NEW YORK-Rural carriers, many of which began as landline providers, already have experienced a long learning curve in service bundling-a current hot topic in the telecommunications industry.
No doubt they face challenges posed by downward pressures on roaming revenues and increased competition in their territories. However, prospects look good from the vantage point of several executives who spoke at a recent conference on rural telephony sponsored by Legg Mason Wood Walker Inc., Baltimore.
Virginia-based Shenandoah Telecommunications, an incumbent local exchange carrier established as a mutual telephone company in 1902, wears many additional hats as a provider of cable television, Internet, paging, cellular and personal communications services. Last year, Virginia regulators also certified the company as a competitive local exchange carrier.
“It is very important for our company and its shareholders to maintain growth rates greater than in traditional wireline, to take advantage of opportunities to expand geographically and to expand customer relationships,” said Christopher E. French, president and chief executive officer.
Under a new affiliation agreement, Shenandoah Telecommunications has exclusive rights to market Sprint PCS services in its territory, which now covers more than 3 million people between Philadelphia and Washington, D.C.
Sprint’s Code Division Multiple Access service “solves some of the major issues with [Global System for Mobile communications technology] … lack of coverage in the South and Southeast and lack of an integrated national network, although (the latter) is less of a factor with the consolidation of VoiceStream, Omnipoint and Aerial,” said French.
Sprint’s “affordable, national network” not only is a source of roaming revenues for Shenandoah but also allows it to offer new features, like Wireless Web. Wireless local loop “is a future possibility,” he said.
Thomas Wheeler, president and chief executive officer of the Cellular Telecommunications Industry Association, Washington, D.C., said wireless telephony offers under-served areas the prospects of advanced fixed and mobile communications services.
“Why are subsidies necessary to bridge the digital divide? Wireline and personal computers are the buggy whips and telegraph keys of telecommunications,” he said.
“In rural America, there is increasing access to competitive wireless providers offering urban-grade services the policy makers say you need subsidies for. Subsidies don’t drive innovation. Competition does.”
In the past two years, Arkansas-based Alltel Corp. has seen a doubling to 54 percent of its customers who now purchase bundled services, said Michael T. Flynn, group president of communications.
Asked his opinion of the AT&T Corp. plan to issue tracking stock for its wireless telecommunications business, Flynn offered this response: “I am pleased they are considering tracking stocks because I don’t believe you can manage your business in the most efficient manner as a bundle if you’re worried about your tracking stocks.”
Alltel has two primary goals: reduction of churn through one point of customer contact for all services and increasing revenue through addition of enhanced services.
“[Bernard] Ebbers (of MCI WorldCom Inc.) is right. Prepare for the death of distance, whether it’s long distance or roaming,” Flynn said.
“We’ve taken the price pressure out of the game with our new agreement with Bell Atlantic/Vodafone AirTouch for equal cost on our network or vice versa. Others will have to follow suit.”
“Beyond voice, Alltel wants to tap the potential of packet data roaming minutes.
“Data is here, the applications are coming, and CDMA will win the battle of wireless data over time because of its efficiency,” Flynn said.
Today, there are more than 25,000 programmers writing applications for wireless telecommunications, said Jonathan Chambers, vice president of regulatory affairs for Sprint PCS, Kansas City, Mo.
“We are not a rural carrier yet, but we are coming. We’ve turned to partners all over the country … and you’ll see all kinds of innovations,” he said.
By year-end, Sprint PCS plans to add voice-activated dialing nationwide. It already is testing the Qualcomm Inc. version of 1XRTT for enhanced data capacity of 2.5 generation wireless. The carrier also looks forward to the revenue generating opportunities possible as the result of government-mandated location technologies, Chambers said.
Despite five competitors in its markets, CFW Communications Inc., another Virginia-based, multiservice carrier, doubled its sales between the end of 1998 and the end of 1999, said James S. Quarforth, chairman and chief executive officer.
“Most of our network is PCS, so we don’t have high roaming revenues. We operate a small, cellular [Rural Service Area], but we don’t charge surcharges, and dual-mode phones have exploded our cellular,” he said.
Furthermore, CFW’s primary target are wireless customers who spend 80 percent of their time within its territory. While roaming is not a big piece of its revenue pie, CFW does receive a “high margin revenue stream from carriers who want wholesale access to our retail customers without building a network,” Quarforth said.
To enhance coverage, CFW has an ambitious plan to add 180 cell sites this year to the 300 already built. To improve service offerings, CFW expects in April the roll-out “of our version of Internet access with Web browsing characteristics,” Quarforth said.
Like Shenandoah, CFW also is exploring wireless local loop opportunities.
“We are in friendly user, fixed wireless trials with Qualcomm. Fixed wireless is well-suited for wireless residential CLEC opportunities.” Quarforth said.
