To the Editor:
I felt compelled to write after your recently published guest article by Reed Hundt (RCR, Feb. 23). Mr. Hundt, now unencumbered from tempering his personal beliefs and feelings, expresses why we, the two-way radio industry, have so much to fear from an attorney whose area of expertise is anti-trust.
His mere suggestion of recovering private land mobile spectrum so it “could be devoted to retail, big bandwidth users” tells me Mr. Hundt has never been to any warehouse, manufacturing plant, office complex, or any other business which depends on a closed, in-house, radio system to get its products or services to customers. He does not understand that those radio users want to communicate within and around their facilities and they want communications for the lowest possible price. They are largely unconcerned with wide-area coverage and most certainly do not want to pay someone for airtime usage.
Or perhaps he has dropped into those facilities. In Kansas City, he would have been astounded by the vast numbers of radio units being used by managers, maintenance personnel and security officers at the Hallmark Cards Distribution facility, the General Motors plant, Sprint, Gateway 2000 and Sunshine Biscuit. I can picture the adding-machine tape running in Mr. Hundt’s head as he calculates the potential revenue being lost to “someone with the zeal to promote such uses, the way Nextel Communications Inc. was built” ad nauseum.
Mr. Hundt, as a proponent of Nextel, has always been quick to point out its worth as a cellular duopoly buster/champion of the cellular consumer. Nextel is to cellular telephony what Milli Vanilli was to rock music. You can see their mouths move-but if you listen closely, you realize the music belongs to someone else.
Since Nextel rolled out [enhanced specialized mobile radio] service in Kansas City, we have seen (and predicted) a steady rise of its basic radio airtime fees. One of its customers, a cable-TV franchise, called us, frantically, to get a price on “building their own tower” to escape the high airtime fees. While the base monthly per unit airtime fee was triple what they previously paid as an SMR subscriber (this was expected), it was the additional per-minute charges for “instant conferencing” that caused their fees to rise drastically. Only after I explained “proprietary protocol,” that his iDEN units would not work in a conventional 800 MHz mode, and that there were no frequencies available to serve his needs, did he realize his situation. Since I, personally, am served by this cable franchise, I know why they will impose their next rate increase.
Many of the small business owners who call us to express similar problems explain that these fees cannot be absorbed or passed on to their customers and still allow them, as a business, to be competitive. It’s obvious Mr. Hundt never talked to an SMR radio user to see what made them choose two-way radio as a cost-effective means for communications within a company.
Much of Nextel’s ESMR customer base in Kansas City seems to originate from the conversion of its existing SMR customers. These are the businesses that bought SMR radios and systems right up to the time they received a letter from Nextel informing them their SMR radio system was obsolete and was being replaced by ESMR. “Obsolete?!? Gee, it worked great until yesterday when they turned off the tower.” Customers are not flocking to Nextel for the benefits of cellular-like service since they need mostly dispatch radio for the bulk of their communication. Fearing 800 MHz trunked radio is about to be obsolete (that’s what they have been led to believe), many made the switch based on their misconceptions about this industry.
In other markets where Nextel has complete (or near-complete) ownership of 800 MHz trunked radio channels, they haven’t so much offered an alternative to cellular service as they have given their former SMR customers little choice but to upgrade to a more costly radio system. What is another name for a company that has the ability to control market price of its product/service, rather than have demand determine the price? But I forget, the former head of the FCC who allowed this to happen is the same person who wanted to force (shove down the industry’s throats) the technology for HDTV (regardless of the cost), rather than have the demand for HDTV drive the marketability of the product.
Nextel’s feeding frenzy for 800 MHz licenses did no more than stimulate the next Oklahoma land grab for spectrum. License speculators, led by the lure of a quick buck for their investment, created an artificial shortage of frequencies for legitimate business needs and growth. The FCC, overwhelmed by filings for wide-area waivers (on systems we know were constructed), did little more than turn a blind eye to the frequency prostitution that incurred. Meanwhile, legitimate license holders who needed more spectrum for growth and wide-area status for protection were largely ignored. Businesses like ours did not have an attorney with connections to an FCC insider to ensure all the “T’s” were crossed in the proper fashion (and with the right color ink for that given date and time).
To be sure, there are striking similarities between Mr. Hundt’s beloved ESMR and the cellular industry. Years ago, we experienced cellular’s dependence on our market penetration into two-way to help stimulate its own growth. As its customer base increased, cellular’s direct sales force expanded and hit the streets. While drumming up new business, they were sure to maintain contact with our (their) existing clients. We, after all, had foolishly given them the inside track to our contacts and their phone numbers. Our customers soon became their customers as the cellular carrier made it easier (and cheaper) to deal directly with them. We, the middlemen, couldn’t provide free repairs and cheap installs. After all, we weren’t seeing the benefits of hundreds of dollars worth of monthly recurring revenues from that customer’s one phone. Direct sales always had slightly better pricing for their product (even though it came from the same warehouse) and was better informed of the latest promotions and gimmicks to woo new customers. Our cellular business (as with many of our competitors) changed drastically and soon it was no longer in our (their) best interest to offer cellular service.
We’ve been asked (several times) to be a Nextel agent. “Thanks, but no thanks.” We’ve been down this road before. The bridge is out.
Companies wishing to copy a rival’s successful product often have their engineers and scientists reverse engineer that product. This allows them to not only replicate the product, but also do so without fear of lawsuits and patent royalty fees. Mr. Hundt, being an anti-trust attorney, helped reverse engineer an entity that certainly steps carefully around anti-trust issues. The legacy he leaves us with is damning to small businesses in the radio industry. We are forced to fight a battle with both arms tied behind our backs and with our feet planted in buckets of cement. I shall watch with great interest to see where his career path next leads.
Gary E. Light
sales manager
Independence Communications Inc.
