Large carriers across the country are painstakenly trying to determine what wireless Internet service offerings will attract customers. Surprisingly, some small and rural carriers are on the same page.
Smaller operators historically have followed the coattails of their metropolitan counterparts when it comes to deploying digital technology and other advanced features. They didn’t have to be aggressive because of the lack of competition in their markets.
Today the story is much different. Smaller markets like Rochester, Minn., and Augusta, Ga., now support five to six competitors as personal communications services operators launch service in second-tier markets. And nationwide operators are relying on regional operators-independent and affiliated-to fill in the missing holes in their footprints, making small and rural carriers an important part of the chain.
Smaller operators also are reaching bigger penetration rates, recording huge margins and reaping in large revenues from roaming fees. Wireless Web-type offerings could increase average revenue per user even further. Short messaging service already is bringing in more revenues for AT&T Wireless Services Inc. affiliate Triton PCS, which is preparing to launch two-way SMS services. United States Cellular, which offers SMS and is testing wireless Web services, believes the wireless Web could bring in more than 25 percent additional ARPU.
“We have to be more aggressive than in the past because of competition. As a small rural carrier, you have to differentiate yourself,” said Dennis Miller, president of Midwest Wireless, a Time Division Multiple Access operator in Minnesota that recently began offering two-way SMS. “Even in the more rural areas, there are three and soon-to-be four competitors … And frankly, the carriers are consolidating at a break-neck pace. National footprints and affiliations are becoming a necessity.”
Midwest Wireless, which covers about 1.5 million pops in the Midwest with more than 165,000 subscribers, in conjunction with a small software company in Los Angeles called Lava2140, has launched MAIL.IT, a two-way SMS service that allows customers to pull information from different sources and use email.
“We’re actually leading the parade,” said Miller. “We’ve been focused on this for a couple of years. We offered one-way SMS for a year, and two-way whets people’s appetite for what they could do. The whole data game is unfolding.”
Penetration rates in some of Midwest Wireless’ markets are 14 percent and higher, said Miller. The carrier’s customers are looking for functionality, he said. Thus, Midwest Wireless also plans to aggressively offer handsets with WAP-enabled browsers.
“We want to tie not just with national content like you can do with push technology, but we want to tie in functions people are going to demand, like access to theater listings and local school information,” said Miller.
TDMA operator Price Cellular Communications Wireless, which controls 3.3 million pops in the Southeast, is waiting along with its bigger counterparts for Wireless Applications Protocol-enabled handsets. Its full-blown rollout of data services will depend a lot on when Nokia Mobile Phones can deliver phones, which the vendor tells President Dennis Stone will happen in the third quarter.
“Are people beating down the door for wireless Internet? No,” said Stone, whose company now supports 476,661 subscribers with a penetration rate of 14.3 percent. “But more and more people are asking about it, and we have to be behind it and aggressive about rolling it out … Our markets abut up to Atlanta, so there’s a lot of advertising [customers] hear.”
Like many operators, Price first plans to offer one-way SMS, pushing content like stock quotes, weather information and sports scores out to handsets over network control channels. It’s an inexpensive way to offer wireless Internet services and determine the market demand for wireless Internet access. Price expects to follow with a circuit-switched WAP offering.
The carrier already has signed an agreement with Giantbear.com, a Web-to-wireless content exchange service and information portal headed by Steven Price, son of Price’s Chairman Bob Price.
“This is a daily thing we are pursuing and thinking about,” said Stone.
Milking one-way
Still, analysts believe many of the independent smaller wireless carriers won’t be as aggressive with more advanced WAP-enabled services, opting to milk the cheaper one-way SMS push services for several years. Most larger operators will offer both one-way SMS services and WAP services, and customers can get one-way SMS services nationwide easily since the services use operators’ control channels.
Affiliate pressures
Carriers that joined Sprint PCS as affiliate companies must move just as quickly as the company they’re associated with.
“The wireless Web is important to us, and that is a requirement for our affiliates to offer as well,” said Scott Fisher, director of affiliate development with Sprint PCS, which today has 18 affiliates filling in the carrier’s coverage nationwide. “We’re working with all of them, and eventually, we’ll have that offering across all markets.”
Fisher said today some smaller affiliates in Georgia and South Dakota already are offering Sprint PCS Wireless Web service, which Sprint PCS launched nationwide last September.
Fisher said the majority of Sprint PCS affiliates have the carrier’s products and back-office systems, which give them the ability to offer wireless Web service quickly. The expense these small operators put into offering the service will be well offset by revenue increases, he said. Analysts say on average, affiliates retain about 92 percent of their revenues. The other 8 percent goes to the parent company.
AT&T Wireless affiliates will move in their own direction with wireless data services. AT&T Wireless has stated its wireless data offerings will revolve around Cellular Digital Packet Data technology, not circuit-switched offerings that threaten to clog the carrier’s heavily congested network. The carrier’s PCS affiliates have more spectrum and more room in their networks to offer circuit-switched data offerings. Seamless offerings won’t come until all companies deploy third-generation equipment and offer packet-data services.
AT&T Wireless’ largest affiliate, TeleCorp, which earlier this year announced plans to buy another AT&T Wireless affiliate Tritel Inc., last week announced it will soon launch a range of one-way SMS personalized wireless Internet services that include real-time stock quotes and alerts, weather forecasts and movie reviews. The carrier will follow with two-way SMS service and WAP-enabled circuit-switched data this year.
“When we go to circuit-switched, those will be regional offerings for the time being,” said Julie Dobson, chief operating officer of TeleCorp. “This is one of the key drivers behind the acquisition of Tritel. We get 32 million pops of contiguous footprint … The mobility user is demanding information on an instant basis. This gets them to use even more minutes on the network.”
New York Bureau Chief Elizabeth V. Mooney contributed to this report.
