the roaming problems that are inherent in them as users travel about the U.S. and abroad.

MULTIMEDIA
Most users will want to keep the current and new features that CDG, wireless operators, system manufacturers and others are now fostering. But business and professional users, in particular, are expecting much more from their wireless systems. They want high-speed data services, such as multimedia, and global roaming capability.

Specifications for just such a third generation system, known as IMT-2000, are now being promulgatedby the International Telecommunications Union (ITU). Hopefully, it will be a model for integrating the emerging and competing regional groups of third generation wireless standards — one centered on GSM technology and another on CDMA — into a seamless global network.

John M. Lusa is currently a visiting associate professor in the Center for Information and Communication Sciences, Ball State University, Muncie, Indiana, and a former publisher and editor for PennWell Publishing.