NEW YORK-Western Wireless Corp. plans to begin offering competitive local exchange services in a few Minnesota towns by year-end now that it has become the first mobile carrier to gain eligibility for Universal Service Funds.
“We will make things up as we go along because it is the first time this has been done in the United States, Mikal Thomsen, president and chief operating officer, said Oct. 13 at the “Wireless Telecom 2000” conference, sponsored by Kagan Seminars Inc., Carmel, Calif.
Initially, Western Wireless is guaranteed to receive $25 per month per subscriber in federal U.S.F. dollars starting next year. By the end of this year, Minnesota will start giving the carrier a state U.S.F. reimbursement, but the rate has not yet been determined.
Western Wireless expects several other states, which he did not identify, will follow Minnesota’s lead in granting it eligibility for Universal Service Funds, Thomsen said.
Headquartered in Issaquah, Wash., Western Wireless has a footprint that encompasses 25 percent of the land area of the country where the average population density is nine per square mile. Within its territory, the carrier’s network covers 99 percent of the people and 97 percent of the land.
Approximately $1.2 billion in Universal Service Funds are distributed to rural telecommunications carriers in Western Wireless’ markets, Thomsen said.
“As a cellular carrier, we can provide wireless local loop competitive local exchange services less expensively than landline telcos … at a lower cost to taxpayers, a burden to be transferred to the states under the 1996 (Federal) Telecommunications Act,” he said.
“Basically, this is a foot in the door to drive an economic model based on a rational cost model … We hope to come up with a price that is economical to the U.S.F., and we will have a price that is economical for the user,” Thomsen said.
Dobson Cellular Systems Inc., which its president, Edward Evans, called “a leveraged buyout firm masquerading as a cellular company,” also anticipates the opportunities Universal Service Funds can provide wireless carriers.
“The pizza box on the side of the house for $450 doesn’t make sense without U.S.F., which is the only way to get competition into rural markets,” he said.
However, he concurred with Thomsen’s view that the desired goal is to level the playing field among wireless and wireline carriers, whether both or none receive federal and state subsidies for rural local access telecommunications provision.
Evans did not state outright that Dobson, based in Oklahoma City, also has applied for Universal Service Funds. However, the carrier recently tested customer perception of call quality in one market to ascertain whether it would have to price wireless local access at a lower price than landline.
“We conducted focus groups in rural Texas about six weeks ago, a blind test of wireless and wireline, and the results absolutely floored me,” Evans said.
“Eighty percent of the customers couldn’t tell the difference, 10 percent thought wireless sounded better and 10 percent thought it sounded worse.”
