Washington Area Becomes First Market with Three Wireless Phone Networks

Strategic Insights -

The Washington area is on the verge of a wireless communications revolution, as Sprint and American Personal Communications Inc. introduce the "personal communications service," offering a unique combination of wireless telephone, paging, and voice mail services. This move may spark a new era of competition, but it also poses significant challenges for the new entrants. With billions of dollars at stake, the question remains whether consumers will care about this new technology. Cellular phone companies are investing heavily in the new system, which is expected to give customers a wide range of service plans and innovative features like Caller ID.

Key Takeaways:

  • The Washington area is the first market in the nation where people can choose among three wireless phone networks, rather than just two.
  • American Personal Communications Inc. has a two-year head start on other companies, thanks to a Federal Communications Commission license as a "pioneer" in the new networks.
  • Sprint Corporation and American Personal Communications Inc. are partners in offering the "personal communications service" throughout the Washington and Baltimore markets, starting Wednesday.
  • The new system will give customers a combination of wireless telephone, paging, and voice mail services, a combination still novel in the cellular industry.
  • Company executives hope to undercut cellular prices by 10 percent to 40 percent, depending on the package of service a person chooses.
  • American Personal got a two-year head start on other companies because the Federal Communications Commission decided to give it one of three licenses reserved for "pioneers" in the new networks.
  • Many giant communications companies, including the regional Bell companies and long-distance carriers like Sprint and the AT&T Corporation, snapped up local licenses around the country by paying more than $7 billion in a Government-sponsored auction.
  • The new entrants face both soaring demand and big risks, with already invested $100 million in construction and start-up costs, and millions more will be needed over the next few years.
  • American Personal executives are not expecting to become profitable for five years, and the key to success lies in sales and marketing effectiveness.

Statistics:

  • $7 billion: The amount paid by giant communications companies in a Government-sponsored auction for local licenses.
  • $102 million: The amount paid by American Personal for its license, using an installment plan.
  • 10-40 percent: The expected reduction in cellular prices by American Personal.
  • 60 cents: The amount spent by cellular companies in marketing and promotional costs for every dollar of revenue they bring in.
  • $100 million: The amount invested by American Personal in construction and start-up costs.

Sources:

  • Sprint Corporation
  • American Personal Communications Inc.
  • Federal Communications Commission
  • Bell Atlantic
  • SBC Communications (formerly Southwestern Bell)
  • AT&T Corporation
  • L.M. Ericsson
  • Nokia
  • Motorola
  • Sanford Bernstein (telecommunications analyst)
  • The New York Times (unspecified date)