MCI Communications Corp. said its recent deal with NextWave Telecom Inc. isn’t just another resale agreement.
“This will involve interconnection, and there is no reseller in the U.S. with interconnection,” said Whitey Bluestein, MCI vice president of wireless strategy and development.
MCI signed a resale agreement with NextWave Aug. 26 to buy at least 10 billion minutes of wireless time in the next 10 years. The companies won’t disclose the dollar value of the contract.
MCI said it is not investing any money in NextWave, nor is it financing NextWave’s network construction. MCI will brand the NextWave service as MCI.
NextWave is licensed to operate personal communications services in 63 basic trading areas throughout the United States. It is only beginning to build its PCS network and doesn’t expect to offer service until mid-1997; most markets should be activated by 1998.
NextWave’s stated strategy is to resell network service and avoid managing single users. The company’s goal is to sell capacity to resellers that will guarantee network use.
MCI owns an intelligent long-distance network and is building fiber optic local phone networks in the business region of 30 metropolitan cities.
But MCI has no wireless holdings. It currently buys cellular minutes from A- and B-side carriers and resells the time in its MCI One package. MCI One offers customers paging, e-mail, Internet, long-distance and calling card services and a personal 800 number. The paging service is available to MCI customers through agreements with Paging Network Inc. and SkyTel Corp.
MCI said this diversification strategy is expected to increase the company’s annual revenue from $15 billion to $30 billion in four years.
The agreement with NextWave is a much better wholesale deal than those worked out with the cellular carriers, Bluestein said.
“The cellcos don’t want to foster viable competition in their markets, and we have no ability to influence quality. This agreement turns the resale paradigm on its ear,” he said.
NextWave will install wireless enhanced service platforms and switches that will connect the two networks. When an MCI PCS customer signs onto the NextWave network, NextWave switches the call to MCI’s intelligent network to complete the call. Where MCI has local phone service, the call will never leave MCI’s control. In some areas, MCI may have to pass the call through a local exchange carrier. NextWave said it will provide some wireless local loop service in addition to mobile PCS.
MCI boasts of a three-fold accomplishment: direct connection to the wireless call, a good wholesale price and control over call quality (through protections MCI has been afforded in the NextWave contract).
“Our objective,” MCI’s Bluestein said, “is to get similar agreements in the rest of the country to have a seamless network” nationwide.
MCI now offers cellular in many of the markets for which NextWave holds licenses: Los Angeles, Houston, New York, Boston and San Diego. Other overlaps are expected to occur later this year when MCI offers cellular service in additional markets, such as Denver, through resale agreements. MCI said it may offer cellular and PCS in the same market for the sake of marketing versatility. Customers with high mobility will be candidates for cellular, due to its large coverage area; customers with lower mobility may opt for PCS, Bluestein said.
MCI expects NextWave to expand its PCS footprint and is confident it can make similar agreements with other PCS carriers.
