PCS Subscribers Are Full Of Surprises; Cheap Talk Converts The Old, Lures The New And Paves The Way For Landline Displacement

PCS Subscribers Are Full Of Surprises; Cheap Talk Converts The Old, Lures The New And Paves The Way For Landline Displacement

August 19, 1997

trend has been building for the past decade, but the recent surge in

demand is due in part to a new digital technology known as

personal communication services.

PCS is making talk cheap and enticing hundreds of thousands of new

subscribers to take a walk on the wireless side. Most entrants to the

wireless world don't know analog from digital, but their attitudes and

emerging patterns of use are redefining the business, says PrimeCo

Personal Communications L.P.

"PCS subscribers are full of surprises," said Lowell McAdam, COO of

PrimeCo, the first-to-market player that won nearly 200,000

subscribers within the first two quarters of this year. "The biggest

surprise is usage. The average PrimeCo customer is already using their

wireless phone almost three times more than the average cellular

consumer." That deceptively simple statistic is hard evidence of just

how fast PCS is changing the wireless landscape.

PCS represents a new frontier with lots of space. Increased network

capacity, in itself, is proving a dynamic catalyst within the

marketplace. For more than a decade, traditional wireless carriers

operated under the 20/80 principle, meaning 20 percent of the

subscribers gobbled 80 percent of network capacity. Leftover capacity

was marketed to consumers as a "safety and security" blanket, which

brought in new customers but discouraged use.

Enter PCS. In a matter of months, its "priced-to-use" strategy

catapulted wireless phones out of the glove box and into the

mainstream.

That mainstream, however, represents uncharted waters. Half of

PrimeCo's subscribers are first-time wireless users who think of PCS

phones as a logical extension of their home phones, according to

McAdam, which helps explain increased talk time. In the past, wireless

phones were viewed as one-way communicators, something subscribers

primarily used to place a call.

The sound of phones ringing in the grocery store, the mall, and the

gym are testament to the fact PCS users are now receiving nearly as

many calls as they place. The increased usage also indicates

subscribers are reaching for their PCS phone to make dozens of casual

calls once reserved for landline connections.

"This shift in attitude literally speaks volumes," McAdam said. "To

enter the mainstream, you have to offer a product that can appeal to

millions. What this out-of-the-gate spike in usage proves is that when

quality and cost are in line with consumer expectations, demand is

there."

Not only have consumers embraced PCS phones for everyday use, some are

selecting them as second phones for home or as an alternative to

wireline service altogether. This early trend toward wireline

displacement is bolstered by PCS marketing strategies that bundle

popular features and services associated with home phones such as

voice mail and caller ID.

Innovations like flat-rate pricing plans for regional local calling,

which consumers often view as "free" long-distance service, narrow the

gap further. McAdam characterizes PCS as the cross-over product

between wired and wireless networks, and agrees with analysts who

predict roughly 20 percent of all telecommunications traffic will

migrate to wireless networks over the next five years.

To contend in this increasingly competitive arena, PrimeCo is

reshaping its coverage footprint to reflect the usage patterns of its

new subscribers.

Typically, traditional cellular subscribers used their phones most

during weekday drive time within central business districts and along

major traffic corridors. PCS subscribers are taking wireless off the

beaten path and out to the suburbs, soccer fields, golf courses, ball

parks, lakes and other getaways. As a result, PrimeCo's subscribers

are using PCS service just about as much on the weekends as they do

weekdays.

This phenomenon impacts all kinds of business decisions, chief of

which is how to efficiently design a network to offer service not only

where subscribers work, but also where they live, shop and play.

PrimeCo is responding with an aggressive 1997-98 network build that

rivals its historic 16-city launch. Some of the new sites are

earmarked to enhance existing coverage, but about 75 percent of the

new sites target new geographic areas.

In fact, when this agressive build is completed, PrimeCo will cover

roughly two thirds of its 61 million potential customers. The

availability of dual-band phones that work on both PCS and traditional

cellular networks, coupled with roaming agreements slated to begin

taking effect later this year, soon will enable the start-up company

to offer subscribers virtual nationwide service.

Handling these logistical obstacles, according to McAdam, clears the

way to tackle the biggest challenge facing wireless carriers wading

into the mainstream - changing wireless communications' "private club"

image to one that welcomes the mass consumer. That's a tall order

involving everything from adopting simple-to-understand pricing plans,

to eliminating long-term contracts, to creating payment options that

make it easier for more people to take advantage of the convenience of

wireless communications.

"As we learn, we adjust course a bit, but our basic strategy hasn't

changed," McAdam said. "Because unlike Columbus or other explorers, we

know what we've discovered. PCS is a whole new world of wireless

users."

PrimeCo Personal Communications provides digital wireless service in

19 major cities: Norfolk and Richmond, Va.; Fort Lauderdale,

Jacksonville, Miami, Orlando and Tampa, Fla.; Chicago; Madison and

Milwaukee, Wis.; Mobile, Ala.; New Orleans; Austin, Dallas,

Fort Worth, Houston and San Antonio, Texas; Honolulu and Maui, Hawaii.

The company, which was formed by an alliance of AirTouch

Communications, Bell Atlantic, NYNEX and U S WEST Media Group, owns

PCS licenses covering 19 states and 61 million potential customers in

11 MTAs and has more than 2,800 employees. PrimeCo sells its phones

and service through its own direct sales force, the company's 44

stores, more than 2,000 indirect retail outlets and a toll-free

telephone sales line. The address for PrimeCo's interactive

Website is www.primeco.com.