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25 YEARS: Robust carrier growth, consolidation has kept marketers busy: The name game

Editor’s Note: Welcome to our coverage of 25 years in wireless. RCR Wireless News is celebrating with a package of stories detailing the advances of the past three decades. For full coverage please visit RCRWireless.com/25years.
During the past 25 years, two overriding factors have shaped the wireless carrier landscape: customer growth and carrier consolidation. The number of wireless customers has grown from fewer than 100,000 subscribers after the first full year of availability in 1984 to nearly 266 million subscribers today. While the number of subscribers has risen, the number of carriers those customers deal with has declined to the point where today the top five wireless carriers serve nearly 90% of the country’s wireless customers.
The current big eight includes four “nationwide” carriers: AT&T Mobility, with around 73 million customers; Verizon Wireless with 69 million customers; Sprint Nextel, with around 50 million subscribers; and T-Mobile USA Inc., with around 30 million customers. Rounding out the top five is regional operator Alltel Communications L.L.C., with 13 million customers. (Verizon Wireless is in the process of acquiring Alltel.)
Surprising growth
Together, these five carriers add nearly double the number of customers each quarter as what many in the industry early on thought would subscribe to wireless service by 2000.
“Here in the United States, the market will grow to over 2 million subscribers by the end of this century,” foretold Donald Porter, director of marketing for Telephone and Data Systems in early 1984.
At the time, Porter’s claim seemed boastful. With only a handful of markets online and less than 50,000 customers signed up for wireless service, Porter’s belief was held by many in the wireless industry.
Expectations were so modest early on for mobile service that AT&T Corp., the 800-pound gorilla of the telecommunications world at that time, decided to let loose its cellular holdings – about half of the total spectrum available at the time – when the government ordered it to lose some weight. Those holdings ended up in the hands of the regional Bell operating companies, which looked at those wireless assets as nice side dishes to their main courses of local and regional wireline services.
Looking back, AT&T’s move is often viewed as foolish, but given the uncertainty surrounding cellular service at the time, it was a move AT&T could justify to its shareholders.
“People often look back and say what a mistake AT&T made,” said Dick Lyons, former president of Cellular One Group in a 2001 interview with RCR Wireless News. “But at the time no one knew how big the cellular industry would become.”
With AT&T out of the picture, the 50 megahertz of wireless spectrum the government set aside for commercial service was split in half, with wireline incumbents getting 25 megahertz and new competitors getting the other 25 megahertz.
Guess where I am!
After much wheeling and dealing, wireless services found their way into the public’s hands by late 1983, and by the end of that year there were two wireless operators – Ameritech Mobile Communications Inc. in Chicago and American Radio Telephone Service Inc. operating in Washington, D.C. Between them, they shared early adopters willing to pay $3,000 for a wireless handset the size and weight of a brick and more than $100 per month for service. Those were steep prices considering most calls were less than three minutes in length. And often the first few seconds began with “Guess where I’m calling you from?”
Even with the high prices, customers continued to flock to wireless. By the end of 1985, more than 340,000 people had signed up for service, which doubled to nearly 680,000 customers by the end of 1986. With subscriber numbers jumping so fast, more and more license holders rushed to turn on their networks.
By 1987, a number of wireless carriers were established throughout the country. Usually they were either a division of the regional Bell company, independent wireline carriers or what were known as nonwireline carriers.
According to RCR Wireless News’ first Top 20 list of cellular operators in 1987, eight of the top 10 largest operators were wireline carriers, which had the marketing advantage of name recognition. Nonwireline carriers were forced to convince people they were legitimate businesses. PacTel Cellular, a division of Pacific Telesis, led the way with 100,000 customers in six markets. LIN Broadcasting Corp., the largest nonwireline carrier at that time, followed with 80,000 customers in five markets; wireline carrier Ameritech placed third, with 65,000 customers in 10 markets.
Sensing their name-recognition disadvantage, many of the nonwireline carriers joined to use the CellularOne brand name across their markets in an attempt to soothe the fears of potential customers.
“Back then customers had to choose between the incumbent RBOC, which they had dealt with for years, or an independent wireless company they had never heard of before,” explained Lyons. “You needed to have that national name to play with the big boys. You have to spend a lot of money to market a new name. We spent billions back then getting the name out, but it was successful. We had the second-most-recognized brand behind only AT&T.”

