Six months ago, personal communications services came to New York with the promise of revolutionizing the cellular market. But the new digital wireless service has had a rough struggle here.
The first entrant, Omnipoint Communications Inc., signed up a mere 16,000 users after four months in the market. This week, Sprint Spectrum L.P. comes to town replete with splashy ads and steeply discounted prices. But its limited geographic coverage is likely to blunt its impact.
In the meantime, the incumbents, AT&T Wireless Services Inc. and Bell Atlantic Nynex Mobile, anticipated the new players by heavily marketing their own digital service and posting double-digit subscriber and revenue gains in the process.
Long term, say analysts, there’s plenty of room for four, even five players in New York, a market where high costs and poor service have historically kept cellular penetration low. A scant 11 percent of the region’s population of 17 million are cellular subscribers, compared with 16 percent nationwide.
But the new entrants will have to keep pace with the region’s incumbents before they capture significant market share. “AT&T and Bell Atlantic Nynex Mobile are two of the strongest and most aggressive competitors in the market,” said Jane Zweig, a vice president with Herschel Shosteck Associates Ltd.
The new entrants are scrambling to get to market because they have hundreds of millions of dollars in debt they must service. “It’s like the airline business, where a seat unsold is revenue gone forever,” said Jeffrey Locke, general manager for Sprint in the New York metropolitan region.
But the strategy is a risky one for the newcomers. Omnipoint launched its service last November, without complete coverage even in Manhattan. The service gaps proved its undoing when Manhattanites found they could make calls from one part of the city and not from another. The wireless company ended up waiving monthly fees for disillusioned subscribers.
Today, Omnipoint’s network in the city is complete, and the wireless newcomer offers global roaming capabilities. But it has holes in its suburban coverage. Omnipoint’s slow start produced anemic numbers compared to American Personal Communications’ PCS launch in Washington, D.C., which toted 80,000 subscribers in six months.
Omnipoint Senior Director of Marketing Mark Caron insists New York is a much tougher play. “Not having complete suburban coverage does hold back a lot of people with more disposable income,” conceded Caron. “But APC in Washington caught the cellular guys sleeping. “
Sprint’s coverage is limited to four of the five boroughs. Staten Island won’t come on for a month. However, Sprint is offering up to 50 percent discounts to gain subscribers. Whether Sprint’s steep discounting can overcome geographic weaknesses remains to be seen. The incumbents have already cut prices and insist they won’t get caught in a price war.
“Sure, prices will come down,” said Rick Conrad, president of Bell Atlantic Nynex Mobile’s metro region. “But we’re not going to engage in price wars.”
