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SPRINT SPECTRUM PCS PREMIERE GARNERS EARLY, WARM RECEPTION

WASHINGTON-Stores are crowded. Literature is disappearing. Customer service is forced to beef up. Product is in short supply. The holidays are around the corner. Overwhelming success is a double-edged sword.

But it is this sword that Sprint Spectrum, the personal communications service joint venture between pioneer’s preference winner American Personal Communications and communications giant Sprint Corp., has had to wield since sales and service began Nov. 15 in the Washington, D.C./Baltimore market.

When cellular service first went commercial in the first half of the 1980s, some industry pundits predicted that the new wireless technology would garner only 900,000 users at best, long term. They were wrong. From inception, PCS advocates believed their service would gain almost instantaneous acceptance, and spot research shows they haven’t been disappointed.

Bolstered by seemingly limitless (estimates stand at $5 million worth) full-page color print advertising, TV spots starring Candace Bergen and galloping word-of-mouth recommendations, Sprint Spectrum PCS units have been selling in area mass-merchandising outlets like proverbial hot cakes. One industry source told RCR that sales of the PCS phones and service were now at seven times Sprint Spectrum’s original business plan. Understandably, Sprint Spectrum is not releasing any advertising specifics or projected sales figures. Because “the competition is so keenly interested in what we’re doing,” said Anne Schelle, APC’s vice president of external affairs, who would not confirm the seven-times projection sales.

According to preliminary estimates released Dec. 1 by Wheaton, Md.-based Herschel Shosteck Associates, more than 3,000 Sprint Spectrum subscribers were activated during the first two days of service, a figure Shosteck said was twice the average of cellular competitors Bell Atlantic Nynex Mobile and Cellular One combined. Shosteck thinks there are more than 10,000 PCS units in service now, and he foresees another 40,000 during Sprint Spectrum’s first year of operation.

Shosteck attributed the carrier’s jackrabbit start to “the benefits of better-quality reception, better communications security and the unique benefits of the phone,” which incorporates paging, voice mail and data-transfer capabilities.

Indeed, an informal RCR survey of Northern Virginia; Washington, D.C.; and suburban Maryland Radio Shack, Hecht’s, Best Buy, Office Depot, Luskin’s and Sprint Spectrum outlets revealed the following:

Of the three phones designed to work on the Sprint Spectrum system-Ericsson, Motorola and Nokia-most stores only have had the Ericsson phones to sell. Nokia models are being sold in a few stores.

The first shipment of phones sold out in areas close to Washington, D.C., during the first day or two of sales, with larger outlets currently selling between seven and 10 units per day. Smaller shops in outlying areas are selling only a few per week.

Half of all buyers have had no exposure to wireless communications; the other half are current or former cellular customers.

There is no recognizable PCS user profile. No set age, sex or ethnic background has been targeted, although store managers agreed that the teenage demographic hasn’t impacted sales, mostly due to credit limitations.

Most purchases are impulse buys. One Radio Shack manager told RCR, “They come in for a fuse and walk out with a phone.”

Few customers who enter a store looking for a cellular phone leave with a Sprint Spectrum phone. These buyers are looking for coverage, rather than for low access fees.

Most Sprint Spectrum customers opt for the lower-priced service plan ($15 per month access charges plus 31 cents per minute), rather than the more expensive plan ($40 per month access charges plus 29 cents peak and 10 cents offpeak per minute airtime.) However, Washington, D.C., customers buck the norm, going for the pricier program because of the 120 free minutes, split equally between peak and off-peak.

Northern Virginia customers appear to be the early adopters of PCS, surpassing their Maryland and Washington, D.C., counterparts.

Although there have been few returned handsets, customers have turned in units because of manufacturer defects, coverage limitations and just plain lack of understanding about how to use the phone and its features.

Sprint Spectrum’s policy of not requiring a service contract, thus allowing customers to terminate PCS service at will, certainly is helping to load the system; however, this tactic may have to be rethought down the road. Shosteck believes the lack of a contract will spur tremendous churn; if customers decide to quit the service, the $100 they paid for the PCS phone (after rebate) is negligible, compared to the penalties cellular customers incur if they terminate a contract early.

“If the costs of churn prove too high, [Sprint Spectrum] will be forced to reduce them,” Shosteck said. “Inevitably, this will increase transactional costs and, thereby, reduce the hassle-free attraction of PCS.”

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