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MINNESOTA TELEPHONE ASSOCIATION Telecommunications Guide April 2001
Wireless - A New Competitor for Local
Phone Companies Minnesota had 1.6 million wireless phone subscribers by the middle of last year, according to Federal Communications Commission data. That’s a per capita rate of 0.33, close to the national average. In 2000, an estimated 86 million people nationally subscribed to either cellular or PCS wireless phone services, more than the number subscribing to cable and satellite TV combined. While wireless only accounts for about 7 percent of voice traffic now, its share is expected to grow to as much as 40 percent in five years. And while definitive numbers are hard to come by, there are some, known as “cord cutters,” who are going exclusively with wireless phones, getting by without wired land-line phone service altogether. Here’s a brief look at the situation. Cord Cutters Who is “cutting the cord,” why are they doing it and how many are exclusively wireless? Young singles lead the list, but some businesses whose employees are mostly mobile are part of the trend, along with some empty-nesters and childless couples. Surveys put the number between 2 and 5 percent of wireless phone subscribers. As to why, the convenience of never missing a call and the fact that some people are rarely home are two reasons. Receiving few if any telemarketing calls is another (wireless numbers aren’t on auto-dial lists – yet), while others cite quality equal to that of wired phones. Cord-cutting is also cost-effective for some, especially if they make a fair number of long distance calls. Wireless-only consumers who buy a lot of minutes and get free long distance can pay about the same for their phone service as they would for the usual combination of local phone and long distance charges. But there are drawbacks to going completely wireless. Receiving signals is difficult inside some buildings. Since wireless numbers aren’t in the white pages (a plus for some, a negative for others), getting pizza deliveries is harder. Multiple phone extensions aren’t possible with wireless phones, which can also be lost or stolen. Consumers have network reliability and battery life worries, too. But the biggest argument for a wired line is that people need one to connect a fax machine and for Internet access. People can get on the Internet via hand-held wireless phones (not all are Internet-capable), but speeds are slower and there’s no comparison when it comes to screen size. Cord cutters do, however, have the option of getting high-speed Internet access through cable TV. Competition for Local Phone Companies Given the drawbacks, wireless phones are often purchased as second or third “lines,” but local phone companies increasingly view wireless companies as direct competitors for basic local service. “Wireless is a competitor that wasn’t on the radar screen ten years ago,” explains Bryce Hallowell, a spokesperson for Qwest, the state’s largest local exchange carrier by a wide margin. “Wireless still wasn’t that large a competitor when the Telecommunications Act of 1996 became law. But today it is an acknowledged competitor to landlines. With many different companies offering local and long distance, wireless has changed the dynamics of the industry. It’s an integral part of a company’s business plan.” The huge increase in wireless use buttresses Qwest’s decision to seek an FCC waiver from section 271 of the 1996 telecommunications act that would allow Qwest to sell long distance services. “Local phone companies obtained relief in New York and Texas and it was a good thing for consumers,” Hallowell says. In some Minnesota cities — including Warroad, Ada, Olivia, Granite Falls, Slayton, Jackson, Truman, Brownton, Grove City, Jasper and Springfield – Cellular One markets a wireless offering as a substitute for local phone service. The rate is $14.99 per month and 10 cents per minute on long distance calls. Where the local company also sells wireless, such competition should be healthy. Where local companies find it too expensive to get into wireless, however, offers like Cellular One’s could take so many customers that the incumbent company’s income would no longer allow it to meet the expenses of maintaining its network, much less upgrade it. As yet, that hasn’t happened. The Wireless View Midwest Wireless is another company offering wireless service that sells long distance by the minute and charges monthly rates for local service similar to those people pay for a wired line. The company introduced the service a year ago in Mankato, Rochester, Willmar and Winona and company president Dennis Miller says the service is “doing what we expected.” Miller, who says that “one could perceive wireless as competition” for local exchanges, says his service is used primarily as a second or third line. “It’s not taking over from land lines,” he notes. For Miller, wired and wireless are not “mutually exclusive. It’s a robust, competitive environment out there,” he adds, “and wireless companies are poster children for competition.” Because the volume of telecommunications services is greatly increasing (data transmission will soon overtake voice traffic and may eventually dwarf it), Miller says it’s “not a zero-sum game. Consumers will buy based on the offering. I’m not a believer in ‘one or the other.’ The future will be a combination of multiple technologies that compete in some ways and augment each other in other areas. It’s all about what the consumer wants the supplier to provide in a bundle of services.” If You Can’t Beat ‘Em, Join ‘Em With new or improved technologies constantly debuting, such as fixed wireless (signals sent to a box at a home or business; used largely in rural areas now), wireless technologies will be a big part of our telecom future. So wire line phone companies must increase the ways they generate revenue. Many already do, offering Internet and other high-speed services – including wireless phone service. Qwest is one company getting into wireless. “It provides mobility while allowing everyone to stay connected in business and with family and friends,” says Hallowell. “We recognize it as a vehicle for the future. Wire lines will still have a place, but combining wire lines with wireless on one number will make people reachable anywhere in Minnesota whenever they choose to be reached.”
MTA Member Profile: Citizens Communications (NYSE:CZN) Soon to be the largest independent phone company in the U.S., Citizens Utilities Company (the former name of Citizens Communications) was incorporated in 1935 to acquire the assets of a Minneapolis-based company. Located briefly in the Foshay Tower, Citizens Communications, as the company has been known since May 2000, has been headquartered in Stamford, Conn. for over 50 years. The company returned to its Minnesota roots in 1999 by agreeing to acquire all of GTE’s 116 local exchanges (the sale was approved in 2000). This summer, Citizens expects to receive approval of its intent to purchase all of Frontier Corp.’s local exchanges in Minnesota and other states. An additional agreement that has yet to receive necessary approval is Citizens’ purchase of 43 exchanges in Greater Minnesota now owned by Qwest. When its acquisitions are complete, Citizens will provide local service in 27 states and have nearly tripled its total access lines to 3.4 million. Its Minnesota business will eventually number 460,000 lines, making it the second largest state in Citizens’ operations. The company’s Central Region headquarters in Mound oversees operations for Minnesota and four other states (eventually nine in all). In addition to basic phone services and advanced calling features, Citizens offers long-distance, Internet, high-speed data (including DSL), wireless, cable TV and teleconferencing (all services not available everywhere). The company also owns 85 percent of Electric Lightwave, Inc., an integrated communications provider. “Our customers in Minnesota are an important addition and we welcome them to our family,” said John Lass, Citizens’ Central Region vice president and general manager.
More information about the Minnesota Telephone Association can be found online at www.mnta.org.
(c) 2001 Minnesota Telephone Association
Published by the Minnesota Telephone Association (MTA) |