In the summer of 1989, one of my favorite bands, the B-52s, released an album with the big hit-tune “Roam,” in which singer Kate Pierson encouraged listeners to “roam around the world.” Well, it took me nine years, Kate, but I finally took you up on it and roamed to Europe over the holidays. Being the wireless addict that I am, I wanted to be able to use my phone while in London, Paris and Stockholm.
Everyone on the streets in Europe always is chattering away into a “handy,” and I, too, wanted to have that savoir faire-that cosmopolitan aura-that comes with whipping out a phone to make a call in public.
In pursuit of this objective, I checked with the various service providers in New York, and here is what I found: Omnipoint Communications Inc.’s international roaming wins hands down.
The Global System for Mobile communications standard was born because people needed to roam across the European continent. The relatively small size of the countries means there is significant cross-border traffic by both business people and consumers. As a roaming facilitator, GSM technology has been an unmitigated success. It has been adopted by operators in more countries around the world than any other standard.
George Schmitt of Omnipoint was at Germany’s Mannesmann Mobilfunk, known as D2, when in 1992 it turned up one of the first GSM networks in the world. His familiarity with GSM has continued at his current employer, despite the few months he spent as a Code Division Multiple Access apostle at PrimeCo Personal Communications L.P.
Omnipoint and others have rolled out GSM networks at 1900 MHz in the United States and signed roaming agreements with numerous foreign GSM carriers. Hence, it was natural that my first call went to Omnipoint.
The Omnipoint plan rents subscribers a 900 MHz GSM phone (with a D2 logo!) for $40 a month. A subscriber identification module chip is put in the handset and carries key data such as the subscriber’s phone number, carrier and, conveniently, all of the user’s programmed names and numbers. The rate per call varies depending on when the network is used, time of day and where the call is going to.
In the United Kingdom, roaming onto both the Vodafone plc and Cellnet networks is permitted. The quoted rates seem to indicate Cellnet is cheaper for in-country calls, while Vodafone is cheaper for calls back to the states. Diligent “manual selection” of networks for the different types of calls helps minimize costs, which are translated to dollars at the exchange rate set on the 24th of each month. This rate is fixed by the GSM carriers and holds for the entire month unless rates change by more than 5 percent.
France Telecom rates back to the United States are much lower than either of the U.K. firms. Unlike the U.K. carriers, France Telecom cleverly boxes its very low international off-peak rate (69 cents) between 1 p.m. and 7 a.m. to coincide with peak times in the states. Short messaging from my secretary’s PC is supported throughout Europe.
In contrast, Sprint PCS, AT&T Wireless Services Inc., and Bell Atlantic Mobile are just not competitive when it comes to international roaming.
A call to Sprint PCS 611 (seven minutes) indicated it doesn’t have any arrangements at all for international roaming.
The next call to AT&T 611 (also seven minutes) yielded an 800 number for Cell Card Systems to rent a phone. In four minutes, CCS explained its terms. Hold onto your hat! Phone rental is $75 for two weeks, or “just” $95 a month.
Then there is a $49 one-year subscription card, with no shorter terms available. The per-minute rate is $2.49 for all calls-in-country and out, peak or off-peak. Incoming calls have international long distance added in at approximately $1.25 per minute. So the total of $3.75 a minute makes the planned rates for Globalstar and Iridium mobile satellite networks look extremely good by comparison.
The plan is set up so my AT&T number in New York would ring the rental phone in Europe. A handset could be in my possession in three days if I immediately placed an order.
Bell Atlantic Mobile came next. The 611 call began at 11: 02 a.m., and after several soothing movements of Eine Kleine Nacht Musik, a customer service representative answered. The initial response to my inquiry about European roaming was that BAM does not offer it. A mention of GSM rang some bells, and the CSR proffered an 800 number to me. After calling the 800 number, the first person, Patrick, listened, passed me to Karl, who listened, then passed me to Diane, who actually had some answers. (What with Mozart, Patrick and Karl, it was beginning to feel very European.)
The phone rental was a “mere” $46.50 a week, plus an average of $7.75 a day charged until the handset was back in the company’s warehouse. Wow, with a deal like that I could hardly complain about the $15 charge for shipping-each way of course. The option of picking up the phone at the airport was available to save the shipping costs.
The international per-minute rates varied by country, with a call from the U.K. to the United States running $2.31 per minute; France to the United States at $2.92; and Sweden to the United States at $3.71. Rates were lower for in-country calls, but no peak/off-peak distinction was provided.
A major drawback of the plan was that a different phone number than my New York BAM number would be required. At 11: 29 a.m., after 27 minutes of dialogue, my handset was too hot to continue.
“You Can’t Touch This”-M.C. Hammer.
The significant ease with which customers of Omnipoint can roam overseas creates a competitive advantage for the company. While several competing carriers have put together a solution for international roaming, the functionality and price points are so ridiculously out of line as to be saying: “We cede this segment of the market.”
On our bill from this trip, the blended average international rate worked out to $1.23 per minute, not much more than some of my domestic roaming rates with the long distance added in. This puts the other carriers to shame, especially when the other fixed rental charges are considered.
For the international traveler, the clear choice at present is Omnipoint. While other GSM operators in the United States can duplicate the functionality that Omnipoint has, I suspect the roaming rates they seek to negotiate with European carriers will work out to be more expensive than those Omnipoint gets. This would be due to the preponderance of international roamers originating in the New York market vs. any other city in North America.
Another factor helping Omnipoint in the international-roaming rate equation is the desire of European carriers to offer U.S. roaming to their customers. As most of those inbound users are coming into East Coast cities, where Omnipoint is the only GSM operator, the reciprocity will be much more beneficial than that for say, BellSouth Corp. Omnipoint also has the Miami market, a popular vacation destination for Europeans who are bored with the Canary Islands.
Because of these factors, we model Omnipoint with a modest premium in its average revenue per unit ($1 on $40 in the long run) over other personal communications services and cellular companies. This gives a slight premium valuation to Omnipoint relative to Aerial Communications Inc., Powertel Inc. and Western Wireless Corp.
With the ultimate availability of a dual-band (900 MHz and 1900 MHz) GSM “World Phone,” the advantage will grow. And then an international roamer will no longer even have to ask the question posed by another band, R.E.M.: “What’s the frequency, Kenneth?”
John Bensche is an analyst with Lehman Brothers Inc., New York. Bensche-marks is a bi-weekly forum for opinion and commentary on the wireless communications industry.