Location, location, location
The need for a nationwide presence was taken a step further by cable industry magnate Craig McCaw, who, with the help of former industry executive John Stanton, quickly began gobbling up cellular interests from license owners and building a far-reaching footprint.
“We probably did 30 or 40 deals for 100-200 interests between July ’84 and July ’85,” John Stanton said in a book detailing the early years of the cellular industry, “Wireless Nation,” written by James B. Murray Jr. “There was a tremendous amount of interests we were buying. It was deal after deal after deal.”
Between 1987 and 1990, McCaw Cellular went from 21,000 subscribers in 17 markets to 380,000 subscribers in 127 markets across 26 states, putting McCaw on top of the cellular heap by 1990.
“McCaw brought leadership to the wireless industry, and a vision of what it was to become,” Lyons said.
While McCaw was the most aggressive acquirer, other wireless operators began to look at spreading their wireless influence. The bigger operators, both wireline and nonwireline, began picking up smaller players, introducing their brand names to new regions of the country. BellSouth, well known in the southeast as both a wireline and wireless service provider, was soon available to customers in Michigan. Bell Atlantic, with a strong presence along the Atlantic Coast, was hawking wireless services in Phoenix. And McCaw was selling services from Seattle to Miami, and almost everywhere in between.
Wireless service was becoming such a stir in the telecom world that AT&T found it necessary to buy its way back into the industry it created more than a decade earlier. By acquiring McCaw Cellular for around $12 billion, AT&T bought its way to the top of the wireless industry by 1996.

Competition speeds up
By the mid-1990s, it was becoming obvious the competitive nature of the wireless industry was waning. While most expected the regional Bell companies initially to be the largest wireless service providers due to their name recognition, it was hoped the nonwireline competitors eventually would make headway. But once McCaw was bought by AT&T, the top carriers were still regional Bells – only now they had nationwide footprints.
AT&T Wireless controlled 5.5 million customers in 105 markets; Southwestern Bell had 3.7 million subscribers in 63 markets; BellSouth Cellular counted 3.6 million customers in 92 markets and Bell Atlantic Nynex Mobile had
3.4 million customers in 70 markets.
Hoping to infuse that good old competitive spirit back in the wireless industry, the Federal Communications Commission auctioned off spectrum in the 1.9 GHz spectrum band in 1995. But instead of letting the big wireless players gobble up the new spectrum, the FCC set aside the spectrum for new competitors into the wireless arena.
While the move initially proved successful, launching nationwide PCS operators Sprint PCS and VoiceStream Wireless Corp., the high prices needed to launch a wireless network quickly overcame many of the small companies, which ended up either defaulting on their loans or merging with the deep-pocketed incumbent cellular carriers.
By the turn of the century, the industry was again showing signs of strong competition as customers could choose from six nationwide operators, a handful of large regional players and dozens of smaller, rural companies.
The big names included Verizon Wireless and Cingular, both created by the merger of several regional players, AT&T Wireless, Sprint PCS, Nextel Communications Inc. and VoiceStream. The era was marked by constant pricing battles among operators looking to one-up their competition and led to a robust period of growth as the number of subscribers nearly doubled from 97 million in 2000, to more than 190 million customers by 2005. The cellphone had suddenly become commonplace in society and began making inroads as a replacement for wireline services.

Consolidation returns
Much of this strong growth was on the back of intense pricing pressures that – while good for consumers – was making it difficult for carriers. The result was a new round of consolidation that has continued to this day.
Today’s largest carrier, AT&T Mobility, resulted from the acquisition of AT&T Wireless by RBOC- controlled Cingular Wireless as well as the acquisition of a number of regional GSM-based wireless carriers. Today AT&T Mobility counts more than 73 million customers.
Verizon Wireless, which today counts more than 69 million customers, picked up a number of regional carriers and is currently in the process of acquiring Alltel.
The current No. 3, Sprint Nextel Corp., is the result of Sprint PCS acquiring Nextel as well as a number of their respective regional affiliates. Today the operator serves more than 50 million customers.
The smallest of the nationwide operators is the former VoiceStream, which following its acquisition by German telecom giant Deutsche Telekom AG, changed its name to T-Mobile USA Inc. and has since juiced its customer base with a number of acquisitions, including the recent deal to acquire former AT&T Wireless affiliate SunCom Holdings Inc.
Competition beyond the big 4 is mostly made by either super-regional carriers like the soon-to-be-acquired Alltel and U.S. Cellular Corp., or by new entrants like Leap Wireless International Inc. and MetroPCS Communications Inc., which got their starts following the PCS auctions and today offer flat-rate pricing plans.
Mobile virtual network operators, which would use their considerable brand names to offer wireless service without owning the network, failed to live up to the hype in the mid-1990s. While the MVNO segment witnessed a brief period of strong interest, drawing such names as Disney and ESPN, the segment has since flattened out and is inhabited by a few brands that have survived – Virgin Mobile USA Inc. and Tracfone Wireless Inc. as two examples.
So, if a quarter-century of following wireless carriers has taught us anything it’s to not get too attached to a brand as the wheeling and dealing needed to remain competitive in the market has shown few stay around for too long. That’s good news for those that follow the market, but maybe not so good of news for those that have tattooed the name of their current carrier on their back.

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