Some people view wireless communication as driving 50 miles an hour while chatting on the phone with a business client or taking a cordless phone into the laundry room so as not to miss a call.
But to the vast majority, wireless communication is something for someone else, a technology they don’t have and don’t need.
Many of America’s biggest companies are betting that within a few short years, however, attitudes about wireless will change radically, and an already sizzling technology will explode to change the face of telecommunications.
And on Monday those companies begin to literally place some high-stakes bets in the marketplace.
This week the Federal Communications Commission begins to auction off new radio spectrum devoted to wireless telecommunications service. It’s the main event in the stampede to bring the new phone technology, called personal communication services, or PCS, to the market.
The auction probably has done more already to reshape America’s telecommunications industry than any event since the breakup of the phone monopoly once held by American Telephone & Telegraph Co. a decade ago.
The race to wireless gained speed when AT&T, which came out of the breakup as the nation’s largest long-distance and phone-equipment company, bought the nation’s largest cellular company, McCaw Cellular Communications. That set off a frenzy of activity among the Baby Bells, which provide local phone service in seven regions across America.
With McCaw, AT&T now provides wireless service across about 30 percent of the country and is looking for new spectrum in the auction to gain a national wireless footprint.
Frightened of looming competition for their lucrative local phone customers, several Baby Bells have banded together in a consortium that will bid for more spectrum in the auction. These include Nynex Corp., Bell Atlantic Corp., US West Inc. and AirTouch Communications, the spinoff cellular arm of Pacific Telesis Group.
Thickening the plot, Sprint Corp., the No. 3 long-distance carrier, has joined with cable television giants Tele-Communications Inc., Cox Cable Communications Inc. and Comcast Corp. to bid on PCS spectrum as a way of getting into local telephone service.
“This really is the last of the big communications land-grabs, at least for this century,” said Thomas Gutierrez, a Washington, D.C., attorney whose firm specializes in telecommunications.
“Anybody who doesn’t get in there to get a piece of this one is really taking a big chance,” he added. “They could be left behind forever.”
And yet, despite all the enthusiasm, some major players are taking it easy on this, the big round in the PCS spectrum auction series. (Two earlier auctions this year doled out spectrum for advanced paging services and two more next year will dole out more spectrum for full-fledged wireless phone services, but in smaller amounts than this week’s event.)
MCI Communications Corp., the No. 2 long-distance carrier, is sitting out the auction, apparently waiting until later to make marketing deals with those who win auction spectrum and build PCS systems.
Ameritech Corp., the Chicago-based Baby Bell, also is keeping a low profile, deciding to bid only for licenses in Cleveland and Indianapolis.
This go-slow approach to PCS by MCI and Ameritech is in sharp contrast to most of the industry.
For instance, Craig McCaw, the man who sold his cellular empire to AT&T earlier this year, is jumping into the auction himself to bid on new spectrum. Also, Pacific Telesis, which spun off its own cellular service as AirTouch, plans to bid for PCS spectrum.
In light of the unexpected success of cellular phones, nearly everyone in the industry is bullish on PCS. At the outset, about a decade ago, telecommunications experts had predicted there would be about 1 million cellular customers in America by the turn of the century. As of this year, about 18 million Americans are cellular users, and the growth shows no signs of slowing.
Most believe that PCS systems will drive down cellular rates and drive up demand for all forms of wireless service.
But just because the wireless future looks bright, that doesn’t mean everyone who wins a PCS license will make money, some skeptics assert.
Ameritech’s low profile is dictated by its Midwest regional strategy and its view of PCS technology as essentially the same thing as cellular.
“Most of the cellular units we serve now are phones that people carry around with them, not phones that are tied to automobiles,” said Richard Notebaert, Ameritech chairman and chief executive. “We don’t view PCS as anything different from cellular.”
After fledgling PCS providers pay hundreds of millions for operating licenses, they must then spend even more to build their systems, Notebaert said, “and they won’t have signed up one customer.”
Cellular firms, on the other hand, will continue to expand their customer base, improve technology and can cut rates to meet the challenge of newcomers, he said.
