New York City Transit is one step closer to building a cellphone network in its 277 subway stations, but it remains to be seen if mobile phone providers such as Verizon Wireless are going to pay to offer the service to their customers.
Next week, the board of the Metropolitan Transportation Authority is expected to vote in favor of letting Transit Wireless, a consortium of telecom and construction companies, build an underground cellphone network.
Under the plan, Transit Wireless will pay New York City Transit at least $46.8 million over a 10-year period, according to the MTA. The firm will also spend an estimated $150 million to $200 million on installing the network.
If approved, the company will build networks in six downtown Manhattan stations within two years and complete the rest of the stations in the next four. But before people can start using their cellphones in the subway, their carriers will have to agree to pay Transit Wireless fees to offer the service.
Some question how Transit Wireless will recoup all the money it has to spend on building the network. While it will be technically challenging to wire the stations, once a network is set up and operational, the success of it is riding on the wireless carriers’ participation. Carriers will have to determine if offering cellphone service on the subway platforms and stairwells will generate more revenue per user or reduce churn, analysts said.
“It is a business issue,” said Ellen Daly, analyst at Forrester Research. “Carriers have to assess whether it is worthwhile.”
“We are confident that carriers will respond,” said Gary Simpson, chief executive of Nab Construction Enterprises, one of the members of the Transit Wireless consortium. Simpson said he has already received a call from an unnamed carrier. “Once we get the official approval by the board, we will proceed to discuss with carriers,” he said.
A spokesman for Sprint Nextel Corp. said the company will review the fees and determine if it makes sense for the company to participate.
Verizon Wireless and T-Mobile USA Inc. would not comment on their plans. AT&T Mobility, which led a competing consortium made up of the other major carriers, declined to comment because it said the MTA had not informed the company of its decision.
The MTA started accepting bids from companies to build a cellphone network in late 2005. It said it selected Transit Wireless, which also includes Dianet Communications Inc., Q-Wireless and Transit Technologies, because it outbid the three other competing offers.
Amanda Fung is a reporter for Crain’s New York Business, a sister publication of RCR Wireless News. Both publications are owned by Crain Communications Inc.
