@RCA 2010: Rural wireless carriers nervously watch government decisions

LAS VEGAS – To the surprise of few, rural wireless operators continue to face a number of challenges in their daily quest to remain viable options for consumers increasingly bombarded with advertising and promotions from nationwide operators. Operators that spend billions of dollars on marketing each year and in the case of the nation’s two largest operators are increasingly dominating the market.
At this year’s Rural Cellular Association event, noted during a panel discussion that the wireless industry was currently being dominated by two operators that were increasingly driving the industry to a duopoly.
“It’s not inevitable, but it’s heading that way,” said recently named RCA President and CEO Steven Berry during a panel session entitled “Wireless at a crossroads.”
Berry noted that 90% of all new postpaid customer growth in 2009, or roughly 9 million customers, were signed up by either Verizon Wireless or AT&T Mobility. And that even the smallest of the nationwide operators, T-Mobile USA Inc., was more than five times larger than the largest member – U.S. Cellular Corp. – of RCA.
Beyond the pressure being applied by rival operators, Berry noted rural wireless carriers were also at a policy crossroads.
“Decisions are being made now that will determine whether we are allowed to compete fairly or that will put us at a disadvantage,” Berry warned.
Those decisions include voice and data roaming, of which RCA gained a victory in last month, spectrum interoperability surrounding the 700 MHz band, details of the National Broadband Plan and Universal Service Fund reform.
“If any of these decisions go into AT&T’s or Verizon’s favor it could put us all in danger,” warned Slayton Stewart, outgoing chairman of RCA and CEO of Carolina West Wireless.
While it appeared that rural wireless carriers gained a victory for voice roaming, data roaming requirements remain elusive.
“Data roaming is every bit as important as voice roaming,” Steward claimed. “We have seen a huge increase in data traffic. If we are not able to offer the latest and greatest handsets and the same size of a network, which is nationwide, it’s difficult to compete. It’s hard for consumer to stick with us.”
RCA incoming chairman Ron Smith, who is also president at Bluegrass Cellular Inc., added that the recent Federal Communications Commission decision adds the presumption that there should be roaming, but that until it spells out that data roaming being included, plans for national broadband coverage will suffer.
“The FCC has to realize it’s still an issue out there,” Smith said.
There is also increasing concern amongst RCA members that the FCC will not take a solid stand on 700 MHz spectrum interoperability that will require carriers and device makers to make their networks and equipment compatible with the different spectrum positions in the band. This concern arose from device and equipment requirements from Verizon Wireless that included support for only its band 13 and from AT&T Mobility for its band 17 in the 700 MHz band. These were supported by the 3GPP that did require standards for interoperability between the different bands.
This issue was originally handled by the FCC in the PCS auctions with requirements that equipment and standards for the spectrum being auctioned be interoperable with all the spectrum auctioned in the 1.9 GHz band. For the 700 MHz auction, the FCC did not mandate such interoperability.
“If you auction spectrum in good faith and allow after the plan for band plans to be developed, how do you plan for that?” Smith asked rhetorically.
Berry also noted this could be an issue for public safety that is set to receive spectrum in band 14 in the 700 MHz band. Without interoperability requirements public safety equipment might not be able to operate on other networks in the 700 MHz band.
USF reform was also discussed, though the lack of clear direction on what sort of reform is being looked at has left rural wireless carriers scratching their heads.
Berry noted that the recently announced National Broadband Plan basically will eliminate USF support to rural wireless carriers, but that the Connect America plan in its place is still lacking in details.
“The NBP falls short for regional carriers,” Berry said. “I am very disappointed in it. It creates new non-facilities-based competitors for regional carriers.”
Smith noted that while USF may need some reform, the premise of the program is still needed for rural wireless carriers looking to offer service.
“USF has been about providing telecom capabilities no matter where you are in the U.S.,” said Smith. “I am still trying to build out wireless voice in some areas. There are still places without basic wireless service.”
Berry also again touched on the handset exclusivity issues rural wireless carriers have been battling, noting that being able to offer compelling devices was imperative for rural wireless carriers to remain competitive.
“We try to differentiate ourselves with coverage and better customer service and have been pretty successful,” noted Stewart. “But, when you don’t have access to the latest stuff, customers won’t stay with you in the market place. Customers are choosing carriers that provide good local service, but if we don’t have the latest offering it’s hard to compete. People are willing to stay with us if we are competitive.”
Smith noted that rural wireless carriers were having some success in negotiating access to some devices, but that more needed to be done.
“We’ve historically had exclusivity in the wireless industry, but in the past it has typically been short lived,” Smith said. “In some cases that has now gone to lifetime or takes it out through the lifetime of the device. On the CDMA side we have the Associate Carrier Group that has been very successful in getting devices, but it’s not the ultimate solution. There is still an issue with 46 of the top selling handsets having some sort of exclusivity tied to them.”