Ameritech is bidding for PCS licenses in Cleveland and Indianapolis because those are the only two markets in its region where the firm isn’t now providing cellular service, said Evan Richards, Ameritech vice president in charge of PCS implementation.
The firm expects that vendors will market “dual mode” phones enabling people to use the same phone to send and receive signals on either the cellular or the new PCS frequencies, Richards said.
Thus, an Ameritech cellular customer in Chicago who took his phone to Indianapolis could use it there on a PCS channel owned by Ameritech.
“Our regional approach is dictated by our customers who tell us they want one-stop-shopping from their phone company,” said Richards.
As new PCS systems are built, Richards said Ameritech will make deals with other service providers around the country so that its customers will be able to use their phones anywhere at reduced charges.
Even though no one disputes that PCS can be viewed as just an extension of cellular service, it would be a mistake to think of it only as that.
PCS is really the industry’s opportunity to sell wireless phone service to the majority of Americans who have little interest in cellular, said Phil Petersen, manager of market research for PCS at Motorola Inc.
“Cellular has a market penetration now of 7 percent and that’s headed toward 10 percent,” said Petersen. “That means that 90 percent of the population didn’t take it.”
The goal of new PCS providers, said Petersen, isn’t to go after cellular customers, but to go after the 90 percent who use wireline phones.
These customers have different requirements than cellular customers, he said. They will require high-quality sound from wireless phones, similar to what they get now from a wired phone or a cordless phone in their homes.
They might walk down the street using a PCS phone or carry it around as they do errands, but they wouldn’t require the high mobility of driving around at high speeds while talking, he said.
The ultimate vision of wireless advocates is an “anywhere, anytime” phone system where a customer has a personal phone number and carries the phone most places.
When at home, the customer would find that the phone would work like today’s cordless phones and cost no more than today’s wired service. While walking down a street, the PCS phone might cost a bit more to use than wired service, but not much.
In a car, the phone might plug into a device that would boost its power and make it a cellular phone at premium rates that are still lower than today’s cellular charges.
“You’re going to see a high tier and a low tier of wireless service,” said Thomas Adcock, an engineer with the Washington, D.C., law firm of Lukas, McGowan, Nace & Gutierrez, which handles telecommunications matters.
“It will be invisible to the customer, but behind the scenes will be several networks using different technologies and different standards,” he said.
All wireless providers have a common goal of making their equipment work seamlessly with everyone else’s because if it doesn’t, customers will stay away and everyone loses.
But behind the scenes, competition will be fearsome, said Rudy Hornacek, vice president of engineering at Chicago-based Telephone and Data Systems, a major holder of independent telephone companies. Hornacek is also president of American Portable Telecommunications Inc., the PCS arm of TDS.
“PCS provides another form of access to the local customer, and that’s something that’s very important to the long-distance carriers,” said Hornacek. “They’re looking for a way to get to local customers without going through local exchange carriers, which charge them access fees.”
The tremendous interest in PCS by big players like AT&T and Sprint, along with the response by large manufacturers like Motorola to provide necessary equipment, gives independent players like TDS confidence that the new wireless technology is going to work as advertised, Hornacek said.
By the time all the PCS auctions have played out, there could be as many as nine different entities providing wireless phone service in large markets like Chicago, a development sure to spawn mind-boggling telephone competition.
Even though Ameritech isn’t a big player in this week’s auction, it likely will be an active bidder for a smaller slice of PCS spectrum next year, said Richards. That spectrum could be used to launch a low-tier service to complement the firm’s cellular operation.
“We’ll be in the bidding next year,” Richards said. “The added spectrum will give us a lot of flexibility for our wireless services.”
Even so, when the dust from the auctions settles and new systems are built, Chicago-area customers likely will be the targets of marketing by at least half-a-dozen telephone service providers.
That is the main reason Ameritech dropped the name “Illinois Bell” and other Bell-named companies in the Midwest and began in the last year stressing the Ameritech brand name.
“When you have big names coming up against you, names like AT&T and Sprint,” said Richards, “you’ve got to do everything you can to consolidate your own brand name and get your customers thinking Ameritech.”
