SourceOne Wireless Inc.’s bankruptcy status may herald the end of the market for calling party pays paging, coming as no surprise to industry analysts, who believe the idea was doomed from the start.
Founded in 1994 with the purchase of American Beeper Company, SourceOne pioneered CPP paging with its ForeverPage service-first offered to Ameritech Corp. customers in nine Midwestern states, then nationally through a resale agreement with Paging Network Inc. in 1997. The company offered traditionally billed one-way paging services as well.
Under the system, ForeverPage customers would buy a pager and pay a one-time activation fee of $20. SourceOne then billed anyone paging that customer 35 cents for each page.
The company used a computer telephony integration automated pager activation system with the help of Fujitsu Business Communication Systems, which tracked and billed the calling party, rather than the paging user.
SourceOne marketed the service primarily to teens, depending on young customers to have a large core group of friends who would page the user frequently. Initially, the company enjoyed the tag of one of the fastest-growing paging carriers in the nation, growing from 20,000 subscribers in 1994 to about 450,000 in 1998.
However, whatever went wrong did so quickly. SourceOne declared bankruptcy in April (listing about 180,000 subscribers) and is pursuing a possible sale. The carrier recently hired investment banking firm Houlihan Lokey Howard & Zukin as its new sale broker, replacing Cornwell Consulting Services. Chief Executive Officer Dave Trop declined to comment on the company’s situation until the sale is completed.
As the only paging carrier to attempt CPP billing, SourceOne’s bankruptcy puts into question the calling party pays billing model. Analysts call the idea expensive, confusing and unnecessary.
“I think it’s a waste of time,” said Iain Gillot, wireless analyst at IDC/Link. “CPP is a good idea when you’ve got an expensive service. Paging isn’t expensive, so why exactly do you need CPP paging? Are you saying there are people out there who can’t afford $10 a month? It’s a lot of effort taken toward solving a problem that doesn’t exist. It answers a question nobody’s asking.”
Darryl Sterling, senior wireless analyst at The Yankee Group, pointed out that paging carriers receive less average revenue per unit under a CPP billing model because the local regional Bell operating company will take a cut for each calling party billed.
“I would suspect the margin per page SourceOne was getting was probably not as good as it would have been in a post-paid scenario,” he said. “35 cents is probably more than the average cost per page,” Sterling said.
But Sterling said even if the billing and price points were to work out, the overarching issue is one of culture, which one small paging carrier is unlikely to change.
“We’re not a society conditioned to calling party pays,” he said, in contrast to the various CPP options popular overseas. “Europe is a debt-based society. Everything here is a credit-based society.”
As such, Sterling said he doesn’t believe SourceOne’s proprietary CPP platform will prove much of an asset when negotiating a sale.
“I think the only way CPP will fly is if it is a strategy embraced by all carriers-both RBOCs and paging carriers-and that’s certainly not in their gun sights. They’re too concerned with their ReFLEX assets.”
